Key Takeaways
- Innovation must live beyond R&D and exist at the forefront of leadership and employees' minds.
- International successs stems from integration into local startup, acedemic, and business ecoysystems
- The scope of opportunity for innovation addressing China-specific issues is vast, dynamic, and technologically intricate.
With a corporate history spanning 350 years, Merck is one of the world’s largest science and technology companies, thriving across the globe with a focus on three core businesses – life sciences, healthcare, and performance materials. For Merck, the key to such long-term success has been a holistic and comprehensive approach to innovation and global strategy, addressing the crucial needs and concerns of businesses and consumers around the world.
In recent decades the industry giant has found the greatest intersection of its innovation efforts and global strategy in China – a business landscape where Merck has deep penetration in not only sales and consumption, but in the ability to tap into the local technological, entrepreneurial, and academic ecosystems, allowing for the successful advancement of their technologies and corporate innovation strategy. For the past two years, Sophie Sun, Managing Director at Merck China’s Innovation Hub and Vice President for Strategy and Transformation has been spearheading Merck’s efforts in China. Under Sophie’s leadership, Merck has revolutionized their China strategy, aligning their business units and resources in search of the synergies between their cross-sector business lines and their mission of advancing human progress.
“At Merck, we position ourselves as a vibrant science and technology company, and for that, innovation is the driving force. We are a company built on curiosity – made up of curious minds that are dedicated to human progress. In many ways, what has allowed us to thrive over these 350 years has been our emphasis on the importance of entrepreneurship, responsibility, technology, and innovation,” says Sun. “Whether it's driving the current business or developing some new technology or solutions for future growth, innovation guides us in our efforts.”
The Merck Model
The source of Merck’s long-time success is intrinsically intertwined with its penchant for innovation and deep roots in science, technology, and research and development, which the company expertly applies in Life Sciences, Healthcare, and Performance Materials. In healthcare, Merck designs and develops medicines and devices that strive to provide ongoing care for patients, focusing on allergies, cardiovascular, oncology, fertility, diabetes and thyroid diseases. In life science, Merck’s products are empowering the science community and solving their problems from drug discovery and development, to manufacturing and diagnostics. And, in performance materials, Merck’s expertise includes groundbreaking liquid crystals and OLED materials for displays, materials for the production of integrated circuits or effect pigments for coatings and color cosmetics, and functional materials for energy solutions.
Sun describes that, “As a science and technology company, we believe that for different areas and different businesses, we want to leverage our technology and our R&D to benefit our customers. For example, if you look at the healthcare industry, we put a lot of emphasis on neurology, oncology, and immuno-oncology.” She goes on to explain, “Those three areas are our primary focus and account for 80% of our pipeline. For our life science business, one of our focuses is on driving new technology in novel therapies, such as gene-editing. In performance materials, we are the leader in solutions – putting a great deal of emphasis on developing next-generation materials for semiconductors and displays. We see a great deal of synergy in these sectors.”
Innovation in China
At the heart of Merck’s industry leadership is a simultaneous commitment to both a top-down and bottom-up innovation mindset. In China, this approach to innovation manifests itself in a variety of ways and permeates out to China’s academic, startup, and technological ecosystems.
According to Sun, “Internally, we believe that the company needs to go beyond our R&D departments and our dedicated innovators, and instead we need to leverage the entire Merck workforce – we need to tap into the employee's innovative mind. As such, we engage employees in several ideation programs to achieve a holistic and bottom-up approach towards innovation.” In China, a great deal of Merck’s innovation strategy involves creating platforms in which they can look to employees from all departments who have good ideas and who have the drive to transform their ideas into viable businesses.
To accomplish this goal, Merck has institutionalized a variety of initiatives to tap into their workforce and elevate the innovative minds of the whole organization. “Through programs like Innospire,” says Sun, “we encourage employees to submit and further develop their ideas for new products or business opportunities. And, through our Innovation Think Tank, we create dedicated teams to analyze future trends and technologies through a 3-month stay at the Innovation Center.”
Simultaneously, Merck understands that leadership with an acute understanding of the importance of innovation sets the tone for the rest of the company and informs the direction an organization takes into the future. “A bottom-up approach is very important, but at the same time a top-down approach is just as important,” says Sun. “We know that innovation is something that doesn’t immediately show results over the short term, and as such does not directly impact P&L. Unfortunately, in many businesses, this reality means that not enough effort, or the necessary effort, is put forth to see the benefit of innovation efforts materialize.”
As Sun describes, ensuring innovation remains a long-term corporate strategy and not simply a menagerie of one-off efforts is often a difficult task. The solution at Merck is to look to leadership as an anchor that can see beyond the short-term bottom line and understand the compounding benefits in the future. Sophie explains that, “The driving force behind the Innovation Center and also the S&T function comes from the very top – from the CEO and the other executives – to push innovation and to establish these efforts at an organizational and company-wide level, rather than sequester innovation off into any single sector or any single commercial organization.”
Sun advises that in order to make innovation happen, top leadership needs to believe that there must be a focus on more than just existing business goals, and instead attention be given to future technologies that can help the company succeed down the line. “It is imperative that those at the top, as well as the employees, have an innovation mindset and are truly engaged in the ideation process and the incubation of ideas,” says Sun. “You need people at every level of the organization who really want to transfer their and others’ ideas into meaningful business opportunities.”
Integrating into Local Ecosystems
As corporations’ internal innovation strategies mature, subsequently refocusing efforts on external innovation becomes paramount – looking to local entrepreneurs, startups, academia, etc. for partnership opportunities that enhance the success of both parties. To this end, Merck places a great emphasis on external innovation and, today, has a litany of partnerships working to develop the technologies of tomorrow to advance human progress. “When we tap into the greater innovation and technological ecosystem, we recognize there are many key stakeholders that all play important roles, such as startups, venture capitalists, incubators/accelerators, as well as academia and the government – we actively engage with all of them,” says Sun.
In China especially, there is a vibrant startup ecosystem in which 1000’s of startups are created each year, all looking to develop solutions for consumer and corporate needs. Oftentimes, for these startups to thrive amidst the ocean of competition, a helping hand from multinationals such as Merck is the perfect solution.
“For startups, we have an Accelerator program in which we target seed stage to series A stage startups who are active in the field of healthcare, life science, performance materials and also some areas like AI-enabled healthcare solutions, liquid biopsy or biosensing and interfaces. At these intersections, we can build between one of our sectors,” says Sun, going on to state, “This is a three-month program in which we provide funding, and more importantly, we provide the startups with access to Merck internal resources. Whether the resources are commercial or research expertise, these startups get the opportunity to work with us, with our business units, with our experts, and also with other networks, such as venture capital groups. We can sometimes can even connect the startups with our suppliers or our distributors. Through this program, the startups get to benefit from the entirety of Merck’s operations in China.”
Merck also offers a two-week boot camp in Europe in which Chinese startups can learn what opportunities are available in, and what type of entrepreneurial and business environment they can expect to find in Europe. “In this program which is more inbound focused,” explains Sun, “we track and actively scout for promising startups to work with. We find startups through two different channels: some are found through conferences where we discover the startups organically, and some we connect with through different incubators or through recommendations by venture capitalists or other companies.”
Further leveraging China’s vibrant startup ecosystem, Merck enlists help from local accelerators and incubators in addition to partnerships with other leading MNCs. “When it comes to incubators or accelerators,” says Sun, “we have worked with Zhangjiang Vi Pai to aid us in finding some recommended startups in addition to finding more laboratory space. As well, we have partners such as Microsoft Accelerator in which with jointly promote corporate innovation amongst the community.”
One of the richest wellsprings of innovation Merck looks to tap into in China is the copious amounts of research institutes and prolific academic arenas found across the nation. “When it comes to universities, we tend work with the technology transfer office of universities to help us to look for those interested in working with Merck,” says Sun. “The advantage of the technology transfer office is that they can engage with an assortment of different schools. As Merck has quite a wide business, we not only look at the medical schools or biochemistry-focused departments, we look at a variety of different areas of academia. The technology office can help facilitate that. As well, we often work directly with specific professors or their labs.”
The Chinese government is yet another key player in Merck’s strategy for innovation. “We take a lot of different approaches in our innovation efforts – we want to work with all the major players in China to help startups develop technologies that can help the industry upgrade, to help the Chinese economy transform into an innovation-driven economy, and to help the government in their agenda of entrepreneurship and innovation,” say Sun.
Merck supports the Chinese government in an assortment of ways, including organizing community events and identifying and selecting promising local innovations and technologies. “For Merck’s government collaboration, we support the [Chinese government] through different ways,” says Sun. “We were the co-organizer of the Anti-Cancer Competition of the Shenzhen International Entrepreneurship Innovation Competition. We co-organized this competition which recruited startups with good ideas from nine international markets. During the competition, we supported in the evaluation and selection of the startups that would be chosen to enter the China market. In such competitions, Merck provides expertise in oncology to benefit the Chinese healthcare sector.” Sun goes on to elaborate that, “We also work with government incubators and they in turn provide us with support. Such as in the case of the Guangdong Innovation Hub in which the government guided us and helped us in the establishment of the site.”
Innovating in China Vs. Innovating Globally
With their first non-headquarters innovation hub established in Silicon Valley just two years ago, Merck’s global innovation strategy and global footprint is expanding rapidly. Now, only a year later, the China Innovation Hub is gearing up to soon be in full swing, spearheading strategy for the entire country with Sun at the helm. This rapid expansion is a testament to Merck’s acknowledgement that a diversity of thoughts, cultures, and locations holds a massive benefit to their own corporate innovation strategy and the advancement of their technologies.
“The reason that Merck wanted to have not only the one innovation center at headquarters is that we see the opportunities with different ecosystems,” says Sun, “Whether it's Silicon Valley or Israel or China, all locations have different advantages regarding the opportunities and resources they have to offer.” By establishing innovation hubs across the world, Merck is approaching innovation with a global mindset that enables the company to work with a greater diversity of efforts, initiatives, and activities.
“The difference between our China Innovation Hub and that of Silicon Valley,” Sun explains, “is that we not only look at new technologies with a global priority but also with an eye to support China’s business growth.” Sun describes how today, Merck has integrated into the Chinese business environment, with the innovation hub development as an integral part of their overall China strategy. “If you look at how we wanted to leverage our China operations, we have to engage the Chinese employees and actively understand and pinpoint what the company offers with different business,” she says. “That's something we do differently from the Silicon Valley hub.”
Another example where the China hub is different from the Headquarter Innovation Center or Silicon Valley Hub is its digitalization programs. The Digital Acceleration program focuses more on ideation so as to generate good ideas from employees and transform good ideas into prototypes and MVPs, while the Digital Curiosity program target the development of the innovation mindset to leverage the talents and skills of Merck’s Chinese employees. “We also hold online and offline activities to invite external speakers to talk about new trends and new technologies in the digital area,” Sun describes, “letting employees participate in online training and online knowledge sharing, in addition to games so that there is a lot of content and incentive for those who actively participate in the online/offline programs.” Merck also recognizes their employees for their involvement in such programs.
Eyes on Tomorrow
For Merck’s China business, the scope of opportunity for innovation addressing China-specific issues is vast, dynamic, and technologically intricate. For example, in diagnoses of ailments such as hyperthyroidism and diabetes, the diagnoses rates in China are extremely low relative to other developed countries. “If we can leverage technologies like AI to help to increase the diagnosis rate,” says Sun, “this could greatly help our healthcare business. If we can help those patient’s in their ability to be properly diagnosed using cutting-edge technology, then they really have solutions to then be able to access the right treatment. And of course, that helps those businesses.”
In China, while healthcare research and quality healthcare are at an international level in many cases, it is not always the reality in every hospital. “Currently, the healthcare resources are not very balanced. You can see that resources are mainly concentrated in the big hospitals. But, if you look at the population of China, 90% of the hospitals are not at the same level as the big hospitals. The community hospitals and the small hospitals which see most patients – the level just isn’t the same. So, if we can develop advanced tools or assisting tools with AI by working in the big hospitals, and then leverage those tools for use in the smaller hospitals, that could really help patients who don’t have the same access to quality healthcare,” says Sun.
As such, there are several innovation fields that Merck is looking at, such as liquid biopsy, bio-sensing, and AI-enabled healthcare solutions that exemplify the type of cross-sector innovation they intend to achieve in order to raise the overall level of China’s healthcare system. Sun describes that, “For AI-enabled healthcare solutions we have identified how artificial intelligence can massively affect several areas, such as with diagnosis rates and how to improve diagnosis overall. Another area is in drug discovery, and how artificial intelligence can help in clinical development to make treatments more cost effective, more accurate, and more widely available.”
Thanks to their in-depth understanding of local and global markets, and their ability to meet the needs of patients, Merck China is exploring and expanding in an array of different areas which are developing rapidly. In building out their global footprint and leveraging the creative and innovative minds of their employees around the world, Sun and Merck China are helping Merck global build off of a historic 350 year portfolio with solutions and digital technologies that will be able to provide people in China, and people around the world, with a better experience, better outcomes, and better lives.
This article was originally published in the second edition of the AmCham China Quarterly, an executive-targeted periodical focused on policy, business, and technology, driven by C-suite perspectives and insights. Clck here to get your copy of the Quarterly. To subscribe or contribute to the Quarterly, contact our editor: jpapolos@amchamchina.org