We develop products and technologies that enrich people’s lives. To this end, we are constantly on the lookout for groundbreaking developments and trends. Research and development (R&D) and innovation are the cornerstones of our success. In 2019, we spent € 2.3 billion on R&D, corresponding to 14% of our net sales. New technologies, and the advance of digitalization in particular, enable us to create innovative technologies, products, services and pioneering business models. Digitalization also decreases the time-to-market for new ideas, which creates opportunities we intend to leverage.
Research and development costs by business sector1 – 2019
Our approach to innovation
Our Healthcare, Life Science and Performance Materials business sectors use established strategies to drive new product developments for the benefit of patients and our customers. The diversity of these business sectors provides us with a breadth of technologies and depth of market knowledge, giving us a competitive advantage in developing new products.
At the same time we aim to create new businesses between and beyond our business sectors and the current scope of our activities. When deciding where to focus our activities, we analyze current megatrends to determine the innovation fields in which we see potential for new business. We endeavor to identify innovation projects that transcend our current portfolio and develop them from the initial idea all the way to market launch. This can only succeed if our business sectors work closely together and if we are open to external momentum. Our end-to-end innovation process seeks to achieve exactly that. In the process of integrating Versum Materials and Intermolecular, which we acquired in 2019, we are reviewing the existing innovation process, making adjustments as necessary.
We also create and foster innovation ecosystems in order to bolster our overall innovative power in several areas. We incubate viable technology companies through our Accelerator programs in Europe and China. Furthermore, we partner with key universities on several development programs, focusing on the fields detailed below.
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Our three innovation fields to drive innovation between and beyond
Bio-sensing and interfaces
Focusing on the interface between the biological and digital world, the goal of this field is to utilize data analytics tools to enable faster and more accurate (remote) monitoring and medical treatments in numerous areas.
Clean meat
This field concentrates on the biotechnology required to produce real meat grown in vitro. This is expected to enable the production of animal protein that is healthier, more ethical and environmentally sustainable.
Liquid biopsy technologies
This area focuses on non-invasive alternatives to traditional tissue-based diagnostics, such as liquid biopsy, thereby reshaping methods of detecting and managing various diseases.
We drive promising projects as quickly as possible from the brainstorming and idea generation stage to an incubation and growth phase, where we provide project teams with a suitable environment to develop their business models and scale up their ideas. Projects are monitored in a lean process in which they prove their commercial relevance at different gates. All activities are supported by experts in business model design, business development, market research, and agile methodologies. The objective is for the new products or services to make a measurable contribution to our business success once they have been launched.
Our approach to driving digital innovation
A major focus of our innovation efforts is digitalization, and we leverage related opportunities to boost our business performance. We are therefore increasingly forming new strategic partnerships with organizations offering different perspectives. We expect to see progress in:
- Research and development: Digital technologies enable us to access and analyze large volumes of data rapidly, thereby accelerating our research and development activities. This is particularly the case in our Healthcare business sector, where we are working to advance the development of new drugs to provide patients with faster access to effective medicines.
- Supply chain management: Digital technologies help us to better manage our supply chain. Centrally collating all data gives us access to crucial real-time data. This enables us to predict supply bottlenecks around the world and respond promptly to make sure medicines reach their destination when needed.
- Production: We set up the infrastructure to capture data throughout all stages of our production processes and apply advanced data science methods to optimize our manufacturing methodologies. To improve the efficiency and reliability of our production processes, we leverage in-silico methods, which means that we simulate molecule properties or chemical reactions on a computer.
- Digital product innovations: Digitalization enables us to broaden our existing product portfolio to include offerings such as new digital services. We also promote health awareness and improve disease awareness and patient treatment through innovative e-health offerings such as our Diabetes Online Risk Assessment (DORA).
- Interactions with customers: Thanks to modern data collection and analysis methods, we can make more efficient use of customer-relevant data. This information allows us to adapt our products and services where necessary.
You can find more information on research and development in our 2019 Annual Report.
How we drive innovation
The organizational setup of our research and development (R&D) activities reflects the overall structure of our company. All three of our business sectors operate independent R&D units, which pursue their own individual innovation strategies.
Our Group Strategy and Transformation function facilitates innovation between our individual business sectors and beyond our current business scope. It oversees an end-to-end process that ranges from setting the innovation direction through project ideation, incubation and growth to establishing long-term new businesses for our company.
Projects of this kind are developed through our Innovation Center at our global headquarters in Darmstadt (Germany), our China Innovation Hub and our Silicon Valley Innovation Hub.
In addition to identifying innovation fields at a global level, we have also introduced a China Innovation Hub, which is mainly centered on AI-enabled health solutions. In this innovation field focused on China, we are exploring new AI-based technologies, products and services that could impact the medical or healthcare industry across the value chain by, for example, increasing efficiency, saving costs or improving customer experience.
Many potential partners for innovation projects are based in Silicon Valley (United States). Through our Silicon Valley Innovation Hub in Menlo Park, California, we aim to uncover new technological opportunities and establish partnerships and projects within our three innovation fields.
Our Innovation Committee (IC) oversees the implementation of innovation projects both between and beyond our business sectors. It is tasked with reviewing the progress of ongoing efforts and with ensuring that the decision-making process for selecting innovation projects is both transparent and consistent. The committee consists of leaders from our Group functions and our three business sectors. For projects requiring larger-scale investments, the IC consults our Executive Board.
Leveraging data science capabilities
We employ a Global Data Science Team of around 30 data scientists to leverage the significant potential in advanced analytics and machine learning. For example, this team works with external and internal data to provide insights to sales teams in Life Science, uses image recognition techniques to support the work of clinicians and researchers in our Healthcare business sector, and assists in the research and innovation process in Performance Materials. The team is part of our Digital Organization, which focuses on providing significant business value by challenging conventional scientific methods and implementing technology to create faster processes.
Investing in promising ideas
M Ventures is our strategic corporate venture capital arm. It invests in innovative technologies and transformational ideas with the potential to significantly impact our core business areas. With a € 300 million fund, M Ventures has a focus on early-stage investing and start-up companies, including the creation of spin-offs to leverage our science and technology base. M Ventures takes an active role in its portfolio companies and has a mandate to invest in the areas of Healthcare, Life Sciences, Performance Materials, and New Businesses.
Our commitment: Protecting innovative ideas
We are committed to ensuring the confidentiality of sensitive information, particularly of intellectual property in digitalization projects, and to protecting our innovative ideas. Our Policy for Personal Data Protection and Personal Data Privacy defines the standards that govern how we process, save, use and transfer data. You can find more information on data protection under Compliance.
Our Innovation Center: Growing ideas into business
Located in Darmstadt (Germany), our Innovation Center offers our employees and external partners an optimal environment to cultivate their ideas and scale them up to viable new businesses. We provide the infrastructure needed to advance cutting-edge projects, along with state-of-the-art methods and tools.
The Innovation Center team holds regular events, workshops, seminars and webinars. Through these channels, we introduce our employees to creative methods that help generate innovative ideas. In 2019, our Innovation Center received several awards and accolades for its unique concept of driving innovation.
Igniting and nourishing internal ideas
We seek to maximize the innovative power within our company, giving our employees around the world the opportunity to present their ideas via diverse channels. Our Innospire initiative encourages employees to submit ideas for new products, services and business models. Through a multi-stage process, we develop the best suggestions into business plans. In 2019, employees submitted a total of 406 project ideas related to either our three innovation fields or our freestyle category. After assessing their viability, we will announce the most promising projects in May 2020.
Our Innovator Academy strives to unlock the innovation potential of idea givers, internal project teams and members of think tanks and start-ups. It provides a wide range of development programs and methodologies, along with online and classroom training courses. We also offer webinars, introducing employees to Innovation Center topics and content through practical examples.
Project example: Mapping the technology and knowledge landscapes of companies
The R&D world in large global organizations is very complex and highly dispersed over many sites, countries and sectors. Finding the right expert or the capabilities needed to start or run projects can therefore become a cumbersome exercise. In addition, building the most efficient R&D strategy for an enterprise requires a comprehensive overview of the available technology platform portfolio.
We have created a digital solution to map the entire technology and knowledge landscape within our company – across sites, sectors and countries. This makes the information created by every knowledge node across the organization instantly available to R&D managers, experts, technology scouts and strategists across the business. A next step is to commercialize this software, making it available to other companies.
Opportunities for university students
In June 2019, we launched the Merck Innovation Summer School, a three-month intrapreneurship program giving students a unique opportunity to learn about intrapreneurship, meaning innovation in a corporate environment. The students were to grow a seed idea into a pitchable innovation concept. They were tasked with exploring our innovation fields and proposing ideas for potential new innovation projects in the Innovation Center. Our expert jury selected two promising ideas, and we offered the winning teams seed funding to further shape their ideas into an initial business plan at our Innovation Center.
Silicon Valley Innovation Hub: Looking for the food revolution
The Silicon Valley Innovation Hub has a strong focus on our Clean Meat innovation field. Besides other initiatives, we began sponsoring the Alternative Meats X-Lab at the University of California, Berkeley (USA) in 2019, to help entrepreneurs and researchers investigate the next generation of foods. The sponsorship offers an opportunity to engage with a prolific research community within the Clean Meat industry that is interested in ideation, problem-solving and driving the research agenda.
We also partnered with the Institute for the Future (IFTF), a not-for-profit think tank based in Palo Alto (California, USA). This relationship will give us access to recent research on the future of food and allow us to collaborate with one of the most highly regarded and successful think tanks in the world on topics within our innovation fields.
China Innovation Hub: Strengthening our innovation footprint
Our China Innovation Hub has locations in Shanghai and Guangdong, which were inaugurated in October and November 2019, respectively. Their role is to use a nationwide innovation network to scout, incubate and invest in innovative opportunities in healthcare, life science, performance materials, and related fields between and beyond our existing businesses.
In addition, we launched a China-specific program for the Merck Accelerator via the China Innovation Hub. Six start-ups completed their three-month acceleration journey, with half of them forging partnerships in business sector and innovation fields of our subsidiary in China.
Synergizing external ideas: Start-ups and cross-industry collaboration
Numerous start-ups around the world are working on new technologies and innovative business models. The Merck Accelerator supports select enterprises in their development through programs at our global headquarters and in China. This helps us gain insights into innovative start-ups, which supports our efforts to identify emerging market trends early on. Our primary goal is to link these start-up companies with our innovation projects or our business sectors for future collaboration. In 2019, we accepted ten start-ups into the Accelerator at our Darmstadt headquarters. Following the end of this three-month program, we initiated collaborations with 30% of the participating start-ups. We are in discussions with another 60% on potential partnerships.
We accepted a total of 18 start-ups from more than 610 applications for the next Accelerator intake at both our global headquarters and in China.
Accelerating innovation
In 2019, we extended our Merck Accelerator Satellite program, making it also available in the United Kingdom. In Africa, it is now run through a public-private partnership with Make-IT in Africa, a tech entrepreneurship initiative initiated by the German Gesellschaft für Internationale Zusammenarbeit (GIZ) in Kenya, Nigeria, South Africa, and Tunisia. This enables us to connect with African entrepreneurs and identify cutting-edge start-ups for our Accelerator program.
Through this African satellite program, we aim to contribute to UN Sustainable Development Goal 3, “Ensure healthy lives and promote well-being for all at all ages”, by identifying innovative African start-ups and offering them partnership and support to help them scale up. We focus on areas close to our business and innovation fields such as bio-sensing and interfaces and liquid biopsy technologies.
In June 2019, we opened the H. Spectrum & Merck Innovation Lab in Taiwan – an incubator that aims to support start-ups in generating patient-centric solutions. We selected four start-ups to participate in the program, working under pre-defined innovation topics: Liquid biopsy, Bio-sensing and interfaces, Patient journey, and Right drug to right patient. The select start-ups gain access to expertise and networks while we engage with new ideas that help drive innovation for technology-based healthcare solutions.
Rewarding inclusive innovation
For the second time, we hosted the European final of the Inclusive Innovation Challenge in Darmstadt (Germany) in October 2019, acting as the exclusive European partner. The competition was initiated by the Massachusetts Institute of Technology (MIT) Initiative on the Digital Economy and aims to accelerate technology-driven solutions that enable greater economic opportunities for medium- and low-income earners. Organizations and companies from around the world can take part with technological solutions that shape the future of work. The challenge awards over US$ 1 million in prize money. We invited the expert judges involved in selecting the winners to take part in an advisory board on the topic of digitalization and the future of work at our company.
Fruitful strategic partnership
Through our strategic partnership with Palantir Technologies, a company based in California (United States), we are able to use their data analysis capabilities to improve and accelerate the development, commercialization and delivery of new medicines. The access to Palantir technology enabled us to create tools that help to improve patient retention, increase the efficiency of sales representatives and aid in strategic targeting to deliver effectively on our product launches. We can also integrate and analyze large amounts of data to improve our operational excellence.
Syntropy is a joint venture formed by our company and Palantir Technologies. The partnership aims to give scientists and research centers access to a technology platform that integrates and centralizes various organizations’ data. Advances in medical research over decades have created a wealth of knowledge about diseases and how to treat them. This includes biomedical data. A substantial amount of this data is inaccessible to the scientists and clinicians who need it to advance their research. Syntropy will create a network that drives discovery and improves human lives.
Promoting visionary research
In 2018, on the occasion of our 350th anniversary, our company launched the Future Insight Prize to honor and promote groundbreaking scientific and technological innovations that stand to benefit humanity in the fields of health, nutrition and energy. We presented the award for the first time in 2019 and offered a € 1 million research grant to the winners: U.S.-based scientists Pardis Sabeti and James Crowe. Pardis Sabeti from the Broad Institute was recognized for identifying innovative genetic technologies used in the detection and therapy of infectious diseases. James Crowe from Vanderbilt University Medical Center received the prize for uncovering the mechanisms necessary for creating therapeutics and vaccines. Their research may enable the development of a “pandemic protector” technology that would help protect people worldwide from pandemic viral diseases.
At the 2020 Curious Future Insight Conference, we will award the next Future Insight Prize in the Multidrug Resistance category.