Fostering Innovation through New Partnerships & Business Models

Spurring Innovation: In this dialogue, Thomas J. Pekich, President of Genencor, and Jean-Marc Gilson, Vice-President and General Manager of the Specialty Chemicals Business Unit at Dow Corning, consider ways to spur innovation through creative partnerships and new business models.

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What's the value of working in a partnership with another company?

TP: A partnership model provides a faster, more economical way to secure results and broaden the opportunity base. Also, partnerships allow us to access competen-cies that we do not possess. When all factors are considered, key benefits result from flexibility, minimization of a fixed asset base prior to full commitment of investments, and sharing the risks (but also the rewards). Our partnership with Dow Corning gives them a biotechnology capability without the fixed costs, set-up time, and human resource responsibilities and costs. For Genencor, it provides research funding and a potential new technology interface, silicon materials, and new business opportunities that may be addressed by Genencor enzymes or could lead to joint ventures.

JMG: When we go into partnerships, it's generally because we couldn't get the same value by ourselves, and the other party feels the same way. So both are open to sharing the value received. This happened when The Dow Chemical Company and Corning, Inc. came together. They had an idea and they agreed to a 50/50 arrangement. By going with somebody else, you share the risk. The partner brings something that we don't have - a technology, a position in the value chain, or an expertise that would take too much time for us to learn. For example, Dow Corning has had limited knowledge about the biotechnology sector, and we wanted to start working in this area. That's the reason behind our partnership with Genencor.

How can two partners work together most effectively?

TP: For a significant effort like our partnership with Dow Corning, it is important to have a dedicated management team. This team should have control of the budget and resources and establish the strategic and operational plans. It is important to align the strategic intentions of both companies and gain support from top management. Also, a clear articulation of the methods to move projects through development and commercializa- tion stages needs to be developed to prevent inefficiencies.

JMG: It's important to have relationships with companies that have similar cultures and values. With Genencor, we started by having our scientists work very closely with theirs, devising ways to use biotechnology to make new silicon molecules. Our scien-tists were learning from their scientists, with the purpose of building new business-es together. There is a lot of trust in the technology-sharing. We work together, the patents are owned jointly, and we are real partners from the beginning.

How successful would you say your company has been through its history with partnerships?

TP: Genencor has developed a number of innovation/business-based partnerships with major companies such as Procter & Gamble, DuPont, Eastman Chemical, Danisco, ADM, and Ciba-Geigy. Each has been unique, requiring customization of the intent, people, scope, financing, and management. The principles of successful collaborative partnerships, however, are consistent for all, and we believe they are captured by the following: 1) marry well; 2) clear objectives; 3) relationships are hard work; 4) senior management involvement; 5) sustainable commitments; 6) metrics for success; 7) shared sense of timing and urgency; 8) win-win.

JMG: I think we've been very successful. We try to apply exactly the same recipe that was used with our own company as a joint venture, which has been one of the most successful in history. We also develop many partnerships with customers - some formal, some informal. Our solutions approach encourages closer engagement with our customers because we want to understand their businesses better.

How do partnering companies share the rewards that stem from joint innovation?

TP: Each of the partnering companies can, and often do, have different weightings on the common factors and may even have unique factors regarding value measurements. Certainly, financial returns, enterprise value enhancements, new market/customer connections, intellectual property assets, technology and market insights, and corporate profile enhance-ments are key reward metrics.

JMG: In many cases, we try to share the learnings and the value generated through the partnership between the two companies. First, we figure out the value of selling our products as well as the value for our customers or partners in selling their products or advancing our joint business activity. We don't necessarily share the value of the final product or put everything into one pot and share it because when it's a brand new application or market you have no reference point.

What kinds of innovative or flexible business models do Genencor and Dow Corning have?

TP: Genencor has used a "biotech" business model to navigate the new opportunity space connecting our technology and competencies with new markets. This model has served well to manage the risks of new product development with the off-set of shared rewards and has allowed the heavy R&D investment required to continually expand the biotechnology expertise of the company.

JMG: The key paradigm for chemical companies is that innovation has been pri-marily product-oriented. Dow Corning has gone beyond that, and it's one of the main reasons we've been so successful. We've been able to put our different capabilities together to create what we call innovation in channel and business models, which led to the launch of our web-based Xiameter ® brand. It has provided a new way to reach a certain customer segment.

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