Is Your Corporate Lab Taking Enough Risk?

Abstract

If not, it's hardly worthy of being called a research laboratory. Being Director of Corporate Research & Development for a multiproduct company is a task only the most self confident engineer or scientist should consider. Holding your own and defending R&D in the debate over funding can make or break the long-term success of a business. And if the research director does not vigorously push the efforts on new product and business development, it is unlikely that the CEO or other functional managers will push for the funding of longer-term projects. The R&D leader must also recognize that the past decade has seen the central laboratories of multiproduct companies become more relevant to company needs than ever before. Hobby shops-scientists pursuing intriguing ideas with no visible connection to business priorities-are no longer tolerated. This is a positive trend, but it shows signs of being accompanied by a negative one: an unwillingness on the part of some central labs to take enough risk. Short-term, Low-risk Focus The same decade has seen less interest in diversification on the part of multiproduct companies. They are more interested in gaining market share and increasing margins than in diversifying into new areas. When they do diversify, it is often by acquiring a single-product start-up. As a result of these trends, central labs tend increasingly to exploit rather than extend their core competencies. They rarely branch into new areas, or do basic, fundamental or exploratory research. Instead, the central labs respond to requests from business leaders that emphasize short-term, low-risk programs. The labs aim to improve productivity, reduce costs, meet changing product specifications, and make other types of incremental improvements that will improve the bottom line quickly. There is nothing wrong with these priorities if that is what a company requires, and for the past decade this was often the case. But eventually every business needs a shot of new technology, and if it is not coming from the research center, that fact had better be recognized and a licensing or acquisition program established to replace the company's own discovery and research process. Recently, this strategy has been well served by hundreds of high-tech start-ups, taking big risks on new technology-and seeing their payoff coming from being acquired by an established company. This worked well for a decade, but my own experience suggests that we should not rely on it indefinitely. Unless our large multiproduct companies, and especially their central labs, remain willing to take well-thought-out, intelligent risks, the U.S. will forfeit a competitive strength that historically has been extremely important to it. Risk-Taking Vital at GE Looking back on my own career, taking that kind of risk was vital to GE Medical Systems when the CT business exploded in the 1970s, based on Godfrey Hounsfield's breakthrough at EMI. X-ray equipment companies recognized that they had to respond. Most did so by adopting Hounsfield's original system and making incremental improvements, such as increasing the number of photo-multiplier detectors from two to six or twelve. Engineers at GE Medical Systems were similarly inclined. But people at GE's corporate laboratory proposed not merely increasing the number of detectors but changing the entire geometry of the system. Rather than scanning with Hounsfield's combination of a thin pencil beam of X-rays and a combination of two motions, translation and rotation, they suggested the use of a fan beam and rotation only. This had the promise of reducing the scan time from minutes to seconds, greatly increasing the medical usefulness of CT. The researchers warned us of the risks. It would require 300 X-ray detectors, and they would have to be of a new and untried type. However, our people had several ideas for making this new detector array. …