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Sourcing Technology from External PartiesChris HewittScience Relations Manager, North America

Outline

Who BASF is

Open Innovation and Technology Scouting at BASF

Other models (RFP)

Things learned (mostly the hard way)

Q&A

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Outline

Who BASF is

Open Innovation and Technology Scouting at BASF

Other models (RFP)

Things learned (mostly the hard way)

Q&A

3

BASF – We create chemistry

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Our chemistry is used in almost all industries

We combine economic success, social responsibility and environmental protection

Sales 2016: €57,550 million

EBIT 2016: €6,275 million

Employees (as of December 31, 2016): 113,830

6 Verbund sites and 352 other production sites

Continuous Commitment to R&D

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152 years of spending in R&D and competency build-up

Synthetic Dyes Fertilizers Plastics / Foams Health Care & Nutrition, Crop protection Systems

1900 1950 2000

1869Alizarin

1897Indigo

1901Indanthrene

Blue

1923Methanol

1913Ammonia

1937Polyethylene

1936Buna

1951Styropor®

1963Vitamin A

1974Basagran®

Herbicide

1980Citral

1990Vitamin

B2 1998 Neopor®

2011 Xemium® Fungicide

1930Polystyrene

1934Magnetic

Tape

1993Opus® Fungicide

1996StrobilurineFungicide

2008HPPO

2006Ecovio®

2015Slentite®

1949U46 Herbicide

2013 Infinergy®; DroughtGard®;FWCTM Four-Way-Conversion Catalyst

New molecules

Improved applications

Functionalized materials & solutions

1960 1970 1980 1990 2000 2010 2020

Batteries, membranes ...

From chemicals to chemistry

Innovation Focus moves from Molecules to Materials and Solutions

Tasks Chemistry as key enabler

for functionalized materials & solutions

Interdisciplinary approach

Deep understanding of customer value chains required

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Chemicals – a growth industryGlobal annual growth rate of ~3.6%*

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… more food needed by 2050

… more primary energy consumption by 2050

… of the world population will live in cities by 2050

Agriculture Health & nutrition

Energy & resources

Transportation Construction & housing

Consumer goods

… people by 2050

Electrical & electronics

Chemistry as enabler to meet current and future needs

* Average annual real change 2017-2019; BASF Report 2016 p.121

70% 50%~10bn 30%

Research & Development is a major growth driver for BASF

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1

2

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6

€1.863billion

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1 Chemicals 10 %2 Performance Products 20 %3 Functional Materials & Solutions 21 %4 Agricultural Solutions 26 %5 Oil & Gas 2 %6 Corporate Research, Other 21 %

Champion in the chemical industry

High R&D expenditures

€10 billion annual sales with innovations

Around 3,000 running research projects, 10,000 employees worldwide in R&D

Global Know-How Verbund with external partners

2016

BASF’s success factors for innovation

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− Establishing R&D in key markets

− Strengthen R&D Verbund with external partners

− Foster creativity, strengthen key technologies and increase efficiency by optimized structures

− Drive digitalization by modeling, simulation, knowledge management and cognitive approaches

− Co-creating to develop solutions for complex challenges

− Managing innovation to optimize speed

Continuous commitment to R&D

Around

3,000projects in

research pipelineRund

3,000Projekte in der

Forschungspipeline

Global Know-How Verbund

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Advanced Materials & Systems Research

Bioscience Research

CustomersIndustry partners

High-techjoint ventures

Researchinstitutions

Process Research &Chemical Engineering

Universities

Technology Excellence

OperatingDivisions

InnovationManagement

New Business &Venture Capital

Three Technology Platforms headquartered in key markets Europe, North America, Asia-Pacific

Close connection with the development units in the Operating Divisions

Global Know-How Verbund and global network with around 600 universities, research institutions and companies

Global R&D presence in key markets

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BASF R&D sites with proximity to customers and markets

Headquarters of Technology Platforms Selected R&D sites

Lemförde

Muenster

LudwigshafenProcess Research &Chemical Engineering

Mumbai India

Shanghai ChinaAdvanced Materials & Systems Research

Amagasaki Japan

Suwon South KoreaSan Diego

Wyandotte

Research Triangle ParkBioscience Research

Iselin

United Statesof America

Germany

Around 70BASF R&Dsites globally

Content Focus

Optimized Structures

New Methods

Constantly advancing R&D performance

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Enhanced innovation approach with the aim of increasing our company’s power of innovation and securing long-term competitiveness

BASFInnovation Approach

Research focus on topics that are strategically relevant for our business

New scientific processes and methods

Globalizing research and strengthening regional competencies

Research in North America

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Major start-up funding9 of world’s 10 most active cities for start-ups

Strong talent pipelineDraws top science and engineering students globally

World-class universitiesAbundance of top universities (6 of 10

top-ranked)

Innovation investmentUS R&D spend is the largest in the world

Customer

Industries

Why is North America a great place to do Research?

Green Sense® Concrete Technology

Eco-efficient concrete optimization

Used in the construction of

One World Trade Center in New York

Challenge: Preserve natural resources while continuing to produce concrete quality products

Research: Optimize proportions in which supplementary cementitious materials, non-cementitious fillers, or both, are used with special high-range water-reducing admixtures

Solution: Green Sense Concrete is optimized for cost, aesthetics, performance and environmental impact

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Outline

Who BASF is

Open Innovation and Technology Scouting at BASF

Other models (RFP)

Things learned (mostly the hard way)

Q&A

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The way we innovate is changingCollaboration is needed to solve complex societal challenges

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BEYOND ONE COMPANY

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Open Innovation Landscape

PostdocCenters

InnovationNetworks

IRT1, NineSigma, consultants

PublicFundingBMBF

Customerse.g. Siemens,

Henkel

Start-Ups,BVC,

Investment VCsas source

Literature,Conferences,Trade Fairs…

‟Our Open Innovation World”

INNOVATION ROUNDTABLE®

UniversityNetworks

Crowd-sourcingInno360TM,

Atizio

Seed-stageStart-Ups,

SBRI II

Co-creation

Open Innovation Culture is necessary to identify external technologies 17

Open Innovation Landscape

PostdocCenters

InnovationNetworks

IRT1, NineSigma, consultants

PublicFundingBMBF

Customerse.g. Siemens,

Henkel

Start-Ups,BVC,

Investment VCsas source

Literature,Conferences,Trade Fairs…

‟Our Open Innovation World”

INNOVATION ROUNDTABLE®

UniversityNetworks

Crowd-sourcingInno360TM,

Atizio

Seed-stageStart-Ups,

SBRI II

Co-creation

Open Innovation Culture is necessary to identify external technologies

University Networks

Startups

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Working with External PartnersHistory

Long history of successfully working with external partners

Currently ∼ 600 collaborations globally with universities, government labs and institutions but many are one-offs

Technology briefs as a route to understanding the core expertise of universities and federal labs

BASF Venture Capital engages with startups

More meaningful, sustainable relationships are preferred

UNIQUE program with 15 universities, of which 6 in the USBased on scientific quality, relevance and fit

6 Postdoc centers, of which 2 in US

Shift to a more structured approach

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What is Technology Scouting?

Technology Scouting is an organized approachto collect information on the external technology environment to identify options for supportingthe tactical or strategic development needsof an organization.

Scouting: Exploring in order to gain information.

→ Technology Scouting is not about making deals and alliances but rather about gathering information to enable decision making.

Source: Werner Kaufmann, BASF 20

Technology Scouting Toolbox

Complex system

Pick and choose as necessary

It’s a toolbox

Three main “boxes”

Publications

People

Data management

Source: Jeff Cope, IRI21

Sources: Alliance Management Group, Inc. Jay Paap, Werner Kaufmann, BASF

WANT

FIND

GET

MANAGE

PREPARE

SCOUT

DECIDE

MANAGE

“WFGM” vs. “PSDM”:Similar Models but not Identical

Tactical(gap filling)

Strategic(longer termimplications)

Market NeedBased

Scouting

Scouting forEmerging

Technologies

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The WANT Brief:The Elements The customer need / How the WANT fits into a new product/service / Definition of success

Business case highlights including financials and timelines

Technical features / Specs

Must haves including minimum requirements and appropriate metrics

Killers / What is out of scope? / Characteristics the asset cannot have / What we do not want

What does the ideal solution look like? / What are the current benchmarks, if any?

What we already know (including what is known not to work)

IP strategy and potential issues

Internal assets that will complement the WANT

A description of how the business will support the FIND and GET steps

Description and contacts with potential external sources

Budget

TimelineSources: Werner Kaufmann, BASF; various 23

BASF Technology NeedsWhere do they come from?

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Crop Protection

PerformanceProducts

Dispersions & Pigments

Care Chemicals

Functional Materials & Solutions

AgriculturalSolutions

Nutrition & Health

Performance Chemicals

Chemicals

Monomers

Intermediates

Petrochemicals

Functional Materials & Solutions

ConstructionChemicals

Coatings

Catalysts

Performance Materials

BASFUnmetNeeds

BASF New Business

How Does BASF Know What to Scout?

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CustomerGovernment Environmental

and Health Regulations

BASF Strategy Global Megatrends

Customers share their needs with BASF through a variety of channels

BASF develops strategic areas for technical competency for long term, sustainable business goals

Global megatrends i.e. urbanization, sustainability, and climate change shape corporate strategies

Government regulations drive product specification and areas for innovation to sustain environmental and health safety

Resources, Environment

& Climate

Food & Nutrition

Quality of Life

Transportation Construction

Consumer Goods

Health & Nutrition Agriculture

Energy & Resources

Global Needs Key Customer Industries Focus Areas (Key Technology Capabilities)

Openness by sharing Innovation Fields –Focus on promising areas

Electronics

Selected Key Technology Capabilities reflect where BASF will invest in continued effort and resources to safeguard todays and tomorrows excellence in innovation.

Polymer Technologies

Biotechnology

Production Processes

Materials

Catalysis

Biodegradable & BiobasedMaterials

Enabling Methods

The Key Technology Capabilities are bundled in seven Focus Areas

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What BASF Needs

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BASF Needs: Example - Additives Fast-fusing sustainable plasticizers for flexible PVC applications

Halogen-free flame retardants for polyolefins / thermoplastics

Antioxidants with chemical resistance to chlorine oxidizing in plastics

New Antioxidant chemistry and/or technologies beyond traditional phenols, phosphites, amines, sulfides **

Self forming barrier layers with physical resistance to chlorine oxidizing agents in plastics

New Light Stabilizer technologies beyond existing hindered amines; e.g. tetramethylpiperidines; piperizinones **

New Light Stabilizer technologies beyond existing UV absorbers; e.g.,hydroxylphenylbenzophenones, hydroxylphenylbenzotriazoles, hydroxylphenyltriazines; nano ZnO; nano TiO2

Flame retardant polymers or halogen free polymer additives especially those that do not act as plasticizers

Adhesive technologies (PUs and acrylics for adhesives, must be flame retardant)

Additives for composite materials:- Toughening (films, powders, fibers)- UV resistance- Flame retardance; incorporated clear and soluble (not particulates)

Flame retardant polyethersulfone (PESU) and polyphenylsulfone (PPSU) (in addition to intrinsic properties)28

Grand Challenges and Competitions Open call for solutions to “big” problems

Regional and global

May be partnered with customers

IP and downstream funding varies

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Conclusion Technology Scouting and Open Innovation go together

o Openly identifying focus areas and sharing needs

o Utilizing existing and developing new networks

o Incubation new technologies into the company

152 years of growth at BASF has depended on open innovation with universities, customers and other collaborators

Open Innovation should be a natural way to cooperate – it is a mindset not a tool

Needs come from many sources, but at the end of the day the customer isking

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Creator SpaceTM

The BASF Co-creation program

Outline

Who BASF is

Open Innovation and Technology Scouting at BASF

Other models (RFP)

Things learned (mostly the hard way)

Q&A

31

RFP

Company identifies areas of need and issues RFP – typically via dedicated website.

May or may not have guarantee of project funding

May be open of focused on specific universities

Often specific requirements for proposal submission

Example:

– Cisco

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Outline

Who BASF is

Open Innovation and Technology Scouting at BASF

Other models (RFP)

Things learned (mostly the hard way)

Q&A

33

Lessons learned

“Lake Wobegon effect”

All our children are over average

Solicitation fatigue

Both sides of the table

Confidentiality

Enthusiastic oversharing

Dealing with Startups

Focus, focus, focus

Consortia

Temporarily trying the waters

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Source: quotefancy.com

Source: danmoldovan.blogspot.com

Source: saadandshaw.com

Source: weeklygravy.comSource:bbncommunity.com

Q&A

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