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Spend More and More to Gain Less

A, B and C to build a CD player, while another may need B, C and D to build a VCR. The software solves the surprisingly complex problem of knowing who, from the seller’s point of view, has placed the most lucrative bid.

IBM could commercialize the auction software on its own, but it might actually be wiser to hand the technology over to a startup. “Say you are an auction company,” explains McQueeney. “We say to you, here is this capability that we’ve had five PhD mathematicians working on for three years. We’ll make it available to you now, but it’s useless to you unless you run it on our infrastructure,” meaning IBM’s software and servers. Not only does the auction company get a big bang out of being first to market with the new software, but once other companies start adopting the technology, IBM gets to sell more infrastructure software. Just as important, IBM researchers are involved throughout the process, meaning they stay plugged into the latest trends and opportunities in their customer communities.

Cutting the Fat

he profusion of new, more fluid corporate research models can create a new problem: monitoring the results. If managers don’t have a good real-time picture of what their researchers are up to, it’s easy to wind up wasting money on redundant studies, underfunding promising technologies or letting moribund projects linger too long. But lately companies such as 3M have been getting serious about knowledge management, the use of searchable databases or intranets to archive what individuals and groups in an organization know and describe what they can do. Not only can that information foster creativity and new collaborations, it can also help chief technology officers decide whether to increase spending in areas of research viable in the current market or cut the fat where it’s unlikely the company would be able to compete well.

3M managers companywide have strapped on their seat belts for a comprehensive spending review of R&D efforts instigated by new CEO W. James McNerney, who started last January. The first step was to build a database showing “where all of our [R&D] money was going in great detail, which was not something 3M had done before,” says Steve Webster, vice president for research and development in 3M’s corporate technology and transportation division. The database allowed “some very specific discussions about which opportunities are likely to have the biggest payoff, some that may not be so interesting and some that no one may be working on but which actually may be better opportunities than what other parts of the company are working on,” says Webster.

As one result, 3M has decided to put even more money into building new electronic displays based on organic light-emitting diodes, already identified as a potential successor to the company’s liquid-crystal display technology. The company also discovered it had underestimated its expertise in an important area: software design. In developing its knowledge database, the company surveyed each business unit about the R&D programs it depended upon. One of the technologies mentioned again and again in the survey belonged to a category called “Other.” “We had to open the box and ask, what is it about Other’ that provides so much growth?” recounts Webster. “In this case it was software and electronics,” such as the technologies 3M sells to libraries to catalogue and track their books and deter theft. In fact, so many of 3M’s products now depend on computers and software that the company realized it needed to shore up research spending on information technology. “When you think of 3M you think of films and coatings, but our systems integration is actually very important,” Webster says. “Now we can quantify that”-and allot R&D resources accordingly.

Balancing an increased market focus-and closer ties to customers-with the pursuit of world-class science is now the trick for many corporate R&D groups. Gone forever are the days when large industrial labs churned out scientific papers and conducted long-term research far removed from business pressures. But while R&D groups have clearly gotten more business friendly over the last decade, they are also feeling pressures to come up with tomorrow’s high-growth opportunities.

Indeed, industrial-R&D expert Richard Rosenbloom, an emeritus professor at Harvard Business School, is convinced that most high-tech firms-especially in the information technology sector-“still aren’t doing enough to invest in the future technologies that will be the next big revolutionary business. They’ve been experimenting with new venture units, spinoffs, joint ventures and the like, but I don’t know of a single big corporation that has a track record that is exceptional in any of those initiatives.”

But if innovative efforts at doing research, like those being implemented at Pfizer, Intel and 3M, do ultimately help their companies pull ahead of the pack-and do so cost-effectively-other corporate R&D teams may soon be looking to turbocharge their own technology engines.

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