A Strategic Balance
Commercial success for high-technology companies never occurs without a strong commitment to research and innovation.
As part of its R&D 100 Awards program, the editors of R&D Magazine hold an annual roundtable discussion that addresses outstanding trends and issues in research and development. This year, the Industry Executives’ Roundtable, held Nov. 7, 2013, in Orlando, Fla., focused on industrial research, featuring executives from several organizations that invest heavily in R&D efforts. These organizations all won 2013 R&D 100 Awards.
Representing the chemical, automotive, electrical equipment and scientific instrumentation industries, the participants discussed a variety of issues facing most of today’s research organizations, including innovation strategies, big data, partnerships, talent management and identifying market opportunities.
Market needs guide R&D efforts
Industrial organizations have increasingly adopted carefully considered research protocols that help them manage their product line while also allowing them to develop intellectual property (IP) and take advantage of new market opportunities.
PID Analyzers LLC, Sandwich, Mass., a maker of environmental instrumentation, pioneered a new market area several years ago when it developed the first portable photoionization detectors. That technology was recently used to develop an arsenic detector, helping the company expand into the food and water testing markets. The company’s recent success in the marketplace, says PID Analyzers President Jack Driscoll, stems in part from a decision made two years ago to put more time—up to 50%—into R&D.
“It’s had a big impact on the time it takes us to develop products and the time it takes us to address problems. We can often sort things out in days rather than months,” says Driscoll.
Thermo Fisher Scientific, Waltham, Mass., has a large and diverse product portfolio that demands a different R&D approach. According to Dan Shine, president, Chromatography and Mass Spectrometry, reliance on a five-stage product development methodology compels the company to focus more on product development than on fundamental research.
“Our current process looks at where projects are, the status of them, and we watch that closely. We go through an annual process of prioritization to make sure we’re picking the highest impact projects,” says Shine.
Despite this, Thermo Fisher Scientific has a number of “blue sky” research efforts and programs that help evaluate ideas. For the best ideas, the company looks at the lifecycle stage for the product area of concern to determine the potential for product differentiation.
“One core tenet of our philosophy is around differentiated products. We want to make sure that whatever products we’re investing in or bring to market are, from an R&D perspective, really unique to the marketplace,” says Shine. “We have a tremendous breadth of technologies across our large company, and we think we can try to identify new ways to put them together to provide new information about sample analysis, and provide speed for our customers.”
At Toyota Research Institute of North America (TRI-NA), fundamental research is a core goal. A research arm of Toyota Motor Company’s Toyota Technical Center, established five years ago, TRI-NA is a counterpart of Toyota’s R&D laboratories in Japan that develops sustainable mobility solutions, such as coldplates for vehicle electronics.
“We actually have several different models for doing research. More recently we’ve been focusing more heavily on in-house research, where the researchers will actually develop a lab themselves and focus on doing the research with resources that are basically within our own organization,” says Ercan Dede, principal scientist in TRI-NA’s Electronics Research Dept. As a developer of consumer-oriented products, however, much of the research institute’s activity is focused around the customer.
For larger companies, R&D expenditures are significant. The Dow Chemical Company, Midland, Mich., for example, spends about $1.6 billion a year on research. One of the company’s principal divisions, Dow Microbial Control, Buffalo Grove, Ill., develops biocide and antimicrobial technologies that contain dangerous microorganisms and preserve materials and operates 12 laboratories globally.
According to Rick Strittmatter, Dow Microbial Control’s global director of research and development, his organization is large enough to effectively innovate while still meeting day-to-day business needs in part because it was consolidated from nine biocide companies, including Union Carbide, 10 years ago.
“Because of our size, we have the critical mass to support existing business with strong technical support, but also the luxury of truly innovating, finding new technologies that aren’t in existence,” he says. Chemical companies often focus more on operational or manufacturing excellence, but Dow keeps innovation as a central component to its mission.
“The overall philosophy for our entire business, not just R&D, is market-driven application science. We do emphasize that we’re in the business of science and technology, not necessarily products. So the R&D team has to own the application science,” says Strittmatter.
Technology advances through collaboration
In developing products, companies large and small must consider regulations, competition and IP management, in addition to core technology. Partnerships help facilitate this process.
At Thermo Fisher Scientific, numerous formal collaborations with universities are managed through specific agreements designed to foster activities such as engaging in new research, information sharing, graduate student training and publishing new methodologies. In addition, the company maintains informal collaborations with users of their products. Feedback from these users at academic institutions worldwide has become important to the company’s product development efforts.
“The informal collaborators are really the users of our instrumentation. They are seeing where the science is going and providing input back to us through the voice of a customer, saying these are the roadblocks we expect to run into, saying ‘We’d love to do this if only we could.’ We’ll hear that and then we’ll start doing some more fundamental research in that area once there is a real identified need that is more broad-based,” says Shine.
Strittmatter sees similar growth in this type of partnership.
“At Dow we have a formal, strategic university program, and we try to focus on universities that have ‘seen the light’ with regard to IP. These master agreements really lower the burden on negotiating every time we do a R&D program,” says Strittmatter.
Not every organization sees growth in academic collaboration, but this often depends on the nature of industry. As an arm of the Toyota Motor Corp., Dede’s Toyota Research Institute is focused on generating its own IP. In recent years, he says, the institute has done a lot more in-house research.
“We’re still doing collaborations with universities and professors, and those have different forms, but bringing the research in house and doing it ourselves is really a key part of it,” he says.
For smaller companies such as PID Analyzers, a strong entrepreneurial approach helps considerably. Driscoll is actively engaged in organizing forums that bring similar chemical companies together with organizations from industries, such as biomedicine, that could benefit from their products and services. An active effort to connect with venture capital is also part of the strategy at PID Analyzers. Driscoll says access to other companies is often derived from participation with industry organizations, such as the American Chemical Society (ACS).
“At the national meetings we organize symposia to bring companies in to talk about their experiences. In some cases they need some help, and we’ll kind of work with them either directly or through the ACS to provide some of the help that they need,” says Driscoll.
This sort of interaction can open awareness to new market opportunities. After realizing that 70% of the apple juice consumed in the U.S. comes from China, Driscoll began focusing on the market, as well as testing for arsenic in rice.
Dow Microbial Control, as part of a large chemical company, also interacts heavily with small companies as well as academic institutions and government agencies.
“We do a lot of projects where we pick up technology from startups, entrepreneurs, academics and government after it’s already gone through proof-of-concept or early-stage development and then try to develop the application science around that technology and then bring it to market,” says Strittmatter.
Sometimes, collaborations occur as the result of forces outside the normal market activity of the industry. This is true in the case of regulator issues.
“A specific example of this access is the area of fracking,” says Jakob Gudbrand, head of Chromatography, Thermo Fisher Scientific, which is working with the U.S. Environmental Protection Agency to analyze hydraulic fracturing’s processes and effects. “We’re sitting on that scientific board to help advise and gain insight on where their trends are going and what type of technologies may be deployed inside that growing space.”
The value that panelists placed on collaborations is high, and they say that government agencies and partner industrial organizations generally benefit from having access to another organization’s capabilities and ideas.
“We definitely gain a lot of value getting outside perspective on what we’re doing. It’s a great forum to share thoughts and ideas. We definitely benefit from it. I think it has accelerated and will continue to accelerate these kinds of relationships,” says Gudbrand.
Balancing objectives, challenges
Each organization at the Industry Executives’ Roundtable has a different approach to R&D. Dow Microbial Control has both an R&D group and a technical services group. The R&D group, which represents 20% of the division resources, is responsible for longer-term objectives, including new market and new technology platforms. The technical service group, which accounts for 80% and is managed by Strittmatter and Dow Microbial’s commercial director, is more focused on customer needs and delivering business.
Dede’s organization is able to focus more on long-term research, he says, but partnerships with universities or in-house projects sometimes demand consideration for immediate product needs from Toyota Motor Corp. From 60 to 70% of TRI-NA’s activities look two or three product generations ahead, but occasionally a study needs to be completed in a month or two.
“As a research organization, we have to do a little more toward the development side and a little less towards the research side, but I think that’s why it’s called R&D. It’s a balance,” says Dede.
To manage a product portfolio spanning several divisions and numerous technology areas, Thermo Fisher Scientific has developed a sophisticated process for evaluating long-term and short-term research efforts.
“Our R&D projects walk through a prioritization process. We define a series of filters whereby we select and rate these different projects, and this ends up being reviewed and selected relative to the specific strategy that we have for the business,” says Gudbrand.
A filter, he says, could be IP, or access to IP. Whether or not that area represents an opportunity depends in part on whether Thermo Fisher Scientific can deliver IP effectively. If so, product differentiation would occur. If not, the area may already be saturated with IP.
One area that Shine and Gudbrand are looking closely at is public health, which they say is a crucial macroeconomic trend that Thermo Fisher Scientific is in a position to address.
“From a safety perspective, if we look at food safety and drinking water, many of our instruments play in that space as well. I think Thermo Fisher is well positioned to meet those macroeconomic, culture-wide issues, and I think we’ll definitely do what we can to support those efforts,” says Shine.
Both Dede and Strittmatter pointed to energy independence as a defining goal for the U.S. and its industrial base. The pursuit of new solutions in energy is not only important, they say, it’s an opportunity. Energy should not be seen as a threat.
“Energy research represents growth in real value by creating jobs such as manufacturing. Embracing energy independence and the political stability that comes with that is one of the biggest challenges we face. And we have to move quickly on that,” says Strittmatter.
Another challenge is the willingness of the federal government to support fundamental research, and the role it plays in educating future generations of science, technology and engineering companies. In addition to dealing with government funding under pressure, the ability of companies to find skilled workers could be more challenging in the future.
“A lot of the fundamental research does tie back to grants. It ties back to the National Institutes of Health and other sources of funding. There is a lot of pressure in Washington these days to reduce that spending,” says Shine.
According to Dede, many of the most skilled researchers, with doctorates, arrive from overseas and leave because they either cannot get an academic job or do not find opportunities in industry.
“Science and technology, engineering, mathematics: All of these skills are basically leaving the country right now. If we can create these opportunities for jobs related to engineering using these science and math skills, I think there is a lot of opportunity for the country,” says Dede.
Shine agrees, saying that organizations like Thermo Fisher Scientific can help by consciously casting a wider net for skilled researchers: “From a diversity and inclusion perspective we need to broaden the pool of people that have that expertise, not just people that have traditionally gone into those fields, but attract new people who want to do that, whether it’s more women inside science or other nationalities.”
At PID Analyzers, Driscoll participates in the National Chemistry Week at the Museum of Science and the Boston Children’s Museum. The organization reaches about 3,000 K-12 students, and his work with the Boy Scouts has connected with 400 more.
“I think that if the U.S. is going to maintain their technology edge in the future, then we have to have better educated people in science, technology, engineering and math,” says Driscoll. “We do a lot of work with STEM because, I think, STEM is the only thing that’s going to save us in the future.”