Does Consortium Research Belong in My Business Strategy?

Abstract

Distinguished Author Series Summary We are seeing a revolution in the way that R&D affects the strategic plans of businesses and governments. Business and government leaders are acutely aware that the future belongs to those who can capture the benefits of rapidly advancing technology. Yet for many companies, the cost of developing and commercializing advanced technology is becoming prohibitive. While the complexity and risk of developing advanced technology are escalating, the time cycle for successful market introduction is shrinking. To manage corporate costs, more private organizations are downsizing their R&D functions. Concurrently, there is an increasing need for technological contributions to current business problems and new business opportunities. These marketplace forces have spurred the growth of collaborative research among corporations, including the establishment of consortium research organizations. This paper addresses some of the most important issues associated with consortium research. Why is collaborative research so attractive today to business and government leaders? What are the downsides? What should one expect from successful consortium research? Introduction In the last 50 years, technological innovation has created a world vastly different from that of the World War II generation. Then, owning a television set was rare, and those who did received only a few live black-and-white programs over a limited broadcasting schedule. Now, it is common to have several color televisions per household, each receiving 24-hour broadcasts of scores of programs through cable technology. The family doctor who used to make house calls armed with only medical training, simple medications, and few diagnostic tools has segued into a complex medical industry in which organ transplants are routine and sophisticated diagnostic equipment challenges our financial resources. The pace of technology advances must be maintained to meet worldwide expectations of an increasing standard of living. However, technology innovation itself has become more complex, more costly, and riskier from a business perspective. One way that organizations are responding to these challenges is by collaboratively supporting research through consortia. Early consortia in the U.S. were generally liaisons established between government and academia to pursue a vital national objective, such as national defense or improved health care. Similarly, the early consortia in the private sector were liaisons between industry and academia. Their efforts were directed primarily at fundamental research that did not affect the near-term business prospects of the corporation. The scientific results from this precompetitive R&D were considered an industry-wide resource. Individual corporations were challenged to convert the basic research results into their competitive advantage. Corporations maintained adequate R&D staff and funding to capitalize on the public results and to conduct independent research to improve their competitive edge. In the face of increasing business pressures and with the advent of federal regulations that allow the formation of consortia without violating antitrust regulations, industries recently created "stand-alone" consortium research organizations. These consortia range from loose alliances, such as a temporary R&D sponsor pool with research directed at a specific issue, to the more formal and enduring relationship, represented by an industry R&Dinstitute. Table 1 lists several types of consortia. Each model provides industry with a unique and flexible mechanism to achieve its business goals. Successful industry R&D institutes include the Electric Power Research Inst. (EPRI) for the electric power industry, Sem-atech for the semiconductor industry, Bellcore for the communications industry, and the Gas Research Inst.(GRI) for the natural gas industry. Because these organizations represent different industries, they have different supporter needs. Consequently, the philosophy and mission of these R&D institutes vary considerably. For example, a highly competitive industry like the computer industry would tend to support fundamental (precompetitive) research cooperatively. The companies anticipate that their own corporate R&D functions will make more effective (i.e., profitable) use of the scientific research results than other cosponsors. In contrast, a completely regulated industry would more likely support consortia that both develop and deploy advanced technologies to maintain industry competitiveness, perhaps against foreign encroachment (imports) or a domestic competing industry. Thus, the nature of a particular consortium, its operating characteristics, and its sponsors' expectations will depend, not only on the type of consortium, but also on the industry it serves. Even so, much can be learned about R&D consortia in general by examining the characteristics of a specific consortium. For this reason (and because of personal experience), I use GRI here as a focal point for discussing both the advantages and difficulties encountered in conducting consortium-based research. P. 531^