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In 2001, Bayer embarked on a project to reshape itself as a management holding company with independent subsidiaries representing its three main businesses. One of the main challenges of the project was to decentralize Bayer's extensive R&D operations. The company had to decide how work would be split among the subsidiaries, or subgroups, and what would be kept under the corporate umbrella in light of Bayer's acquisition of Schering this fall.
The new R&D structure has become robust enough, the company now says, that incorporating Schering's R&D operations into Bayer's health care subsidiary was one of the first integration tasks to be tackled.
As Wolfgang Plischke, Bayer's board director with responsibility for R&D, put it at the company's Innovation press briefing in October, "The key to a successful future lies partly in how innovation is structured. Bayer is a science-based inventor company, with innovation obviously taking place primarily in the R&D labs of our subgroups."
Each of the firm's three subgroups—HealthCare, CropScience, and MaterialScience—has specific interests and substantial differences, Plischke tells C&EN. R&D spending in these three groups made up 98% of Bayer's total research budget of roughly $2.4 billion in 2006.
The addition of Schering's research activities will bring R&D spending at Bayer HealthCare, already the biggest spender of the three groups, up to roughly $2 billion from a 2006 budget of $1.23 billion. Last month, Bayer initiated a reorganization of Bayer and Schering R&D sites in the U.S. as the first step in a global pharma restructuring. Research now dispersed among various sites will be consolidated into three major R&D centers: Berlin and Wuppertal, Germany, and Berkeley, Calif. About 600 U.S. R&D jobs will be cut in the process (C&EN, Nov. 13, page 13).
According to Plischke, specific projects such as the pharma R&D reorganization are mainly carried out by Bayer's subsidiaries, which have R&D management committees to decide on research priorities. The holding company becomes involved only for major strategic decisions. Its own R&D budget is a mere $50 million.
There are several other ways that the holding company becomes involved in R&D, Plischke says, especially as the company seeks synergies across its three subsidiaries.
One way is through what he terms R&D community management. "These are the key R&D managers of the subgroups. They meet to discuss best practices, the quality of R&D, human resource issues, bringing forward shared projects, and developing technology platforms," he explains. "This is the main steering committee for the main subgroup activities."
In addition, however, the Bayer holding company encompasses two other independent units that report to the main Bayer board. These are Bayer Technology Services and Bayer Innovation Group, both charged with supporting and extending innovation opportunities across the company.
Bayer Technology Services is, in essence, a technical and engineering company, Plischke says. It has about 650 scientists working in what he describes as "a world-class pioneering unit." The technology unit supports research in process innovation and development of technology platforms. He cites as examples microreactor chemistry and nanotechnology, both of which have broad potential across the subgroups.
By contrast, Bayer Innovation Group is a much smaller unit assigned to come up with new ideas for businesses outside the main subgroups, according to Plischke. It is spearheading Bayer's work, for example, in plant-derived pharmaceuticals.
The innovation group is also looking for opportunities, Plischke says, to coordinate with "Triple i," an initiative launched in April that seeks to extract inspiration, innovation, and ideas from employees.
"In a company like ours with many different businesses, you need a general initiative to foster the commitment to innovation and to create new ideas from all employees," he explains. The initiative encourages employees around the world to share suggestions for new businesses. Bayer has set aside roughly $65 million to develop the ideas, more than 1,600 of which have already been received since the initiative was launched.
According to Plischke, ideas arising from the 3i project that are deemed interesting might end up at the innovation group, which would take them to proof of concept. Proof of concept would be particularly important, he points out, if an idea lies outside the innovative scope of the subgroups.
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