October 2001

Intel Revamps R&D

A shift in strategy could help broaden the firm's horizons.

By Robert Buderi

Bring up the U.S. Defense Advanced Research Projects Agency (DARPA) in technology circles, and most people will think of the blue-sky research that the agency funds, like the work that spawned the Internet (see "DARPA's Disruptive Technologies,"). Bring up Intel, and a different image comes to mind: a not very imaginative research-and-development program that cranks out one Pentium processor after another. Great stuff, but hardly research capable of producing tomorrow's technological breakthroughs.

That could all change, as Intel's research director David Tennenhouse is engineering a sweeping overhaul of his organization, modeled largely on DARPA. Tennenhouse, who directed DARPA's Information Technology Office for three years before joining Intel in late 1999, says the problem is straightforward: although Intel will shell out more than $4 billion this year for R&D-ranking it among industry's top spenders-the company rarely ventures off the familiar semiconductor road map into emerging areas like ubiquitous computing, wireless networking and biological computing. But such "disruptive research," Tennenhouse says, is "the research that's going to lead to new business for Intel or open up areas that are going to jar the road map."

Tennenhouse bills Intel's new research structure as a DARPA-like "virtual laboratory." The company will follow the agency's lead by using a small cadre of program managers to identify and fund projects-inside the company and out-that fit Intel's long-term strategy but are beyond the scope of its existing business lines and research. At the same time, Tennenhouse plans to open six to eight small "lablets" near top universities; the first three will be running by this fall.

Intel's modeling of a significant portion of its research-which might eventually total more than $100 million per year-after a government agency appears unique in business, says Harvard Business School's Henry Chesbrough, an expert on industrial R&D. The changes, he notes, illustrate the need for companies to balance the pressure to improve existing products with the desire to hit a few home runs. "Every company has to learn how to access the wealth of ideas that are distributed outside its own four walls," as well as those inside, says Chesbrough.

Tennenhouse spent more than a year studying Intel's R&D structure before he began implementing the new plan last February. The company employs about 6,000 R&D people, almost all in business-division labs. Intel also sponsors some 360 university projects, including several disruptive studies. Tennenhouse didn't want to upset these efforts; he wanted to enhance them and, especially in the case of the disruptive projects, make them part of a more formal long-term strategy. What he didn't want to do was create a separate central research lab like those at IBM, say, or Microsoft.

The answer was to create a small group-fewer than 20 people-to evaluate, fund and oversee the additional disruptive studies he felt would be vital to long-term growth. These efforts can take place in Intel's existing labs or in universities and nonprofit research organizations, in close conjunction with Intel scientists. If and when they mature, the efforts will be brought into the main R&D pipeline.

Tennenhouse identified five "sectors" for Intel to explore: microelectromechanical systems (MEMS), distributed systems, biotechnology, statistics and machine vision. Sector directors were charged with developing strategic plans in their areas and working with researchers to develop projects that fit those plans. Projects that make it through an approval process led by Tennenhouse will receive $2 million to $3 million a year for two to four years. In contrast to the vast scale of Intel's conventional semiconductor research, which can involve hundreds of people on a single effort, the ideal disruptive-project size is probably five or six people, says Tennenhouse. "Most good research gets done at that size."