|
|
|
|
Science Technology and the Economic Future edited by Susan Raymond
Robert W. Galvin
Chairman, Executive Committee Motorola, Inc.
Former Chairman Task Force on Alternative Futures
for the Department of Energy's National Laboratories
Based on remarks delivered to the New York Academy of Sciences, in collaboration with Business Executives for National Security, on March 14, 1996.
For decades, one of the central elements of the nation's security system has been the system of national R&D laboratories attached to the United States Department of Energy (DOE). These institutions have become premier centers of research and technology development. They are at the cutting edge of discovery across scientific disciplines. But, with the end of the cold war, times have changed. Whereas in the past much of the DOE labs' attention was focused on critical goals of national security and military preparedness, their future promises to be much more diffuse and complex, with a shift in emphasis toward competing in the global economy
Triple Roles for the Laboratories
First, the national preparedness mandate will continue, albeit at a different level and for a wider range of problems. America must continue to be a strong and prepared nation in the conventional sense, as well as relative to new threats such as combatting drug trafficking and international terrorism. The research capacity of the laboratories will provide a core capability in evolving future readiness.
Second, the legacy of the past remains with us physically, however much it has unraveled politically. The threat of global nuclear war may have faded with the demise of the Communist system, but the stockpile of weapons technology that made the threat so very real is still to be found throughout the world. Managing and/or dismantling that capacity will require continued commitment of resources, perhaps as much as a quarter of laboratory resources over the next several years.
Third, and even more recent, however, is the laboratories' role in forging a linkage between the R&D capacity of the national laboratory system and the commercial marketplace. The relationship between the nation's federal R&D capacity, represented by the national laboratories, and the competitiveness of its private sector is one that will need to be carefully planned and executed.
In turn, binding all three of these roles into a unified laboratory mandate and operating system will require new management techniques. The Task Force on Alternative Futures for the Department of Energy National Laboratories spent considerable effort in 1994 on examining the needed adjustments in the objectives and operations of the laboratories, and, especially, the implications of these adjustments for laboratory governance. Although Task Force recommendations have not been fully implemented, they have led to a deeper discussion of what must change and why.
Who Needs to Care about Change?
The critical audience for the core recommendations is really the United States Congress. Although the Department of Energy has responsibility for the laboratories, those who need to be convinced of the need for change sit on Capitol Hill.
There is a debilitating practice by Congress to ordain micromanagement of the institutions, to specify in great detail what institutions should do and how they should do it. I would assert that this is not a healthy congressional role in general, and certainly is not optimal in the area of R&D and technology development. The national laboratory system is staffed with some of the world's best scientists and engineers, with relationships to a network of the best academic and private institutions in the country. It is inconceivable that congressional micromanagement would add value to their programmatic decision-making.
"Corporatizing" the National Laboratory Asset
One major recommendation of the Alternative Futures Task Force was that the national laboratories be corporatized. What are the implications of such a move? A few definitions will help to clarify the distinctions between two approaches—privatization and corporatization.
"Privatization," a much discussed yet generally poorly understood term, means that the laboratories would be owned by private, commercial shareholders, investors, or institutions. The equity present in the laboratories would be acquired by private investors. Although this may ultimately happen, it is not likely to fit the nation's current capacities. No large corporate entity presently exists
that is big enough to be able to purchase the value represented by the national laboratory asset. This may change, and I will return to that possibility later.
The alternative is to "corporatize" the laboratories. In this strategy, the laboratories would continue to be owned by the United States government. The citizens of America would, in essence, be the shareholders. The government would provide all of the laboratory assets to a new corporation.
The governing board of the corporation would comprise private professionals, from business or science, who would serve for no compensation. There is no question in my mind that the most senior, experienced business executives and scientists in the nation would volunteer to serve in this fashion.
The executive and legislative branches of government would then entrust stewardship of the laboratories to the corporate board. The board would name and oversee the management of the corporation. Embedded in the word "entrust," of course, is the key assumption behind the strategy—trust. The political process would ultimately need to trust that an apolitical, private group of individuals can manage a key element of the nation's technological capacity. Trust is not a comfortable concept in many halls of government, which is perhaps why the corporatization option has made such slow progress.
What would be the benefits from corporatization? Most importantly, the ability to make and implement decisions at the laboratory level would reduce the administrative overhead associated with managing the institutions. Greater control of laboratories over their own management could result in up to 40 percent cost reduction—not 4 percent, 40 percent. That may seen unbelievable, but management studies in the private sector indicate that such savings (or, conversely, equivalent increases in productivity) result from organizational changes that bring management control closer to operations and private initiatives of quality management practices.
Why Not Privatize?
If such savings could result from corporatization, why not just privatize the system? This is simply not financially possible at this time. Each of the laboratories is engaged in between 0.5 and 1.5 billion dollars of R&D per year. The capital cost to purchase each of the laboratories would be approximately the same. There is simply no U.S. technology-based company rich enough to afford to buy one of the laboratories at that price.
It might be possible for a consortium of companies to access such a level of capital, but then the question would be efficiency. Even a consortium of companies would not want to purchase the laboratories as they currently exist because they have not been allowed to operate at a level of efficiency that would allow them to blend into a corporate structure.
Nevertheless, privatization is certainly imaginable in the future, particularly if the management changes that corporatization would allow were in force. Some U.S. technology corporations are growing very rapidly. I believe that a day will come when certain of them will have annual revenues in the upper hundreds of billions of dollars. The corporate engineering budgets, which normally constitute 10 percent of corporate expenditures, will then be larger than the budgets of the laboratories. At that point, some national laboratories will be attractive takeover targets.
National Laboratory Future Priority: Energy
Given that, as already noted, some 25 percent of national laboratory work is devoted to national defense work, where should the other 75 percent go? The Alternative Futures Task Force recommended that the focus be on energy. We are on the eve of possessing the means to have low-cost, clean, affordable energy generation in place around the world. That energy will allow rapid increases in productivity, which will, in turn, expand incomes and investment and fuel global economic growth. More widespread sources of energy are critical for future growth.
At Motorola, we look increasingly at the opportunities around the world as an algorithm of population rather than of gross national product. Soon, the world will support six billion people. The U.S. will be about five percent of that total, a robust, dynamic five percent to be sure, but, in terms of the profile of our business, 95 percent will be outside of the U.S. But, we cannot enter and serve those markets without energy. It is critical for local development and for the increasing incomes that will allow healthy economic relationships.
In many ways, it is energy that will allow the kinds of investments necessary to take advantage of the great opportunities that science and technology now can place before global society. Continued progress will require new energy capacity. Developing the technology that will create that capacity could be the major challenge of the national laboratory system. If we succeed, it will mean scores of new industries all over the world, and a new era of global prosperity.
Email this citation