Nestlé Innovation Partnerships:

the new open innovation

Knowledge Transfer Conference – Hong-Kong – November 7-8th 2010

R&D Beijing 北京研发中心 1

Let's talk Nestlé

Nestlé
The world’s leading nutrition, health
and wellness company

R&D Beijing 北京研发中心 2

 The Nestlé story – how it all began

1867 1866

1929

1938

1947

1960s
Henri Nestlé
1866 1970s

1980s

1990s

2000s

R&D Beijing 北京研发中心 3

Nestlé Facts and Figures

• CHF 108bn sales in 2009

• EBIT CHF15.7bn
• Over 280,000 employees
• 449 factories
• Operations in 83 countries

• 93% of sales are food and beverages

• No other food company is so clearly focused

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 Innovation is the driving force of the
Nestlé business model

What is needed
by consumers?

• 5-6% Organic Growth

Can we create What is
Innovation scientifically and
• Sustainable increase
value for Nestlé
and the society? Sweet-Spot technologically in EBIT margin and
possible? ROIC

Do we have the
commercial
capabilities to do this?

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Our Challenge:
Connecting benefit platforms and consumer aspirations

Protection Skin Health & Comfortable

Beauty and refreshed

Growth &
Fit at all ages
Weight
Development Management

Balanced
Performance Digestive Comfort and happy
Healthy and
well

Healthy Ageing Healthy Recovery

Confident
and relaxed
Alert and
energetic

Science Consumer
understanding

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 Lead Science and Technologies across
Consumer Benefit Platforms

Reinforcing the body’s natural protection

PROTECT©, Adapted to the First A probiotics

instant coffee specific needs Growing-Up supplement for
naturally rich in of cancer Milk with dietary
polyphenols patients immune management of
from green undergoing enhancing dogs and cats
coffee chemo- or properties with diarrhea
radiotherapy

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 Nestle R&D Global Network
2 Bio CHF of annual investment in 2009
R&D Centres with
partner projects

York
Welwyn
Singen
Garden City
Minneapolis Fremont Vittel
Solon Amiens Beijing
St. Louis Lisieux Tokyo
Beauvais
Tours Shanghai
Sderot
St. Joseph Lausanne Casa Buitoni
Marysville
Konolfingen Singapore
Queretaro Orbe
Abidjan
Rutherglen
Santiago

Science & Research 28 PTCs and R&D Centres … + 280 Application Groups

• Basic research in Nutrition, Food • Product and Process • Product renovation

Science and Safety
• New core technology platforms
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development • Technology deployment
• Packaging and Design • Local manufacturing support
• Engineering
• Manufacturing support 8
R&D Beijing: Connect and Innovate for and
from China
ƒƒ A
A Nestle
Nestle R&D
R&D Centre
Centre with:
with:
ƒƒ Nutrition
Nutrition &
& Health
Health
Research
Research
ƒƒ Product
Product & & Packaging
Packaging
Development
Development
ƒƒ Opening
Opening October
October 2008
2008
ƒƒ “Speed-ovation”
“Speed-ovation” for
for and
and from
from
China
China

R&D Beijing 北京研发中心 9

“Speed-ovation” for and from China
Proximity – Interaction - Communication

R&D Beijing 北京研发中心 10

Nestlé’s extended R&D Set-up:
Innovation Partners

Research on new Development of new Joint R&D on products and

ideas ideas services

Universities, Start-Ups Venture Capital Key Suppliers

Since 1990 Since 2003 Since 2005

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 Typical Development Stages of
Innovation Partnerships

Focus
Business
Needs

Innovation Partnerships with

In-kind Contributions Key Suppliers

Innovation Partnerships with

SMEs and Inventors Venture Capital

Innovation Partnerships with

Universities and Start-Ups Cash Contributions
Benefit
Areas

Early Development Stage Mature

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12 Nestlé Innovation Partnerships

 Relationship Stages of
Innovation Partnerships

Indispensable ESTABLISH BUILD CREATE

dialogue steps TRUST GOODWILL VALUE

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13 Nestlé Innovation Partnerships

 Innovation Partnerships as the Role
Model for the Present and the Future
Smart communication, internally and externally, of our activities in innovation partnerships
and open innovation

Disciplined structuring of the ways we work with external partners, including solid
collaboration agreements and an early understanding of IP usage and commercial benefits

Research on new Development of new Joint R&D on products and

ideas ideas services

Universities, Start-Ups Venture Capital Key Suppliers

Establish and optimize

Smart Selection of academic relations and partnerships
Optimize VC portfolio to
partners in order to influence with a select group of
make it a strong part driving
and help shape academic suppliers as the preferred
towards successful
research that serves future Innovation Partners.
innovation 14
innovation needs Nestlé has selected 15
innovation partners

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 Innovation Partnerships the New Model:
How to Capture External Innovation

Active Communication
Strategic
Needs and benefits

Company contacts and expert networks Dedicated focus external ressources

internet search engines (e.g. Swissnex, …)
WorldClass, Visionary University Partners
Suppliers & Partners Networks
University based on strategic need
Industry organisations
VC investment

Active External
Innovation
Projects

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15 Nestlé Innovation Partnerships

 Innovation Partnerships
In a Nutshell

¾ Innovation Partnerships have become the new role model and

an integral part of the company’s strategy and vision on its
drive towards the No. 1 Nutrition, Health & Wellness company.

¾ This can best be described as a "Give-and-Take" activity:

Æ sharing of well-defined elements of information with the
innovation partners

Æ sharing of know-how and resources within a specific

framework of confidentiality

Æ clear expectations as to the resulting solutions, their timing,

related costs and benefits as well as IP ownership

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16 Nestlé Innovation Partnerships

 Innovation Partnerships: How to handle them
in Difficult Economic Times?

Investment

Low
Innovation Partnerships

Alliances

Contract Research

High

Difficult Market Situation Good Market Situation

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17 Nestlé Innovation Partnerships

 How Sustainable is the Concept of
Innovation Partnerships?

• The term « Open Innovation » has become a « buzz-word »

• Buzz-words and fashions are never sustainable, they come and go,
they mutate

• Open Innovation will eventually become the normal way of working

• Innovation Partnerships (INP) are the new Open Innovation (OI) and
are an integral part of the innovation landscape in general

• INP is one important element in the innovation equation, the others

being alliances and contract research

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18 Nestlé Innovation Partnerships

 Innovation is the Driving Force of the
Nestlé Business Model

• Approx. 5 Bio $ growth

What is
needed by
annually
consumers? • Sustainable increase in
EBIT and ROIC
• 3,700 People in Nestlé
Can we create What is Research
value for Innovation scientifically
Sweet-Spot and
• 2 Bio $ investment into
Nestlé and the
society? technologicall R&D (internal and
y possible? external)
• Approx. 200 Mio $
Do we have the
additional business
commercial linked to partnerships
capabilities to do after the second year
this?
frank.lehmann@nestle.com

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19 Nestlé Innovation Partnerships

 吾尝终日而思矣，不如须臾之所学也。吾尝跂而望矣，不如登
高之博见也 - 荀子·劝学篇

Artist: Mr. LIU Wen Hui

Once I contemplated a whole day, but what I gained was less than what I would achieve by a moment
of learning.
Once I stood on tiptoe in order to look farther, yet what came into my sight was inferior to what I would
see by looking from a higher elevation.

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(Xunzi. Admonition on Learning)