The challenge of business R&D

With 15k employees focused on R&D the idea of exploratory work was not foreign to Bayer. They had an established understanding in their scientific research that you might start with 10,000 molecules to get to one drug. The attrition rate along the way was part of the process. This was normal and understood for their science R&D work. Yet, it did not transfer to their business innovation work. Most business projects at Bayer followed a linear execution process. This created a set culture for business projects. These projects normally embraced predictability and minimal failure. While this worked well for executing their existing business it posed challenges for innovation.

Henning and his team had to work to redefine what the word innovation meant. They needed to establish a different process that centered on iterative experimentation as this was key to being able to establish their internal accelerator, the Catalyst Fund. They had to help the company see that when they mentioned innovation they were talking about value creation for customers. Innovation was not limited to developing new active ingredients for medications. It also encompassed turning ideas into businesses and designing and testing new value propositions.

Regulatory roadblocks

Getting the structure and format of their global innovation accelerator up to speed was only half of the battle for Bayer. As they looked to turn ideas into viable new business opportunities, there were many barriers. Bayer is a pharmaceutical company working in a regulated environment which poses unique challenges when testing out new ideas with customers. There was limited access to patients and a number of legal and data privacy considerations for them to overcome. Since gathering real feedback from customers is a key aspect of the innovation process, this was a blocker.

To overcome this they invited employees from the legal department to be a part of the team and to attend key team workshops. They also made sure to connect teams with the appropriate legal employee in their respective country at the start of new innovation projects. Lastly, they created an internal crowdsourcing platform. This was to be able to use internal employees to gather feedback on innovation projects. It proved a much more cost effective and efficient way than only relying on external testing.

Innovation training

Another key challenge for Henning and his team was the lack of innovation expertise across the organization. The company was not well versed in designing and testing new value propositions and business models. It required mastery of a different set of practices from what employees were accustomed to. This problem became more clear as they looked to scale to a large number of teams in offices around the world. They realized they needed to equip teams with the proper language, tools, and mindset needed for intrapreneurship.

All teams that took part in the Catalyst Fund ended up getting training and coaching support from Strategyzer. We held design workshops where the teams learned how to design value propositions and business models. We also held workshops where teams learned how to set up the right tests with customers. They learned to extract, prioritize and test hypotheses using business experiments. While they were testing their ideas, they were supported by Strategyzer coaches who helped them design the right experiments, collect data and analyze it for insights.

Scaling innovation practice

Henning and his team also took other strategic actions to establish innovation in the organization. They established an innovation network with 1,000+ global members. This network educated and developed employees in innovation best practices. They also created prototype support. This included outsourcing the design of pre-defined experiment offerings. A common one was website landing pages of potential new products and services. This allowed teams to rapidly test their ideas and to not be slowed down by unfamiliar tasks.

The innovation team at Bayer realized there were many aspects to consider to create a portfolio of new businesses. They needed to address innovation processes, programs, and systems around their accelerator. By tackling blockers and obstacles around these areas they created the conditions necessary for growth.

Discovering new growth engines

Strategyzer partnered with Bayer's innovation accelerator, the Catalyst Fund, for three years. Over that time they received 400 proposals for new business opportunities from employees and teams. The Catalyst Fund was run like a venture fund, but internal teams received the investments.

Of the 400 proposals, they chose 74 projects to receive an initial €10,000 each in funding. They tested these business ideas over a 3 month period. They were then evaluated by evidence of desirability and willingness to pay from customers. Strategyzer trained senior leaders in how to select ideas for further funding. They were taught to use innovation metrics to make evidence based decisions after each stage. Only 29 of the 74 projects were selected for the program's next phase and received a grant of €90,000 each. After this 6 month phase, 17 projects successfully showed feasibility and viability. The business then continued these with a further investment of €100,000 – €300,000.

Bayer’s innovation portfolio successfully went from 400 ideas to 74 projects to 5 new growth engines created. These five projects have now launched into the market and these businesses now exist adjacent to the existing business. Projections estimate they will produce up to €1Bn in annual revenue.

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... It was a tremendous amount of work and we are extremely thankful to the whole team at Strategyzer who supported us all this time. We learned so much: three years ago we didn't really know how to start, and now I think we have built a robust program that generations after us can continue to run.”

Dr. Henning Till

VP of Innovation, Bayer