Implementing and Evaluating Science and Technology Strategies

Summary Points

__ Participants from several countries pointed out that taxpayers and the market are increasing the pressure on R&D organizations and national governments to not only do good research, but to produce results as quickly and cost effectively as possible. The need to set priorities and achieve specific goals is providing impetus for the development of new approaches to managing programs, as well as evaluating and communicating results.

__ For several of the research institutions and programs discussed at the symposium, defining a clear contribution and role within the overall organizational or national effort is an important fundamental step in effective implementation and helps lay the groundwork for constructive evaluation methods.

__ Finland's Technical Research Center (VTT) is a national facility that is partly funded through budget allocations and partly supported through contracts with government and industry customers. It is one of the longest existing national programs aimed at civil industrial technology in the world. A recent evaluation of VTT has prompted significant changes in organization.

__ China has been pursuing a broad strategy to increase its science and technology capability to serve national goals such as improved agricultural productivity, better health, and economic growth. A key thrust has been to encourage scientists and engineers at universities and institutes to launch new technology-based enterprises.

__ The Data Storage Systems Center at Carnegie Mellon University is a successful example of the university-industry partnerships that have spread in the United States over the past 15 years. In these sorts of efforts, the willingness of companies to help fund research, hire students trained through collaborative programs, and otherwise participate can be measured and evaluated.

Björn Wahlström, Technical Research Centre (VTT), Finland

National Context

At the start, I want to stress that Finland is a small country with a population of only about 5 million. Nevertheless, several of our companies have enjoyed success in global high technology markets. Perhaps the best known is Nokia, which is a leader in cellular phones, and whose portable communication products are



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--> Implementing and Evaluating Science and Technology Strategies Summary Points __ Participants from several countries pointed out that taxpayers and the market are increasing the pressure on R&D organizations and national governments to not only do good research, but to produce results as quickly and cost effectively as possible. The need to set priorities and achieve specific goals is providing impetus for the development of new approaches to managing programs, as well as evaluating and communicating results. __ For several of the research institutions and programs discussed at the symposium, defining a clear contribution and role within the overall organizational or national effort is an important fundamental step in effective implementation and helps lay the groundwork for constructive evaluation methods. __ Finland's Technical Research Center (VTT) is a national facility that is partly funded through budget allocations and partly supported through contracts with government and industry customers. It is one of the longest existing national programs aimed at civil industrial technology in the world. A recent evaluation of VTT has prompted significant changes in organization. __ China has been pursuing a broad strategy to increase its science and technology capability to serve national goals such as improved agricultural productivity, better health, and economic growth. A key thrust has been to encourage scientists and engineers at universities and institutes to launch new technology-based enterprises. __ The Data Storage Systems Center at Carnegie Mellon University is a successful example of the university-industry partnerships that have spread in the United States over the past 15 years. In these sorts of efforts, the willingness of companies to help fund research, hire students trained through collaborative programs, and otherwise participate can be measured and evaluated. Björn Wahlström, Technical Research Centre (VTT), Finland National Context At the start, I want to stress that Finland is a small country with a population of only about 5 million. Nevertheless, several of our companies have enjoyed success in global high technology markets. Perhaps the best known is Nokia, which is a leader in cellular phones, and whose portable communication products are

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--> adding functions such as email, fax, and so forth. Although the natural resource based industries such as timber and mining are still prominent, Finland has achieved rapid growth in high-technology production and exports during the 1990s. Systematic investment in technology, including private and government investment, has played a major role. At a national level we have done several studies over the years to look at Finnish science and technology policies. These studies allow us to develop a vision of the future, which I believe is very useful. The major players in Finnish science and technology policy include VTT, a national laboratory doing applied technical research, and the Technology Development Center (Tekes), which funds research. The Science and Technology Policy Council has also played an important role in recent years. Council members include the Prime Minister, other elected cabinet officials, the directors general of VTT and Tekes, and representatives from industry, universities and other institutions. We have set a national goal of spending 2.9 percent of GNP on R&D in 1999. We started setting these kind of goals in the mid 1970s, and this has provided an important national focus. In 1996 Finland spent about $2.7 billion on R&D (at 5.54 FIM per dollar), with industry accounting for about 67 percent and government 33 percent. Our goal is to reach a 60-40 ratio between private and public spending. Other major national priorities are to increase international cooperation and to improve the training of research scientists. The Role of VTT and Tekes VTT's budget is about $180 million per year, accounting for 6–7 percent of Finnish R&D. In 1993, an international group was charged with evaluating VTT and recommending directions for the future. One outcome of the evaluation was a restructuring into nine research institutes, as shown in Figure 4-1. The basic idea was to form larger institutes with a consistent structure. As the figure shows, we cover all technical fields. VTT operates in several locations within Finland, with most of the 2,700 staff in Espoo. To take my own institute, VTT Automation, as an example, it is quite typical in terms of funding sources. Figure 4-2 gives a breakdown. About one-third of our funding comes from the budget and about two-thirds comes from individual projects. This financing structure has several important benefits. The budgeted money gives us the flexibility to do longer term, speculative sorts of research. At the same time, the need to get project funding forces us to incorporate a customer orientation into what we do. Included in the project funding is government support through Tekes and other agencies. The role of Tekes is very important. It stresses very much that participation by industry is crucial in all stages. Tekes does have flexibility to fund projects with a longer time horizon with larger numbers of companies as well as projects with a shorter time horizon. It is even able to give development loans. A recent evaluation of Tekes-funded projects found that the volume of net sales and exports achieved with Tekes funding is 10–20 times the initial investment, that four to five new jobs are created per million marks invested, and that without the

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--> Figure 4-1 The restructuring of VTT resulted in nine research  institutes and an Information and Internal Services group. funding a quarter of the projects would not have been realized and two-thirds would have been limited or slower. International Cooperation As I mentioned, we are very interested in expanding international cooperation. Certainly the European programs are a natural focus for us. Finland is now a member of the European Union, and we are a full member of all the programs. Active participation in the R&D programs such as the Framework Program, Eureka, and so forth, is especially important in order to help define the content and objectives. For example, the EU is formulating the Fifth Framework Program, and Finland is very active in the development.

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--> Figure 4-2 Breakdown of funding sources for the VTT Automation research institute. To summarize, I think that several factors have contributed to Finland's success. We are a small country with a high educational level, and people seem to be very fond of high-technology gadgets. Also, I think that the systematic promotion of cooperation between companies and between different organizations as well as regular evaluation and feedback have been very important. On a more general level, I think the world is changing at a rapid rate, and it is clear that organizations and countries need to adjust. Networking on a global basis is necessary, because only those who are in the forefront in development and investment can really compete. Chen Zhang-Liang, Peking University, China National Context for Chinese Science and Technology Policies I would like begin with a brief overview of the national priorities that the Chinese government is working to address, and explain how strategic planning for science and technology policies and changes in the organization of science and technology relate to these national goals. The four national goals. I want to mention are: (1) increasing the productivity of agriculture, (2) improving health and

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--> medicine, (3) improving the efficiency of state-owned enterprises, and (4) controlling inflation. The first three have the most relevance to science and technology. The first area is agriculture. China has a population of about 1.2 billion, roughly 23 percent of the world's total, and about 7 percent of the arable land. The stability and productivity of agriculture is an important issue for China and other countries as well. We have heard concerns from other countries about whether China can produce enough food over the long term to feed its own citizens. There are several long-term pressures on Chinese agriculture. To begin with, the population is continuing to grow, which leads to a rise in demand for food. Also, with rapid economic growth cities are expanding, more factories are being built, and farmers are building larger houses as they get wealthier. This puts pressure on agricultural land. There are also irrigation problems. One example is a city near Hong Kong which has grown very rapidly over the past ten years. Farm land and rice cultivation have declined, while the average income of farmers has risen. There is a great deal of controversy within China and abroad over whether China will need to import a great deal of food and cause problems for the world. We believe that China needs to be self sufficient in food, which is why we are focusing on introducing modern technology into Chinese agriculture, especially agricultural biotechnology. The Chinese government has been putting resources into this, and will continue to do so. The second area is medicine and health. This is also an area with long-term problems. For example, we know that China has the largest incidence of hepatitis B. Almost 10 percent of the population carries the virus, and among them 10 percent develop the disease. For cardiovascular disease, diabetes, and cancer there is quite a large patient population, and it is increasing. In the medical field, you are familiar with the large per capita expense for medical care of the United States. In China, the per capita annual medical expense is only four or five dollars. In five or ten years suppose we reach the level of the Philippines. That would mean a tremendous increase in the amount of pharmaceuticals needed. Many of the Western pharmaceutical companies are entering the Chinese market, but we need to build and sustain the pharmaceutical market and production within China. This is another area where science and technology can make a contribution. The third issue is state-owned enterprises. China is a socialist country with a growing market economy. The state-owned enterprises make a great contribution, but face many challenges. For example, the techniques of many state-owned enterprises are more or less out of date, and it is difficult to make improvements. Further, each factory has a very large workforce, some on the order of 100,000. Also, the Chinese government has encouraged investment in the state-owned enterprises, regardless of the investment fundamentals, and is now cutting its subsidies. So it is difficult for these enterprises to invest and manage themselves in a way where they could compete with the very efficient multinationals entering China, such as McDonald's Motorola, and Boeing. Improving the technology of state-owned enterprises is another key task of national policy.

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--> Government Infrastructure The Chinese National Science Foundation (NSFC) is one of the key agencies in Chinese science and technology policy, and is growing very rapidly. NSFC funds basic science. In 1986 the Chinese government also established a new program to fund research grants in high technology, which is very important. The major priority areas for science and technology funding include biotechnology (for agriculture and health), space, informatics, new materials, and energy. We think that we have accomplished a great deal over the past ten years. One example is in biotechnology. As a result of the high technology planning and investment program in agricultural biotechnology much is being done in areas such as disease and insect resistant crops, higher quality varieties, and yield improvement. China is one of the leading countries in terms of field release of transgenic plants. Many new biopharmaceuticals are also being introduced and developed in China. Another focus of Chinese government funding support is special economic zones. This involves support for professors who are encouraged to run an industrial company in one of the zones. Also, tax exemptions are given for three to five years to new companies in these zones. One of the most famous is Shenzhen near Hong Kong. Another is in Beijing, especially in the area near Peking University. The whole area is a high-technology zone, with many computer companies and biotechnology companies being launched. Most Chinese high-technology companies have been around for less than ten years. The vast majority have as CEOs scientists from universities or the Chinese Academy of Sciences (CAS). We have only recently started management education, so it is necessary for scientists to move directly into management. Legend Computer is one of the famous examples of a Chinese spin-off enterprise. Spin-Off Enterprises at Peking University Launching high-technology enterprises from universities and CAS institutes is an important part of the Chinese government's strategy. Peking University, also known as Beijing University, is one of the largest universities in the country. So far we have established about 80 companies that are wholly owned by the university. One of these companies now has over 2,000 employees, with $15 million in gross income, of which $3 million goes to support university research. Our university is perhaps the most advanced in running enterprises, but other universities around the country are moving in this direction. This is having an impact on the university budgets. Another example is a biotechnology company in which the university controls a 40 percent share and a multinational company's pension fund controls the rest. These changes are causing considerable debate about whether we are on the right track. We are following the imperative that we need to move knowledge and talent into applications, and launching a number of initiatives to see what approaches work best.

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--> Future Issues We have established an evaluation system for science and technology but it is only at the early stages of implementation. Although we have achieved great progress by switching emphasis from basic science to applied science and building high technology businesses with scientists as managers, we still have quite a few challenges. First, the overall education level is still quite low for our 1.2 billion population, in contrast to developed countries. Second, there are still bureaucratic problems involved with encouraging scientists to launch enterprises. Third, our legal system still needs improvement, especially in the area of intellectual property rights. This has been an international issue, as well as domestically among Chinese scientists. Finally, we lack a system of venture capital which is so significant in the United States for promoting high-technology development. We do have some emerging strengths that we can build on. For example, if we look at the scientific leadership in China, the most active group in terms of publishing in international journals are those born in the 1930s and 1940s. Although in many countries the most active group was born in the 1950s, in China we lost this generation due to the Cultural Revolution. But starting in the late 1970s the university system started to function again, and we started sending many students to the United States, Japan, and European countries. This younger group is coming along rapidly, and will be taking on more leadership in science and launching high-technology enterprises, especially as more people return from abroad. So over the next 10 or 15 years we can expect to see a great deal of progress in Chinese science. So far the Chinese government has moved quickly to promote science and technology. I am a member of the National People's Congress and we are making some changes in that body. The Chinese government should continue to invest more in high-technology areas and continue to encourage universities and CAS institutes to get involved in industry and establish companies. We also need to encourage industry to support research in universities. This is difficult because we do not have many large companies that are strong at this point. Which is why we need to continue working with multinational corporations. Many of the top multinationals are in China and are making a contribution. Many have R&D facilities as well as production facilities. Finally, the journals Nature and Science published articles on Chinese science at the end of 1995. Overall they are very accurate. Nature says that we are in much better shape than we were ten years ago, and Science says that we are making aggressive attempts to upgrade basic research. Both go over the challenges. Science emphasizes the change in structure that is needed. We are in fact changing our structure for science and technology, which was adapted from the Russian system. For example, CAS runs about 120 research institutes and each institute has over 300 researchers on average. Reforming the structure of science and technology will be the major issue over the next ten years, and I am confident that we will be successful.

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--> Mark H. Kryder, Carnegie Mellon University, United States Context I will outline the de facto strategy put in place to help the U.S. data storage industry overcome some of the problems it was facing in the early 1980s and where we are today. To start with the background, in the early 1980s there was a lot of concern about U.S. competitiveness. We were losing the DRAM business to Japan, we had lost the television business to Japan, we had lost the videotape recorder business to Japan, the automobile industry was on the ropes, and so forth. If you look at magnetic recording, not only were all VCRs made in Japan at that point, but also forty percent of the magnetic disk drives for computers. There were a number of highly successful Japanese industry consortia supported by the Ministry of International Trade and Industry (MITI), and the products made by Fujitsu, Hitachi, and NEC were making heavy inroads. U.S. firms such as IBM and Digital Equipment which had large manufacturing and product development operations in Japan did make attempts to get involved with some of these consortia but were denied permission to do so. Interestingly enough, data storage at that point was comparable to the whole electronic memory business. It is currently about a $100 billion per year industry. Yet, there was a sense that you could count on one hand the number of professors in the United States working on issues in this industry. In contrast, you could go to almost any research university in the United States and find someone working on semiconductors. There are complex reasons for this situation, but the net result was that there was almost no university support for the industry, and virtually no Ph.D. graduates in the United States who understood magnetic recording. Development of the Data Storage Systems Center Based on my own experience at IBM and a belief that something needed to be done, I organized a workshop at Carnegic Mellon in 1982 involving about a dozen of the key technical people from industry. These included IBM, Xerox, Ampex, Verbatim, and others in the magnetic recording business in the United States. Over the two days we developed about thirty ''Ph.D. topics" which were suitable for Ph.D. research in the university environment. Based on that, I wrote a proposal and gained the support of the companies after about a year of discussion. IBM and 3M were the first two to jump in, agreeing to contribute $750,000 each over three years to get this effort started. By the end of 1983, we had $3 million per year in funding from a large number of companies, and the Magnetics Technology Center (MTC) was formed. This was possible because the total vacuum in university efforts was obvious, and because IBM and several of the other companies involved understood the challenge from Japan, based on experience in other industries. Over its first five years, funding for MTC grew to $5 million per year. The

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--> associate members who were contributing about $250,000 a year to the center guided the research agenda, but there was no overall strategic plan. This meant that the university research effort was being pulled in many different directions. By 1988 I had become a broker for the faculty at CMU in terms of facilitating research projects from industry, which was not as much fun as I had in starting MTC. In that time frame, European countries were allowed to join, but because Japanese consortia excluded U.S. companies, Japanese companies were not allowed to become members of the center. At the same time, other universities jumped into this field, including the University of Alabama, the University of California at Berkeley, the University of Minnesota, Washington University in St. Louis, and Santa Clara University. In the mid 1980s, the U.S. Congress was also concerned about U.S. competitiveness and provided extra funding to NSF to launch the Engineering Research Centers (ERC) program. Given the disagreement in the community over whether priority should be given to single investigator or center work, it is important to note that the ERC program involved extra money that did not come from funds that could have supported single investigators. By 1989, it seemed that the way to make MTC effective in the long term would be to develop a coherent centralized focus to the research. We applied to NSF for one of the ERCs in systems-oriented research projects. Magnetic recording is very systems oriented and multi-disciplinary, in that it involves electronics, mechanics, media interface, chemistry, materials, and computer science at the systems level. In 1990 we were awarded an ERC and changed our name to the Data Storage Systems Center. As part of the grant, we had to lay out a rather detailed 11-year strategic plan for three generations of data storage systems, both magnetic and optical. Interestingly, industry was very supportive of the systems approach once we had secured this long-term centralized funding, although before they had always tried to pull the research agenda in a particular direction that most interested them. Several other interesting developments occurred soon after the launch of DSSC as an ERC. First, the National Storage Industry Consortium (NSIC) was founded in 1991 to coordinate university-industry-government research in the data storage industry. The background to this is that IBM, which had founded much of the research in this area, was making significant cuts. Profit margins at all companies were very low due to the intense competitive environment. The formation of NSIC was helpful in developing additional research programs in the data storage area, which were funded by the Defense Advanced Research Projects Agency (DARPA) and by the National Institutes of Standards and Technology (NIST) through its Advanced Technology Program (ATP). A second development is that the Agency for International Development and NSF funded DSSC to help form a Magnetics Technology Centre at the National University of Singapore. This project was strongly supported by U.S. industry sponsors of DSSC, many of which had manufacturing facilities in Singapore.

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--> Results and Future Issues Here are some of the results of these efforts over the years. First, this research has contributed to a number of products with multi-billion dollar markets today, such as lower flying sliders for disk drives, improved magnetic head technologies, lower noise magnetic media, improved disk drive actuator technology, and an electro-optic beam scanner. There has also been about a 20-fold increase in the number of Ph.D.s being graduated in the field. But perhaps the biggest impact is that the systems-oriented approach of DSSC better prepares students to make an immediate contribution in industry. For example, a typical student who has done work in a narrow discipline like mechanical engineering may join a magnetic recording company where the first problem he is asked to work on is to develop a head for a certain interface. So he sits down and sitting across the table may be an electrical engineer worried about the signals and noise coming out of the head, and sitting next to him a chemical engineer who is worried about the lubes that go on the disk. While the typical engineering Ph.D. needs at least a year or two of on-the-job training to understand enough about the whole system to become effective in the company, the Ph.D. who spends significant time with DSSC can contribute immediately. One current issue is changing funding patterns. NSIC attempted to get programs in the hard disk area funded on an ongoing basis, but was unsuccessful. What happened is that ATP appeared to shift its focus from pre-competitive research to projects which would have a clear business plan and a clear product orientation. The optical recording industry still has good ATP support, but the hard disc drive industry does not. The research agenda in this field is developed on a strategic planning basis by the universities and industries working together. The NSF/ERC program has been critical to doing this. However, DARPA funds mission oriented research, predominantly related to the defense industry, and ATP is now funding programs expected to lead to new businesses in a 5-year timeframe. This does not fit the needs of a major industry which is in very strong long-term competition. Interestingly enough, the U.S. disk drive industry will not be submitting any ATP proposals because they are more interested in the 5–10 year horizon rather than things that turn into products in 5 years. Ironically, in this instance government has a shorter time horizon than industry. This contrasts with the situation in Japan. As I mentioned, MITI-funded consortia were highly successful in the early 1980s, and then support in this area declined in the late 1980s and early 1990s. More recently, Japanese industrial firms formed a consortium, with no government sponsorship, with the stated purpose of forming centers like those at CMU, the University of California San Diego, and Stanford. They want to fund university research in Japan much like NSIC is doing in the United States. The Japanese government is now putting more money in storage research as part of a larger program that funds research in semiconductors and displays. So it is possible that Japan is working to revitalize the research base of this industry while we may be moving in the opposite direction.

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--> BOX 4-1 Evaluation of University-Industry Cooperative Research Programs General Criteria __ New Relevant Fundamental Understanding __ New Measurement and Modeling Capabilities __ New Technologies __ Quality and Quantity of Graduates Systems Research Criteria __ Is there effective multidisciplinary systems oriented research? __ Is there a testbed for the system? __ Are the systems level goals being met? __ Do the graduates have a good understanding of the systems level goals? __ Are the graduates effective in team research? Box 4-1 shows some of the criteria that I believe are important in evaluating cooperative university-industry research programs. For example, new measurement and modeling capabilities should be a major output. DSSC has produced a number of these in areas such as finite element modeling and instrumentation, which spin-off companies have commercialized. Of course new technologies, quality and quantity of the graduate students are all important. But it is very important that we make this transition in the United States to a systems-oriented education for our students in order for graduates to be instantly employable and useful. As for the future, I will give one final comment. Although the ERC program has been highly successful, there are only a limited number of these in the United States. One of our problems as a country is expanding that impact to a larger group of universities. Currently, there are about a dozen U.S. universities with ongoing research in the data storage area and NSIC has put in $1.5 million dollars to form a nationally coordinated program.