R&D's New Face

Is R&D going down the tubes in the U.S.?

Pundits have taken to bemoaning a retreat by U.S. industry from basic research. And indeed, it's easy to find research labs whose glory days have come and gone -- Bell Labs comes to mind. But consider this: IBM, Microsoft Corp. and Hewlett-Packard Co. collectively spend $17 billion annually on research and development.

That's right: $17 billion.

While much of that is for product development, hundreds of millions flow into areas like computational biology and nanotechnology, which may take years to bear fruit, if they ever do.

It's significant that all three companies have recently seen major changes like these in their research labs:

• In July 2007, IBM named a new research director and announced plans to invest more than $100 million in each of four long-term research projects.

• A month later, HP brought in a new research director and launched a strategy based on five mega-areas of IT research.

• And this year, Microsoft announced that it would greatly expand its research campus in Beijing and open a new lab in Cambridge, Mass.

Although their research agendas are strikingly different, the three have one important thing in common: They're all increasingly reaching out to collaborate with universities, customers and other companies. With that comes a new openness that can enrich and speed the flow of ideas into the marketplace.

"R&D is basically seeking out new knowledge, and the question is, Where are the good ideas?" says Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley. "After World War II, the good ideas were loaded up in a small number of large companies." Universities generally disdained working with industry, instead relying on the government, which was eager to fund research that might help win the Cold War.

But once the Cold War was won, much of the federal largesse dried up. "Product markets got more competitive, and those big companies couldn't sustain the long-term investments in research that they could in the earlier period," says Chesbrough.

Into the breach stepped smaller technology companies, universities, companies in Europe and Asia, and even customers. "So today, no one has locked up the really good ideas," Chesbrough notes.

He says HP, IBM and Microsoft are all demonstrating a move toward "open innovation," which means that good ideas come from both outside and inside and that companies take the fruits of those ideas to market via both internal and external paths.

HP Labs: Five Big Bets

In March, less than a year after it hired Prith Banerjee as director of HP Labs, HP announced that it would shift its focus from a large number of smaller research projects to a few "big bet" projects in five areas: information explosion, dynamic cloud services, content transformation, intelligent infrastructure and sustainability. "These are the big research challenges that we think are most important to our customers in the next decade," says Banerjee, formerly the engineering dean at the University of Illinois at Chicago.

Explains Banerjee, "We had taken the approach of letting 1,000 flowers bloom and hoping a few would pan out. We'd have two or three people on a project, but now we'll have 20 to 30 large projects, each with 10 to 20 researchers working in teams." HP Labs has a total of 600 researchers in seven labs around the world.

Some observers have suggested that the new strategy was yet another retreat from long-term basic research. But Banerjee insists otherwise. In the past, he says, less than 10% of HP Labs' budget went to exploratory, or "blue sky," research. Under the new plan, spending will be split evenly among such research, applied research and advanced product development.

A major thrust is more collaboration with other companies, universities and venture capitalists. The HP IdeaLab Web site gives would-be partners sneak previews of prototypes. In May, HP asked universities for ideas on collaboration in its five research areas.

Of course, this strategy is backed by bottom-line business sense. It not only allows HP to cull ideas from a wider pool; it also lets it mitigate risk and share research costs.

Still, Chesbrough finds it interesting that HP "would bring in not a career engineer or scientist from the company, but an academic. Instead of the go-it-alone attitude, I see this as evidence of a much more collaborative, distributed process."

IBM: 'Collaboratories'

IBM has given up the insular approach to research that marked its earlier years, Chesbrough says. While the company remains strong in basic research in materials, semiconductors and the like, it has turned its efforts more toward services and support technologies, he says.

Shortly after John Kelly ascended to the top of IBM Research, he announced that IBM would spend more than $100 million over three years on each of four "high risk" basic research areas: nanotechnology, cloud computing and Internet-scale data centers, a new integrated systems and chip architecture, and managing business integrity through advanced math and computer science. Another 15 research topics would be funded at $30 million to $50 million each, and many more at lesser levels, he said. And IBM would increase collaboration.

Part of the new game plan is "collaboratories," mostly small, regional joint ventures with universities, foreign governments or commercial partners that tap into local skills, funding and sales channels to quickly get new technology into the marketplace. For example, in February, IBM said it would form a nanotechnology collaboratory with Saudi Arabia to develop and market water desalination, solar energy and petrochemical applications.

Mark Dean, a vice president at IBM Research, says IBM is adding some big exploratory projects. "For example," he says, "how does DNA interact with carbon nanotubes for self-assembly of circuits?"

Dean says IBM is increasingly collaborating with customers. For instance, it is working with "a prominent candy company" to apply a prototype Web analysis tool to find hidden patterns and meanings in structured and unstructured information. The tool, he explains, "will look at trends and biases within a culture to predict whether a particular brand of chocolate will be bought."

MSR: Academic Model

Microsoft Research Director Richard Rashid makes no secret of his operating model: "The work we do is not that different from what you'd find at Stanford or Berkeley or Carnegie Mellon, in the sense that it is publishable basic research that is peer-reviewed. Our research may have a short-term impact on the product groups," he says, "but that's not why we do the work; it's a consequence of the work."

Because Rashid's philosophy is to first do good computer science and then see where it might fit, he focuses first on people. An example is the new Cambridge lab. "You don't establish a lab without the right person to do it," he says. "We had a great researcher, Jennifer Chayes, and she was really excited about a lab in that area. If it wasn't for her energy and initiative, it probably wouldn't have happened."

To be sure, many of the 272 research projects named on the MSR Web site are designed with major product lines like Windows or Xbox in mind. But many seem to have no likely application in anything the company sells today.

"We are growing outward into areas where computer science intersects with other disciplines, like AIDS research, computational biology and the environment," says Rashid. "We are increasingly engaged where computer science is making a big difference in the way other sciences are done."

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