Connect and Develop to Enhance R&D and Innovation Charles F. Larson President Emeritus

1. Connect and Develop to Enhance R&D and Innovation Charles F. Larson President Emeritus Industrial Research Institute, Inc. Trans-Atlantic Conference on Research, Innovation, Technology Transfer, and Commercialization Washington, DC December 3, 2003

2. Overview • US S&T policies promoted linkages • Techniques to improve innovation • Connect and develop complements R&D • Current growth strategies (P&G, GE) • Success keys for R&D and innovation • World’s Best Technology Conference

3. U. S. Science and Technology Policies • Consist of many studies over past 25 years • Science policies called for U.S. leadership through basic research and improved education • Technology policies called for investments in R&D and IT, steady supply of engineers, efficient patenting policies, IP protection, and strategic alliances • Helped stimulate highly competitive U.S. innovation system, with closer cooperation between industry, universities, and government labs

4. Techniques for Improving the Innovation Process • Competitive intelligence • Stimulate creativity and idea generation • Integrate technology planning with business strategy • Promote discontinuous innovation • Measure effectiveness with metrics • Have an effective R&D operation • Promote connections to enhance innovation

5. Connect and Develop Complements R&D and Innovation • Internal and external connections are important to innovation and business growth • Utilization of the corporate Intranet and the external Internet are a must for “smart” reporting systems and effective knowledge management • Must seek illogical, unpredictable or unobvious combinations of technologies • Linking technologies in unexpected ways can lead to breakthroughs/disruptive approaches

6. P&G Pursues a Connect andDevelop Strategy • Uses a corporate intranet for “smart” learning reports and knowledge sharing through an “InnovationNet” website • Creates communities of practice (in numerous disciplines) • Identifies internal technology entrepreneurs • Promotes joint technology development with other firms

7. P&G Pursues a Connect andDevelop Strategy • Sponsors internal connection expositions • Has an internal Corporate Innovation Fund • Has an Internet Venture Fund to sponsor external opportunities in marketing, procurement, and supply chains • Wants half of the ideas for new products to come from outside sources

8. GE Pursues Long-Term Innovation through Internal Development • Grow market share and margins by funding R&D that reflects customer needs • Opened new labs in Budapest, Munich, Bangalore, and Shanghai to bring development to global customers and tap local talent • Investing in R&D over long time periods and “taking more chances” • R&D funding is 60% from BUs, 30% from corporate, and 10% from external contracts

9. GE Pursues Long-Term Innovation through Internal Development • GE Global Research R&D Center formerly ran up to 400 projects concurrently • Now run only 50-60 high-impact projects • The Global Research Center, with its new conference center, will be the hub for driving change, developing technology strategy, keeping BU leaders educated, and learning from customers

10. Future Success Factors for R&D and InnovationHuman Resources • R&D needs a culture of receptivity to new ideas and change • Learning must be constant, along with diversity in staff and markets • Emphasis on stretch goals and breakthroughs • Nurture creative researchers who are excited about work, passionate about projects, full of ideas, frequently a loner, and not concerned about time

11. Future Success Factors for R&D and InnovationHuman Resources (cont’d) • Researchers should make human interaction a teaching and learning experience • R&D scientists/engineers need to become extremely customer focused • R&D staff need to spend large part of their time with customers • Realize that R&D organizational structures will be highly dynamic

12. Future Success Factors for R&D and InnovationStrategy • R&D will be encouraged to undertake intelligent risks in its work • R&D should have core group of experts in technology intelligence • Partnering with customers, other firms, universities, and government labs will be more important

13. Future Success Factors for R&D and InnovationStrategy (cont’d) • New product development processes should be functional and efficient, with appropriate resources and appropriate strategy for integration with business units • A “no-excuses” environment should be created, with internal barriers to innovation eliminated • Services will be a key to profitability

14. Future Success Factors for R&D and InnovationLeadership • CTOs must lead integration of technology planning with business strategy, one of two most important success keys (second is leveraging external resources, i.e., C&D) • Effective management of transformational, disruptive innovation will be far more important than incremental change • R&D leaders must look for solutions beyond the first obvious few

15. Future Success Factors for R&D and InnovationLeadership (cont’d) • R&D leaders must find new ways to communicate, to make decisions, and determine which new scientific frontiers to pursue • R&D leaders must adapt to rapidly changing conditions of technology and competition, and withstand adversity • True leadership will depend on changing, disrupting, and destroying the value-creation chains supporting their budgets

16. WBT04 March 21-23, 2004 Wyndham Arlington Arlington, TX www.wbt04.com

17. What is the WBT? • Annual conference focused on the commercialization of new technology • Emphasis on federally funded research & development results • Focus on technologies with significant commercial potential • Produced in cooperation with the FLC and NASVF • Website www.wbt04.com

18. What is the WBT? • National competition • Up to 75 Exhibitors selected by a screening panel comprised of industrial and investment professionals • 25 selected to make 12-minute PPT Pitch • All receive exhibit space • No cost to apply • Registration fee $595, which includes exhibit space and registration for one participant

19. Background • Concept co-developed by: • Federal Lab Consortium for Technology Transfer • Representing over 700 federal labs • National Association of Seed and Venture Funds • National nonprofit focused on risk capital and regional economic development

20. World’s Best TechnologiesPittsburgh, 2002 • 200 first time participants • 37 world-class technologies • 60 seed investors and corporate licensors • Over $24 Million VC and R&D funding committed to date • Three exhibitors named to Fortune's list of "14 Hot Startups for 2003."

21. WBT Objectives • Fund Deals • Commercialize “hidden” technologies • Educate investors & licensors • Educate researchers & scientists • Build long-term relationships among this fragmented group

22. Selection Process • Priority given to Federal Lab/Agency and University – based research • Seeking: • Platform Technologies • First in Space Technologies • Close to Market Technologies

23. Get involved to… • Access to a unique and focused source of deal flow • Network with bona fide deals and deal makers • Learn about new technology • Make a difference!

24. Summary • US S&T policies encouraged connections • Many techniques to enhance innovation • Firms use different strategies to compete • Many success factors for future success in R&D and innovation • Check out www.wbt04.com to make a difference