For the tenth consecutive year, the editors of R&D Magazine interviewed the CEOs of the leading independent R&D laboratories in the U.S. to determine the challenges and opportunities they face. The following is a summary of their responses.
Q: Do you expect any changes in your lab with the 2009 change in U.S. leadership?
A: The Industrial Research Institute (IRI), Arlington, Va., is particularly hopeful about the new administration. "IRI was thrilled to see a Nobel Laureate, Steven Chu, former head of Lawrence Berkeley National Laboratory, an IRI member lab, named as Secretary of the Dept. of Energy," says Edward Bernstein, president of IRI. "We are optimistic that relations between the Executive Branch and the scientific community will be much stronger and more positive than they were during the previous administration. We understand that the economy will be a factor in many policy decisions, but the role of R&D in creating a sustained recovery cannot be ignored. We are hopeful this administration will work with the scientific community toward that end."
Under new U.S. leadership in 2009, we expect increased emphasis on energy and environmental initiatives related to efficiency, energy security, and carbon emissions reduction," says David Carroll, president and CEO of Gas Technology Institute (GTI), Des Plaines, Ill. "GTI is well-positioned with active projects in each of these areas, and we anticipate increased R&D activities and partnering with federal and state agencies in achieving the goals of these initiatives."
Midwest Research Institute (MRI), Kansas City, Mo., is also optimistic. "Fortunately, MRI conducts research in areas that are more bi-partisan in nature—energy and defense—and as long as these sectors remain national priorities, there isn't as much fluctuation in the work at our labs with a change in administration," says James L. Spigarelli, president and CEO of MRI. "However, each administration does change the emphasis within the priorities, and we can expect some change in that regard. In today's environment, we see the financial crisis as the more immediate driver behind change."
Southwest Research Institute (SwRI), San Antonio, Texas, is similarly well-positioned. "Because we traditionally maintain about an even split between our work for clients in government and industry, we are well positioned to respond to new government-sponsored R&D initiatives," says J. Dan Bates, president of SwRI. "In addition, we have built our capabilities over the years across a broad range of technologies, from structural and mechanical engineering to software and intelligent systems. If the new administration wants to invest in infrastructure, we are prepared to support that. If there's new direction toward alternative energy, we can support it. If it's smarter, more efficient and environmentally friendly vehicles, we can support those, too."
Other labs will need to adapt to the new administration priorities. "Since Draper's core business is sponsored research from the government, principally Dept. of Defense and NASA, we expect that the new administration will have new priorities to which we will need to adapt," says James D. Shields, president and CEO of Charles Stark Draper Laboratory, Cambridge, Mass. "While the global economic crisis may slow the growth of the defense budget, the country will still face significant security challenges which Draper should be able to address. There is also uncertainty about the future direction of NASA relative to the Exploration Initiative."
Q: Do you expect any major changes in your 2009 R&D operating budget compared to 2008?
A: "Due to the dramatic events of late 2008, many seem to have forgotten that the current recession started in late 2007," says Bernstein. "R&D budgets for 2009 were developed well into the current recession, and therefore IRI was aware that R&D would be affected in 2009. Our "Trends Forecast" confirmed this prediction. The events of late 2008 did not seem to change overall R&D budgets, which had already been slated to flatten out after several years of R&D growth."
"We see increases in the operating budget for 2009 primarily driven by an emphasis for investments in clean energy technology needed to meet national energy goals," says Spigarelli. "That emphasis should increase the budget for NREL [the National Renewable Energy Laboratory, that we co-manage for the Dept. of Energy]. In addition, we expect that the federal stimulus package will help overcome the slowdown in R&D spending that occurred in 2008."
"We continue to see growth in our research activities over the past several months," says Bates. "It's sort of a paradox, but a weaker economy can actually put contract labs like ours in a position to take on a bigger share of work for companies that may be temporarily unable or reluctant to tie up working capital in a large in-house R&D operation. We can help them devote more of their resources to funding their core operation."
GTI and Draper forecast moderate growth for 2009.
Q: Has 2008's economic slowdown had any effect on your lab's operations?
A: Most labs are making adjustments due to the downturn, but they remain optimistic.
"In anticipation of reduced meeting attendance, we have adjusted our annual budget to prepare for reduced revenue," says Bernstein. "We have also undergone a scenario planning exercise to prepare for an even greater decline in revenue. However, we had planned a major expansion of services in some strategic areas, and these plans will not change, and for the most part we will continue to improve our value proposition."
"In spite of the economic downturn, there remains a strong interest in energy and environmental technology development—the core business for GTI," says Carroll. "We have a solid business backlog and anticipate similar revenue to 2008, though we remain cautious in light of the dramatic fall in energy prices over the last year and the availability of capital which may impact our clients."
"Sponsored research has held up well in spite of the economic slowdown," says Shields. "We did have to address refinancing variable-rate bonds that were issued in 2000 to finance our buildings, but while the economic climate created this problem and made it a challenge, we were able to complete this financing successfully in October."
SwRI feels that they are in an even stronger position. "We would expect some adjustments as the year goes along and our clients adjust to changing economic demands," says Bates. "We started our fiscal year last September in a relatively strong position, coming off a year of record revenues. We operate 11 separate divisions in an entrepreneurial atmosphere which allows us to adapt to changing economic conditions. That gives us a competitive advantage for our clients who know we can react quickly to changes in workflow and workloads in multiple areas."
Q: Has your staff recruitment situation changed over the past year?
A: "We have experienced significant growth at NREL that resulted in recruiting more than 200 new staff in the past year," says Spigarelli.
"Our workforce grew more than 10% in 2008 and we're near full staffing for our current business. Our leadership team is well-established and we expect to hire selectively to fill science and engineering positions in strategic growth areas," comments Carroll.
SwRI saw similar growth. "We increased overall staffing by just under 10% this past year. We continue to attract, and just as importantly, retain, top quality personnel. Our turnover rate among staff is 7%, about half the national average of the R&D industry as a whole," says Bates.
IRI and Draper saw more moderate growth. "We recently brought on new staff, which is consistent with our continued growth, however, we have also delayed the hiring of other staff until we are more confident in our fiscal projections," says Bernstein.
"Because we have completed the design to extend the life of the Trident Mk6 missile guidance system and are building the first flight test units, Draper's staffing needs have moderated this year so that we will add only about 4% net new staff," says Shields. "We have continued to be able to attract very high quality staff to the Laboratory."
Q: What's the most significant change that occurred in your lab in the past year?
A: Growing lab facilities were a major focus of these labs in 2008. "Draper established two new facilities in Florida this year," explains Shields. "One of the facilities is a BioMEMS Research Center in collaboration with the Univ. of South Florida, which we expect to accelerate the growth of the Laboratory's biomedical systems work. The second is a multi-chip module development center which will focus on the development and low volume supply of vanishingly small systems for specialized applications for our government sponsors. We expect that this facility will enhance our ability to work with the U.S. Special Operations Command due to the close proximity of our new location to the command's headquarters."
"We just completed a $25 million renovation of our MRI's headquarters and laboratories in Kansas City, and we have three significant construction projects underway at NREL," says Spigarelli.
"In addition, in 2008, R&D Magazine selected NREL's Science and Technology Facility (S&TF) as one of the best laboratory facilities built in the U.S. in 2007," adds Spigarelli. "The S&TF is a 71,000-ft2 research laboratory that was the first federal laboratory building to achieve the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) Platinum designation as one of the world's most energy efficient and environmentally friendly buildings."
"GTI continues to grow its laboratory facilities to address priority areas in energy and environmental research," says Carroll. "We are nearing completion of the expansion of our Advanced Gasification Test Facility, which represents a significant addition to our capabilities in gas production, processing, and cleanup technologies. We also recommissioned the laser applications lab to evaluate the potential of high-power lasers for downhole well completion and production activities."
IRI's most significant change was more technical. "We are investing heavily in new knowledge management systems," says Bernstein. "We made these investment decisions prior to the banking collapse in the fall, however, we expect that the increased access to IRI content through the Internet will help those who cannot participate directly. We are building our Webinar capacity and using other distance learning techniques to enhance our educational events in order to ensure that travel does not become a critical barrier to extracting the full value of IRI."
"Our greatest change over the past year has been more in the way of renewal," explains SwRI's Bates. "Four of our 11 technical division VPs were promoted to their positions within the past year. At the same time, and this is quite significant, all four were promoted from within. We have strong succession plans throughout our technical divisions, which enhance our overall organizational stability."
Q: Has your relationship with academia, industry, or government labs changed significantly over the past year?
A: "We are increasing our collaboration with all sectors—academia, industry, and government—in order to have a greater impact in solving some of the most challenging and complex national problems," says Spigarelli.
"Draper continues to work very closely with a wide range of government, industry and academic organizations," explains Shields. "Our Draper Fellows Program, where we support graduate students at leading universities, such as MIT, Harvard, and Rice, that are near our operations allows us to maintain an active relationship with leading research professors in our areas of interest. These relationships are also facilitated by the more than $2M of campus-based research that Draper funds annually."
Q: Has your lab's focus changed over the past year with regard to energy research, homeland security, or climate change?
A: Energy is a major focus of all of the labs. "Natural gas is a secure domestic energy resource with the lowest carbon footprint of the fossil fuels," explains Carroll of GTI. "We've seen increased project activity driven by fuel prices, renewable energy, energy security, infrastructure, and energy efficiency. Our business related to alternative energy options—such as syngas and liquid fuels production from coal and biomass, and biogas from renewable resources—have experienced strong growth in 2008."
MRI's research focuses are similar. "We continue to focus on energy research, much of which is related to climate change, and homeland security. They have always been focus areas for MRI," says Spigarelli.
"Draper's energy initiative, which is in its second year, is building momentum," says Shields. "Our focus is on leveraging our expertise in instrumentation and controls to improve the efficiency, safety, and security of existing energy systems. Specific areas of research are directed at coal plant efficiency and improved management of the power grid."
"We have seen some new opportunities in alternative energy research over the past year, largely due to fuel-price volatility," explains Bates. "We are seeing new opportunities to turn some of our existing expertise in geology and hydrology toward new strategies for mitigating greenhouse gases. In addition, homeland security has been a big part of our government-sponsored work for the past eight years, as have new technologies for the warfighter."
Q: What's your lab's latest hot technology?
A: "We have a new electrostatic precipitation (ESP) technology that efficiently collects micron-sized particles for the defense industry and has many advantages over inertia-based systems," says Spigarelli.
"Draper's work in integrated ultra-high density (iUHD) electronics packaging offers the potential to reduce volume by an order of magnitude over our current multi-chip module technology, which already reduces the volume of electronic circuits by a factor of 100 over conventional surface mount technology," explains Shields.
"If there's a hot technology these days, it's probably intelligent vehicles that communicate with each other and with the roadside to improve traffic safety," says Bates. "Through our internally funded R&D program, some of our engineers modified a production SUV into an autonomous vehicle that they demonstrated last fall in downtown Manhattan. It stopped at stop signs, interacted with traffic, and avoided pedestrians crossing the street, all with no input from the driver."
"The application of lasers to downhole operations is showing potential for high benefits to natural gas producers," says Carroll. "Continued advancements in compact gasifiers to produce syngas from solid feedstocks will improve viability and help expand the clean energy portfolio. We're qualifying new fuels to ensure safe introduction into the delivery infrastructure and providing companies with solutions for compliance with pipeline regulations. High-efficiency boilers and other energy utilization equipment are of high interest to government, industry, and consumers. In fact, GTI won a Chicago Innovation Award in 2008 for the SuperBoiler, a watertube boiler that achieves 94% efficiency in a compact, modular design. And we're investigating solar thermal–natural gas hybrid technologies for hot water/steam generation and thermal-driven gas cooling to lower energy costs and carbon emissions."
Published in R&D magazine, February, 2009, p0p. 12-14.
