Japan`s smashing commercial success with American technology has sparked an intense national re-examination into why U.S. industries have been slow in turning laboratory breakthroughs into marketable products.
It has all the signs of a U.S. commercial counterattack.
Legislation designed to help American industry speed up the lab-to-market process is brimming over in Congress. Some U.S. businesses are organizing themselves so that their technological experts would have greater clout.
Federal research and development programs are shifting their focus more toward applied science with the expansion of engineering research centers at major universities.
Greater cooperation between these centers and private industry is being encouraged.
Typical of the legislation is a bill offered by Sen. Ernest Hollings (D., S.C.). It would convert the National Bureau of Standards into a Federal Technology Laboratory, designed to ride herd on development of state-of-the-art products from U.S. labs.
”While we count our Nobel Prizes, Japan counts its profits,” said Hollings.
All this springs from one overarching criticism of American industry, now so commonplace it has almost become trite: The U.S. invents; the Japanese apply.
This aphorism is often said another way in the nation`s capital:
Americans come up with the ideas, and the Japanese make money off them.
From the videotape recorder to the computer chip, developed in American labs, the Japanese have proved to be commercial geniuses.
The Washington debate, typically, exaggerates reality. Scientists point out that the Japanese are highly capable inventors, too, and that many U.S. companies have done a superb job of applying Japanese laboratory discoveries. Still, they concede, there`s enough truth in the generality to cause searing self-assessment.
Why is the U.S. slower about getting products from the laboratory to market? The answer is partly cultural, partly economic.
The engineer is not accorded the highest prestige and paid as handsomely, relatively speaking, as in the 1950s and 1960s when the U.S. was in a technological race with the Soviet Union for space supremacy.
”This society has always valued the individual and discovery more than anything else,” said John S. Baras, director of the University of Maryland Systems Research Center, one of 13 National Science Foundation engineering centers. ”There is more delight and prestige in discovery in our society.
”How many professors do you know who have become famous because they have taken a scientific discovery and taken on the challenge of turning it into a usable project?”
Retired Adm. Bobby Ray Inman, who before starting Westmark Systems of Dallas had directed a consortium of high-tech companies that researched the next generation of computer technology, said U.S. technology is so broad-based that companies have become arrogant about it.
”There is a lack of urgency,” Inman said. ”In the huge defense area, the procurement cycle used to be four or five years. Now 12 to 13 years is the norm for going from R&D to a product.
”There is no incentive for a contractor to move technology into a workable system. That to some degree replicates itself across the society at large.”
Even more disturbing is a growing perception that some highly visible U.S. labs have slipped in recent years. Inman said the antitrust breakup of AT&T hurt Bell Laboratories as many key scientists left. That perception is shared by Baras.
”I worry about IBM`s labs,” said another well-respected technology analyst, who asked not be identified. ”They`re sluggish when it comes to turning ideas into new products. They`re just not dazzling, not out there in the forefront as one would expect with all that government money going in there.”
Inman said Japan has made much greater use of engineering at the factory level than the U.S. has because, after World War II, it knew it was going to be behind in technological advance. So, he said, the Japanese built an economy upon fast development of technology and high quality of goods.
The fact that Japan produces primarily commercial goods, and not weapons, also provides a great incentive for it to get products out of the lab sooner.
The admiral said that of the 21 companies that were involved in the American research consortium known as Microelectronics and Computer Technology Corp. (MCC), only 4 ”moved very rapidly” to turn ideas into products.
”It was very frustrating to me to see the relatively slow pace of the companies to develop the technology that was emerging. Some of them are just waiting around and asking, `Where`s the product?` ” he said.
Two of the four aggressive firms were Boeing and 3M, Inman said.
Sluggishness of U.S. industry in developing products contrasts with the number of high-quality labs and well-trained scientists it has relative to other nations.
”We have the best scientific and technological base in the world,” said Pat Choate, an economist for TRW Inc.
Yet, he said, U.S. firms take as much as two years longer to get products from the lab to commercial development.
”If you go back to (just) after World War II, we owned the whole shebang,” said Lee Rivers, Washington representative of the Federal Laboratory Consortium, a government group that oversees federal labs. ”The world was our oyster. We brought new science forward at a pace no one else could equal, comparatively.
”Product life cycles might have been 8 to 15 years, but nobody was introducing new products based on science any faster than that.”
Rivers said U.S. firms were run by managers with legal or financial backgrounds.
”We`ve never had a cultural history of people with manufacturing, technological, or scientific backgrounds running companies. That`s not true of our European competitors or the Japanese,” Rivers said.
”Today we no longer control the pace at which our science is converted into products, goods and services. The Japanese, in some cases the Europeans and soon a lot of the developing nations, certainly the Asian Rim nations, have (or will have) found excellent mechanisms within their own societies for moving science into world-competitive products more rapidly than we.”
Rivers said chief executive officers of U.S. firms are waking up to the problem and recognizing that technology and its use will drive the world economy.
”If we are not successful in strategically managing technology, which means right out of the (chief executive officer`s) office, we are going to fall further and further behind in the global marketplace. We are going to see fewer high value-added jobs in this country, unless they are brought here by Japanese or European-owned country,” he said.
He predicted there would be fewer well-paying, highly skilled jobs unless they are brought to the U.S. by Japanese or European-owned companies. It means workers such as engineers or other scientists add high value to a product.
One thing that is dying–still too slowly–is the not-invented-here syndrome that dominated U.S. corporations, Rivers said. Firms that didn`t dream up an idea would not try to make a product out of it.
Now, he said, more sophisticated firms are hiring chief technical officers who are gathering new technology and hiring scientists who will speed this process.
But TRW`s Choate doesn`t see that much improvement. In his mind the problem is one of corporate bureaucracy.
”There is a fascination inside corporations with corporate planning,”
Choate said. ”An idea has to go through many layers of middle management, and it can take months and years. We have this institutional ossification. We have proceeded as if time didn`t matter.”
In this climate, he said, U.S. firms can no longer afford bureaucratic delays, because products in this technological age become obsolete much faster than they did before. The average life of a new product now is said by many analysts to be three years, and falling.
Richard Foster, a consultant for McKinsey & Co. in New York, said many firms spend too much of their research and development money on refining mature technologies rather than developing new ones.
”I think we could cut the R&D expenditures by 20 percent, maybe 40 percent, and not notice the difference in technical output,” he said.
”Instead of taking that money and turning it into profits or shareholder values, I`d like to put it into newer technologies. The failure rate would go up, but so will the success rate (on new products).”
Why do firms permit squandering of R&D money in their laboratories?
”A lot of them don`t know it`s going on,” said Foster. ”The guys who see it are the middle managers, who see it as a very safe way of doing things.”
Too many firms would rather make a small, safe incremental profit on refinements of old technology such as light bulbs and tires than take a risk that would involve either substantial gains or losses, he said.
Choate agreed with Foster`s assessment of poor allocation of research and development money–but not everyone does. Some fear that such thinking could cause the U.S. to de-emphasize R&D spending, and that would be
counterproductive.
The federal government is putting up $66.7 billion in fiscal 1988 for research and development, about half the money spent on R&D nationally.
Since President Reagan has been in office, R&D spending has jumped rapidly for defense activities and has declined for commercial activities. Some of this defense research in U.S. firms, however, has spawned commercial spinoff products. Many of the nation`s best scientists are in defense-related labs.
The National Science Foundation`s new focus on expanding engineering research centers has caused some criticism that it is getting away from its mission of supplying funds for basic research that enables bright researchers to develop scientific breakthroughs without the pressure of commercialism.
Kenneth Flamm, a technology expert at the Brookings Institution, said the science foundation should be careful that it does not overdo putting money into applied science.
Although there has been a shift, a foundation spokesman said, the agency still is spending the great bulk of its $2 billion budget on basic science.
The Washington-based Council on Competitiveness said Japan`s major industries spend as much or more on R&D as a percentage of sales than U.S. companies. From 1978 to 1983, it said, the largest Japanese firms doubled spending for R&D.
”The comparable growth rate for real (inflation-adjusted) R&D expenditures by the largest U.S. firms during the same period was only about 4.5 percent a year,” it said.
These money differences aren`t everything. U.S. labs are still highly innovative and work at problems in a different way.
Roland Schmitt, chief scientist at General Electric Co., said the world competition is so intense that firms that want to survive should make sure that company managers work with lab people even before a product is designed. GE permitted Japan to distribute its advanced CAT-scan medical diagnostic machine, he said, but would not license the technology immediately. After a year it set up a joint venture with the Japanese and then conveyed the technology to the Japanese firm.
”They immediately designed a CAT-scanner at a lot lower cost than the one we designed,” Schmitt said.
”Here in the U.S. we had clearly done an outstanding job of technology, even embodying it in the first product. It was something the Japanese firm found hard to do. Once they acquired the technology they did just an absolutely superb job of design.”
Schmitt said that U.S. engineers ”are superb in thinking of new features, further capability, but always letting the cost creep up as they add these new features.”
”The Japanese say, `We are not going to let things get above a certain cost,` and do a good job of cost within that framework,” he continued.
”That`s an element that is not talked about very much.”
WEDNESDAY: America`s lagging, but improving, management of technology.
