“Accessing Supplier Innovation”

1. “Accessing Supplier Innovation” Road warrior or road kill; it’s your choice Gene Slowinski Rutgers University & Alliance Management Group, Inc. a PRTM affiliate gene@strategicalliance.com 908 234-2344

2. Whatis Open Innovation? “Open innovation is any external collaboration whose purpose is to obtain or co-develop a technology, material, product, process, brand or other opportunity on either an exclusive or preferred basis.” Some products enabled by Open Innovation…

3. In today’s ultra-connected and ultra-mobile society external technology and capability are literally at one’s fingertips Those who are able to access and implement external technology into their innovation process will have a major competitive advantage Consumers see faster more radical innovation and will demand more and more Our own skill set is no longer unique leading to rapid commoditization of our business Whyengage in Open Innovation? Individuals, companies, and organizations with resources relevant to our business Our Firm’s R&D capability We must connect to compete and re-invent our innovation process

4. Manage Want Find Get What tools, metrics and management techniques will we use to implement the relationship? What external resources do we need to succeed in our mission? What mechanisms will we use to find these resources? What processes will we use to plan, structure and negotiate an agreement to access the resources? Transformational Growth: Industry is accessing the world for innovation The “WFGM” Model

5. The strategic use of alliances The traditional model

6. The strategic use of alliances The network model

7. Network Structure of Industry

8. Network Structure of Industry

9. Value added chain

10. Manage Want Find Get What tools, metrics and management techniques will we use to implement the relationship? What external resources do we need to succeed in our mission? What mechanisms will we use to find these resources? What processes will we use to plan, structure and negotiate an agreement to access the resources? Transformational Growth: Industry is accessing the world for innovation The “WFGM” Model

11. The “Want” equation is simple but powerful A + B = C Internal resources + external resource = meet customer needs

12. Palomar Medical Signs Agreement With Johnson & Johnson Consumer Companies to Develop Home-Use, Light-Based Devices for Skin Rejuvenation, Acne and Cellulite BURLINGTON, Mass., Sept. 7 /PRNewswire-FirstCall/ -- Palomar Medical Technologies Inc (Nasdaq: PMTI) said today that they signed an agreement with Johnson & Johnson Consumer Companies, Inc ("JJCC"), a Johnson & Johnson company, to develop, clinically test and potentially commercialize home-use, light-based devices for (i) reducing or reshaping body fat including cellulite; (ii) reducing appearance of skin aging; and (iii) reducing or preventing acne. Palomar Medical and Gillette in Next Phase of Development Agreement Jun 30, 2004 Palomar Medical Technologies Inc. and The Gillette Company announced that they have completed the initial phase of their agreement to develop and commercialize a home-use, light-based hair removal device for women, and both parties will move into the next phase.Palomar will now disclose additional proprietary information to assist the parties in completing the development and commercialization of the device. In conjunction with entering this next phase, the parties have amended the agreement to provide for additional development funding to further technical innovations.

13. Working with Suppliers

14. Company A Slow, cumbersome decision making We must own ALL IP One financial model for commodities and innovation Cannot sell to competitors Company B Fast, efficient, repeatable process Rights-to-use IP allocated to partners based on business needs Multiple financial models based on innovation content First into the marketplace, royalty on competitor sales Which Company will a Supplier Chose?

15. The Food Industry

16. William R. JohnsonChairman,President andChief Executive Officer

17. Portfolio of Alliances Research - sponsored research at various Universities -Senomyx Distribution - exclusive retail distribution agreements for:

18. The Chemical Industry

19. Imperial College Protexeon APTech Database John P. Jones III

20. Dow Corning Corporation has launched the External Equipment Provider Alliance with nine leading companies from the electronics assembly and packaging industry. 2004.10.19Dow Corning Partners In A New Photonics And Electronics Research Consortium Dow Corning Corp. announced today a strategic partnership of a new photonics and electronics scientific consortium based at one of the world’s premiere research universities.

21. The Consumer Products Industry

22. Competition in Home & Personal Care is fierce

23. Manage Want Find Get What tools, metrics and management techniques will we use to implement the relationship? What external resources do we need to succeed in our mission? What mechanisms will we use to find these resources? What processes will we use to plan, structure and negotiate an agreement to access the resources? Transformational Growth: Industry is accessing the world for innovation The “WFGM” Model

24. The Alliance Framework • A rigorous process for planning and negotiating an alliance. • Developed in the electronics industry to create high quality deals quickly or, to understand that a deal is not possible …, quickly. • Requires input from all key stakeholders    Adopted by many Fortune 500 companies.

25. Why alliances fail !

26. Alliance Framework Elements • Typical Elements: • Objectives (ours, theirs) • Roles (ours, theirs) • Overall resources • Boundaries • Market model • Strategic exclusivity • Intersections with the potential alliance • Business plan summary • Detailed objectives and detailed resources • Financial pie-split • Intellectual property • Working process and governance • Term and termination • Alliance structure

27. Becoming the “Partner of Choice”

28. What Partners DO NOT Want ! • Why companies lose deals: • Low offers, claim to have no money • Slow, cumbersome decision making processes i.e., committee after committee that only meet once a month • Ad hoc process for creating alliances • Ad hoc processes for managing alliances • Favor internal products at the expense of the partner’s product • Unwilling to take the partner’s strategic needs into account both inside and outside of the boundaries of the alliance • History of lost or lousy deals • Continual turnover of key alliance personnel • Do not learn from prior alliances • Unwilling to listen to the partner’s view and take advantage of their expertise • No alliance training, processes or diagnostic capabilities

29. A complete system Integrated into the established organizational structure A widely applicable system From simple deals to multi-party global alliances • A flexible system • Applicable at any step • Adaptable to variations in management style and organizational structure • Incorporates feedback loops A fast system Requires a streamlined decision-making structure A stakeholder-created system People support a system they help create • A learnable system • Must be understood by people of varied background and experience levels • Includes training and support An improvable system Adjustable to reflect new learnings and organizational changes • A top management-supported system • Adequate resource commitments • Decision-making processes tied to the system

30. Manage Want Find Get What tools, metrics and management techniques will we use to implement the relationship? What external resources do we need to succeed in our mission? What mechanisms will we use to find these resources? What processes will we use to plan, structure and negotiate an agreement to access the resources? Transformational Growth: Industry is accessing the world for innovation The “WFGM” Paradigm

31. The Alliance Implementation Program • Twelve tools born from the ashes of thirty failed alliances. • Designed with the help of very thoughtful people • Widely adopted in the pharmaceutical industry but adaptable to any industry

32. Tool 7 - Protecting Know-how and Trade Secrets • What Intellectual Assets • Must we share • May we share • Must never share

33. Thank You

34. “Accessing Supplier Innovation” Road warrior or road kill; it’s your choice Gene Slowinski Rutgers University & Alliance Management Group, Inc. a PRTM affiliate gene@strategicalliance.com 908 234-2344