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The New Engineering Research Centers: Purposes, Goals, and Expectations (1986)

Chapter: 4: The Future-Challenges and Expectations

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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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Suggested Citation:"4: The Future-Challenges and Expectations." National Research Council. 1986. The New Engineering Research Centers: Purposes, Goals, and Expectations. Washington, DC: The National Academies Press. doi: 10.17226/616.
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IV The Future Challenges and Expectations

Challenges of a Technologically Competitive World: A Vision of the Year 2000 JAMES BRIAN QUINN The year 2000, which looked so distant for so long, is now practically upon us. In fact, the work the Engineering Research Centers start this year will be exploited mostly after the year 2000. What trends and chal- lenges are likely to continue throughout that time? What are the most likely implications for the Centers? Technology and history are so full of surprises that I will not attempt any precise estimates of future states of the art. Instead, I will attempt some surprise-free comments about the future. One should not be seriously surprised if trends already existing create the results predicted (Kahn and Wiener, 1967~. Of course, unex- pected major events a war, political upheaval, or unforeseen accident- could change the picture enormously. WORLD POPULATION AND WEALTH The world's population is expected to be about 6.2 billion people in the year 2000, with almost all the growth occurring in developing countries (Figure 11. This growth in population to 1.4 billion people more than we have today is greater than the current population of China. Yet this growth is only a point in a continuum toward a likely population of 8 billion people a few decades later. Growth in world gross national product (GNP) has fallen from the annual 5% per year enjoyed through the mid- 1970s, yet even the currently expected growth rates of 2.7% to 3.5% (Frisch, 1983) have formidable consequences. By the year 2000 real wealth should be 50% to 66% above 1985 levels. Recent spurts in wealth and productivity gains in the Asian rim, China (which has shown productivity 139

BIRTH AND DEATH RATES, 1950-1980 1 CRUDE RATE (per thousand) 40 30 20 10 ~ Births _ 1 _ I .. __ Developing ~ countries Deaths ~ 1 1 1 1 / 140 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD gains of 7% to 8~o per year in both agriculture and industry since 1978), and other developing countries suggest the possibility of even higher gains (The Economist, 1984). Worldcasts and the World Energy Conference estimate a world GNP of about $17.7 trillion (in 1983 dollars) for the year 2000, representing a world market of $7.8 trillion (in 1983 dollars) beyond today's levels (World Bank, 1985). Wealth per capita is expected 11 _ 10 40 _ 9 Developed I 30 countries I _ 8 20 ~I _ 7 0 10 ~:i6 o 1 1 1 1 1 ~ 1950 960 1970 19BO1990 ~00 1950 1960 1970 1980 199 1°°° 1 5 ~ CRUDE RATE I (per thousand) I Total world population I Developed / countries' \ / population ~, _ rat - , A.D.1 1000 1200 1400 1600 1800 2000 FIGURE 1 Past and projected world population, A.D. 1-2150. 4

JAMES BRIAN QUINN 560 540 520 _ ~ x 480 In ' 460 - z 440 o ~ 420 0 400 380 360 340 D:: Actual production _q ~ Prorl''~ti~n triter] Population trend 320 ~1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1962 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 YEAR FIGURE 2 Food production in developing countries. 141 to rise in real terms from today's $2,000 to between $2,600 and $3,200 by the year 2000 (Frisch, 19831. A key question is whether this wealth will be further concentrated in the developed countries or reasonably distributed among developing countries. Two kinds of technologies food and energy will play principal roles in determining this outcome and other competitive patterns in the world. FOOD AND AGRICULTURAL TECHNOLOGIES 1 Among the great forces affecting international competition will be food and agriculture technologies. There have often been dire predictions about future world food supplies. Television constantly reminds us of the tragic pockets of hunger in the world today. Yet world food production per capita has actually been greater than ever before in both developed and devel- oping countries (Figure 21. The much-maligned "green revolution" has brought important relief to many areas of the world with the development of dwarfed and higher-yield crops, but often at the cost of significantly increased energy and chemical requirements for the land. Diffusion of these technologies will continue to offer productivity increases until the next decade, when advanced biotechnologies are expected to offer even greater potential through higher-yield varieties, improved pest resistance, and better adaptability to saline or low-moisture conditions.

142 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD Some experts have estimated that with known technologies the world could feed twice its estimated population of 6.2 billion in the year 2000, and that developing counties could produce two to three times as much food as they do today (Revelle, 1976~. For example, pest control could provide enormous gains. Today almost half of all crops produced are destroyed by pests (David Pimentel, personal communication, 1983~. Sadly, agricultural technologists know what to do about many of these problems, including the soil destruction that is increasingly moving farms onto ever more marginal lands. Application of known, low-cost technologies such as soil retaining, low tillage, crop cycling, scheduling, land-use planning, and storage could preserve valuable lands, control many pests, and increase usable foods dramatically. Unfortunately, applying more advanced chem- ical technologies to increase production to the level of developed counties may require capital, energy resources, and technical knowledge that are not always immediately available in the countries that need them most. Getting these resources to where human needs are greatest will be one of the strongest issues, creating potential alliances and conflicts among na- tions for the next two decades. TABLE 1 Urban vs. Rural Population Growth in Developing Countries Average Annual Percentage of Population Growth, 1980-2000 Income Category UrbanRural Low income Asia (excluding China) 4.20.9 India 4.21.1 Africa 5.81.5 Middle income East Asia and Pacific 3.10.9 Middle East and North Africa 4.31.6 Sub-Sahara 2.91.7 Latin America 2.90.4 Southern Europe 2.9- 0.2 All developing countries (excluding China) 3.51.1 SOURCE: World Bank (1985).

JAMES BRIAN QUINN TABLE 2 Trends in Exports from Developing Counmes Value of Exports In Billions of Dollars 143 Commodity 1965 1982 Annual Growth Rate (Percentage) Manufacturers 7.1 134.6 21.7 Food 13.3 74.8 12.2 Metals and minerals 4.5 26.9 12.6 Fuels 7.3 165.1 23.1 SOURCE: World Bank (1985). MORE INTENSE LABOR COMPETITION Certain patterns and consequences of the improvement of food tech- nologies are likely in the near future. While some countries will undoubt- edly be plagued by drought and impossible incentive and distribution structures, most countries in the Organization for Economic Cooperation and Development (OECD) will have farm surpluses that are genuine po- litical problems. U.S. farmlands are being abandoned or sold under dis- tressed terms because of high interest rates and the government's refusal to support production at prices higher than those of the world's increasingly competitive markets. U.S. agriculture, which provided the greatest U.S. net export balance about $20 billion in 1983, may be on its way to becoming only a "residual source" for world markets, with corresponding negative effects on the U.S. trade balances needed to buy energy and raw materials. Most important, however, in many developing countries about 70 percent of the population has traditionally been employed on farms (Food Policy, 19841. Increased agricultural productivity is allowing people to move to cities in unprecedented numbers, creating megalopolises of tens of millions of people, with corresponding huge labor forces that must be employed in nonagricultural tasks (Table 1) (dining, 19851. These people provide a tremendous pool of cheap labor, which can manufacture with known technologies at very low costs. Cheap labor has begun to change the trade balances of developing countries toward manufacturers (Table 2), and throughout the foreseeable future will create relentless downward pressures on the price of manufactured goods in international trade. Even U.S. agriculture is threatened by imported processed foods (like frozen orange juice from Brazil). TECHNOLOGY AND CAPITAL TRANSFERS Each emerging country will urgently seek new ways to form capital through involvement in the more highly value-added industries. U.S.

144 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD companies will increasingly seek to produce and source abroad, and capital will certainly be available to those who do so. World capital markets will be ever more closely linked by these ventures through the instant access offered by electronics technologies, and through new worldwide invest- ment and banking structures that exploit these technologies' potentials (The Economist, 1985c). With a few exceptions, as in Japan, cost ad- vantages resulting from capital availability will be hard to maintain. Given the increased rapidity with which technologies have crossed bor- ders (Vernon and Davidson, 1979), permanent technological advantages will be ever more difficult for any single company or country to maintain. The only feasible bases for greater long-term comparative wealth in the United States will be continuous technological and management innova- tion, more rapid productivity increases in all sectors, and better systems and incentive structures that will encourage U.S. industries to create and adopt new problem solutions. These considerations will be central to the success of the Engineering Research Centers. ENERGY TECHNOLOGIES For years the United States based its industrial strength in part on cheap energy and raw materials. Now our relative position with regard to these resources is not so attractive. Although the country enjoys great total resources, these have become marginally more expensive than foreign sources. Despite concerns expressed in the 1970s about limited energy and mineral reserves, the world is slowly recognizing that its ultimately exploitable fossil energy supplies are very extensive, and that its raw materials may be substituted for each other almost without limit, based on their relative prices (Simon, 1981~. The Electric Power Research In- stitute (1981) estimates in its review of world hydrocarbon resources that vast amounts of oil and its substitutes (the equivalent of 7 to 11 trillion barrels, less energy for development and refining) could be available in the very long run with proper combinations of prices and technologies. Although new non-fossil-fuel technologies (and increasing environmental and investment costs for fossil fuels) may mean that most of these hy- drocarbon resources are never used, fossil fuels will undoubtedly predom- inate for the next two decades. The important questions are, at what prices and from what sources? High Replacement Costs Although energy costs have temporarily dropped for the United States, this is not true for much of the rest of the world, which has to buy oil in

JAMES BRIAN QUINN 145 dollars (The Economist, 1985a). Developing countries will use more en- ergy per capita as they industrialize. Replacement costs are likely to rise steadily until new synthetic fossil or high-technology approaches are well established. Many replacement sources lie in remote locations and will require investments of many trillions of dollars for development and ex- ploitation over the next 15 years. To the extent that these investments are made in less developed countries, they can provide strong forces driving those nations' economic growth and emergence as attractive world markets and suppliers of other goods. Few people expect fossil fuels to be as inexpensive as they were in the 1960s; the pressures of politics and replacement costs hold prices up too powerfully. Although we have effected some permanent savings from installed insulation and redesigned engines, it will be interesting to see whether energy growth rates move back toward their pre-1973 values, which were greater than 4 percent, as market forces reassert themselves and energy prices drift toward levels of marginal substitution for other products similar to the levels seen in the early to middle 1970s. The popularity of low-set thermostats, small cars, and slower speeds has al- ready waned rapidly in the United States and OECD countries. A contin- uing challenge in industrial design will be properly evaluating trade-offs between energy and other costs, including energy-related externalities like acid rain and deposition, polluted groundwaters, and injuries to those most heavily exposed to toxic by-products of energy production and use. Other Developing Alternatives By the year 2000 the world will probably have proof of several other large-scale systems offering truly permanent energy access. At Creys Malville, France should have proved continuous breeder reactor opera- tions-if not their economics-on a commercial scale. Although formi- dable technical problems remain, U.S., Japanese, European, and Russian fusion power programs still seek to surpass Lawson's criterion (energy break-even) within the next decade (Clarke, 1981~. The constantly im- proving field of solar voltaics-a young $180-million business in 1984 (The Economist, 1985b) is another developing alternative. But neither of these will significantly affect energy supplies by the year 2000. Once proved at commercial scales, however, these technologies could offer a long-term prospect, characterized by relatively stable energy costs and fewer environmental problems. More important, they could redefine the very nature, scale, location, and availability of the raw material resources of the world and thus the longer-term wealth potentials of many now- developing areas.

146 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WON NEW STRATEGIES FOR THE AMERICAN ECONOMY Assuming that major trends in these two most important technology areas-foods and energy- develop in the noncatastrophic fashion sug- gested, what is a likely scenario for U. S. . and world industry over the next several decades? While we must assume that the United States and other advanced countries will be increasingly dominated by their service sectors (Figure 3), we must also remember that "services" include many high- technology industries that do not happen to produce a tangible "product": airlines, utilities, communications, retailing, wholesaling, healthcare, banking, insurance, financial services, and others that are very technology- intensive and need continual infusions of engineering science and exper- tise. It is difficult to maintain reasonable trade balances, however, solely by exporting services. There will probably be strong pressures to maintain at least a 20 percent employment presence in manufacturing. Solely for reasons of national security, it seems likely that at least viable steel, chemicals, ground transport, aircraft, electronics, domestic energy, and ship-building capabilities must be maintained, by government subsidies if necessary (Quinn, 19834. Other industries that will have to remain internationally competitive must squarely face the problems outlined above: how to compete with some companies (like the Japanese firms) that may have half the capital costs, with others (like those in developing countries) that have a tenth or twentieth of the labor costs, and with still others that have especially low-cost raw materials in addition to low labor costs. 70 68 z 66 ~ 64 on 62 ~ 60 I 58 -> 56 . 54 a: o 52 in 50 o <~' 48 ~ 46 cot 44 cr: `~ 42 404 38 - o - - United Kingdom France United States Japan ;;=; ,' ~ ~ r I I I I I 1960 1965 1970 1975 YEAR 1980 1981 1982 FIGURE 3 Distribution of employment in service industries.

JAMES BRIAN QUINN 147 There are few easy answers. Strategies must fall back on what the United States can do best: exploit its extraordinarily rich and varied scientific base; get closer to its own customers in the largest, wealthiest market in the world; relate sciences, technologies, and customer needs to the search for new solutions with higher total value added; and exploit the country's entrepreneurial capabilities and flexible capital structures, which have been the envy of the world. All these strategies require continuous innovation, not just in products, processes, and system technologies, but also in the use of smaller, more flexible organizations and more imaginative man- agement concepts. ELECTRONICS AND COMMUNICATIONS Many opportunities will arise from electronics, the most powerful single technology of the current era, and from biological technologies, which will offer a wide range of new solutions for agriculture, human healthcare, environmental improvement, chemical processes, and even energy pro- duction. Many important dimensions and trends within the electronics and communications technologies have been well documented. However, it is their interface with other technologies and their use in entirely new system solutions that will present some of the most fascinating horizons of the next 15 years. What are some of the likely effects on industry structures, competitiveness, and management? The demand for electronics functions has been growing continuously and exponentially for several decades, and it is expected to grow another 100-fold in the next decade. When one asks executives or investors how they would like their company to be in an industry with such a growth rate, they exhibit a mild excitement. Oddly enough, virtually all companies and institutions have the opportunity to share in this growth rate, because it is the use of these technologies that will expand so rapidly in the next decade. Almost everyone is a potential applier of the technology, whether in their travels or at home, in factories or government offices, in retail shops or on farms, in research centers or educational institutions, in health- care facilities or places of entertainment. The benefits of electronics will accrue most notably to those who apply electronics, not to semiconductor manufacturers, as is often implied in discussions of world trade advan- tages. Each capability of the technology opens its own particular oppor- tunities. Communications Bandwidth Bandwidth, the amount of data that can be carried over a single link per second, has been growing continually and exponentially for decades

1olo o a) A) 1 on - ~ 1 06 At Z 1 o 1 Do 1 Lasers Communication / ~ satellites '_, if, ' 148 CHALLENGES OFA TECHNOLOGICALLY COMPETITIVE WORLD l ~ Helical waveguides ~ ~ (100,000 voice channels) 5~ Coaxial cable and microwave / (32,000 voice channels) If, Microwave (1,800 voice channels) / Coaxial cable (600 voice channels) Carrier telenhonv (12 voice channels) ~ ~r ~ First telephone lines Dot multiplex telegraph (6 telegraph machines) Imprinting telegraph systems ~ e~Early telegraphy: Morse code . - Oscillating needle telegraph 1 . . . . . . . . I I I I I I I I I I I 1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 2060 YEAR FIGURE 4 Sequence of inventions in the telecommunications field. (Figure 4). Today advanced laser optics systems in commercial use can transmit approximately one-half billion bits per second- the information equivalent of the words in 100 sizable books. In the laboratory, researchers can now transmit approximately one trillion bits per second the equiv- alent of the words in 200,000 books. At this rate lasers could transmit all of the word information in the books of the Library of Congress in less than half an hour. The theoretical potential of light-frequency lasers is still approximately two orders of magnitude beyond the current laboratory art, and significant progress toward that goal should be expected by the year 2000. Will we use information in the same way when it can be transmitted commercially at these rates? Probably not! Demands will expand mark- edly. To use this capability effectively will require whole new industry infrastructures. Already major new endeavors have arisen in information packing, mass storage, fiber optics, light-frequency modulation, rapid remote sensing, light-frequency recording and playback, solid-state laser components, light-activated computer devices, and computer security tech- niques Other completely new consumer systems (instant remote imaging), institutional systems (medical diagnostic and surgical techniques), com- munications services (local area networks and data systems), input-output devices (voice and on-line sensing), and linkage systems (electronic jails) seem to pop forth daily to use these huge bandwidths.

JAMES BRIAN QUINN 149 Density of Components The density of components has continued to grow rapidly, although at a slower rate of change than in the early 1970s. Meindl and others have suggested that component densities close to one billion components per chip are possible by the year 2000. Others believe this may be conser- vative. In any event, such capabilities immediately suggest the potential of very powerful (several picosecond) computers in minuscule packages, fractions of inches in dimension. Of course, along with this extraordinary power and small size come fascinating challenges for software and firm- ware to program the chips and organize input data so their capacity can be realized. The full power of such devices cannot be exploited without extensive real-time sensing capabilities, high-bandwidth transmission ca- pabilities, and software concepts (like those of artificial intelligence) that decrease the distance from the central processor to its most remote memory sources. A few chips can give each appliance, factory tool, vehicle, school, office, clinic, home, supermarket, and corner repair shop a computing power that would have been unimaginable in 1970. Given the creative ways people have used increased computer power in the past, one can only wonder what further applications will be commonplace 15 years from now. Electronic capabilities will undoubtedly restructure virtually every institution's research, producing, financing, distribution, servicing, pur- chasing, and marketing systems. These changes will be at least as im- portant as lowered production costs for most companies. Some examples are discussed below. Electronics Costs Historically, semiconductor costs have dropped 25 percent to 30 percent for every doubling of volume; capability has become ever cheaper as power has grown. However, the costs of developing and making the first new chip have ballooned from a few hundred thousand dollars for large (LSI) chips in the late 1970s to tens of millions for very large (VLSI) chips in recent years (Figure 5~. Today there are two different views about future cost patterns. Some sophisticated companies say they have found ways of developing and introducing new complex chips that will not inflate future costs. Others say that future generations of chips will take hundreds of millions of dollars to develop and introduce. Once a production line is set up and debugged, however, it is nearly totally automated. Marginal materials and labor costs approach zero; semi- conductor costs become determined by error costs and yields, with prices

50 40 0 30 _ ion m 20 , ^6K RAM / (Intel) 5~ 4K RAM (Intel) ~ ~ 1K RAM (Texas Instruments) 01 11 1 - /AM (Japanese) - 150 CHA~ENGES OFA TECHNOLOGIC~Y COMPETITIVE WOR~ - 0 100 200 300 400 500 CUMULATIVE RED EXPENDITURES (S millions) 600 700 800 FIGURE 5 Growth of total R&D costs for improvements in semiconductor units of memory. SOURCE: McKinsey & Co. following low-margin commodity patterns. Few doubt that very dense, powerful, reliable chips will be available in high volumes at low cost in the late 1990s. Still, their use in devices will require entrepreneurial imagination, rapid and flexible production and marketing techniques, and extraordinary attention to quality production and the software without which the chips would be useless. These are familiar problems of mass production, and should be an arena where the United States can compete well if corporate incentive and promotion systems are adjusted to attract and reward well-trained people for quality manufacturing. As important as computers are, they are increasingly likely to become commodity items, except for those used in extremely advanced laboratory or military applications. If patterns seen in other fields obtain, a few firms with great depth in the technology itself, significant production expertise, and strong distribution capabilities will dominate these commodity mar- kets. The use of computer technologies will be much more crucial to profitability and the generation of wealth in a society than the actual production of semiconductor chips and the off-white boxes that contain them. Storage Capabilities Electronic storage capabilities and costs have also improved exponen- tially over the last several decades. Today all the words in all the (non- duplicate) books in the Library of Congress (some calculate about a

JAMES BRIAN QUINN 151 quadrillion bits of information) could be stored in an incredibly small space. For example, if laser disks now in the laboratory can store 4 trillion bits of information, only 250 to 1,000 would be required to store the amount of information in the Library of Congress. Beyond today's ca- pabilities~lie potentials of another order, in atomic storage which has essentially unlimited capabilities. To use these capabilities will require a fascinating merger of atomic physics, molecular biology, and chemicals and electronics research: a stimulating set of challenges for a new labo- ratory system. Since none of the above subsystems in electronics and communications will approach its theoretical limits for some time, these major technologies should continue to improve in all their important dimensions throughout most of the next decade. What do we do with these technologies as they approach zero marginal cost, operate at the speed of light, occupy almost no space, are able to store infinite information, are immensely reliable, and demonstrate flexibility beyond belief? Automation and Employment Many have made the dire prediction that electronics will perform all jobs; hence employment, incomes, and demand will disappear. This has certainly not been the pattern of the past. All studies to date show that electronics has actually increased total employment substantially. In fact, our service-dominated economy today would be impossible without elec- tronics. There is the obviously substantial employment in computer and associated products industries; and service sectors like banking, insurance, air transportation, hospitals, libraries, travel services, education, com- munications systems, entertainment, government services, and the military would grind to a halt without electronics. All such services seem more likely to expand than contract their employment during the next decade. Although one cannot predict precisely what new products will spring from the imaginations of inventors and entrepreneurs, they are certain to occur. In the mid-1960s few would have thought that the American home of the 1980s would be a combination of supermarket, movie house, video arcade, short-order restaurant, discotheque, computing center, and auto- mated heating and plumbing establishment. We are now poised to move beyond mere comfort and entertainment to other basic needs like personal medical diagnoses, self-education, home employment, security services, child-monitoring, emergency health services, automated household re- pairs, transportation services, electronic banking and shopping, and so on ad infinitum. Farm and ranch homes can adopt electronics technologies in even more spectacular ways to help with hard chores. Automated plant nurseries,

152 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD and animal- and plant-feeding, irrigation, planting, monitoring, spraying, harvesting, testing, and product-classifying systems already exist. Among the more interesting applications are an automated sheep-shearing system developed in Australia and a chicken-deboning system created for U.S. restaurants. Further potentials are limited only by human imagination. There should certainly be unbounded opportunities until well beyond the year 2000. THE FLEXIBLY AUTOMATED FACTORY Much has been written about the impact of electronics on each type of institution mentioned above. However, the flexibly automated factory illustrates many of the greatest potential impacts of electronics on man- agement and competitiveness (Jelinek and Goldhar, 19841. In such a factory items can be produced in essentially any sequence without incurring substantial extra setup costs. (Each machine is relatively indifferent as to whether it produces 100 of the same item or 100 different items in se- quence.) The setups are all preprogrammed. As setup time approaches zero, the Economic Lot Quantity (ELQ) for production approaches one. This transition shifts economies away from certain well-known "econ- omies of scale" toward "economies of scope." Because producers suffer no additional costs for producing variety, they benefit by absorbing soft- ware and hardware investments over the greatest possible range in the marketplace. This means that a flexibly automated producer should com- pete in as many niches as possible within relevant markets. An experience curve for this family of products replaces the individual skills and learning curves of workers as the variable cost most influencing total costs. Costs decrease most as one improves the software and machine relationships in producing the highest volume of products within the design range of the system (Talaysum et al., 19841. Customer Orientation From the viewpoint of marketing it becomes essential that the factory be as closely connected as possible to customers. Ordering systems could electronically link individual customers by computer directly with the plant's production planning system. This would minimize finished stock inventory costs and allow greater market competitiveness by ensuring that the customer gets the precise product and delivery desired. As completely flexible automation is approached, variety in the marketplace not only does not cost the producer more, it adds value for individual customers. On the other hand, since the plant approaches having all costs fixed (other than for materials and parts), unit costs become very volume-sensitive.

JAMES BRIAN QUINN 153 Hence, serving each customer and market niche and maintaining contin- uing market relationships are more important than ever. Since other flex- ibly automated factories can approach the same cost characteristics, competition moves from traditional cost modes toward more understanding of customer needs and desires, and enhancing product quality and services accordingly. These concepts pose real challenges in understanding for engineering research centers and engineering schools. It should become possible to produce products of nearly perfect quality each time. This should lower quality costs by decreasing reruns and war- ranties. Since process control is in software and hardware rather than in labor skills, many products may be produced equally effectively anywhere in the world, thus opening new world markets for a company's product lines. Electronic bandwidths and communications can allow these remote plants to be controlled and monitored with whatever detail is necessary. Consequently, managers can delegate with greater confidence. The tech- nology thus permits highly decentralized organizational structures oper- ating close to customers. Unfortunately, the danger also exists that managements may use the technology to centralize structures and thus drive out the very people and attitudes necessary to design and make the systems work right in the first place. Lower Costs Although costs for some pieces of equipment and for software may rise, many other investment costs can be lowered for a variety of reasons. With zero setup costs, a given piece or grouping of equipment can offer higher capacity on the same plant floor space. This should decrease space expenditures, as should the minimizing of personal facilities, heating and lighting requirements, and so on. Investments should also be lowered by the decrease in work-in-progress because of automatic transfers among work stations. Inventories may be further decreased by coordinated (or just-in-time) inventory control systems worked out with suppliers. To realize the full benefits of flexible automation, better supplier relationships become crucial, and entirely new supplier strategies may be necessary. Suppliers must be allowed to invest in these same advanced technologies. This probably means fewer, more sophisticated suppliers per manufac- turer, longer-term contracts to justify automation expenditures, and closer relations with suppliers to ensure that quality and delivery specifications are met in all cases (Goldhar and Burnham, 1983~. More dramatically, however, manufacturing labor costs decrease drast- ically as a percentage of total costs. Automated factories in the United States should begin to approach the unit labor costs of less developed countries. This could assist the resurgence of manufacturing here and in

154 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD . other advanced countries. It may also allow the development of world- class manufacturing facilities in developing countries, but these countries will be relatively hindered by their lack of sophisticated supplier and communications networks. Optimal locations will be increasingly deter- mined by supplier availability and minimized inventory costs, rather than labor cost differentials. All the above points demand longer planning horizons for companies than were required in the past. They also require a global approach to product and manufacturing strategies. Implementation Flexible automation requires very careful strategies to implement its complex capabilities within the factory and with necessary supplier and marketing links. To date the approach usually taken is to develop clusters of machines affecting single parts or subassemblies ("automated cells") that slowly bring key operations under control. This allows the company to gain needed experience before linking the whole system into an inte- grated network and organization. Interestingly, the people who have been "staff" in the past now become "line" personnel. The old bull-of-the- woods supervisor is no longer relevant. Programmers and maintenance people become the core of the operating force, with the remaining work force consisting of a small group of unskilled laborers who punch buttons, watch meters, and sweep floors. As automation occurs the changeover to this new kind of work force requires careful planning, and great care in the retraining of people to minimize personal and organizational distress. Smaller-Scale, Flexible Operations A continuing trend in industrial organization appears to be toward smaller- scale, more adaptive operations. For reasons of motivation, cost control, and flexibility, many companies (especially in innovative industries) are trying to keep the number of personnel at individual locations below 500. Even in large-scale, continuous process industries, the minimills of the steel industry suggest the economies that may be available by decreasing fixed plant overheads and adopting alternate technologies as conditions change. Sociological trends indicate a continuing preference for more individualized items in the consumer trades. These changes, and the need to get ever closer to industrial customers' specific requirements, increas- ingly seem to be making flexible manufacturing systems more cost-ef- fective than fixed-position automation for specific situations. Many studies suggest that better understanding of customers is one of Me most powerful competitive advantages American producers could have, but one that they have often overlooked in their rush to achieve greater

JAMES BRIAN QUINN 155 efficiency. Many new forms of flexible design groups "skunk works," venture teams, and partnering, for example that allow continuous feed- back from customers and active involvement of workers have become essential for rapid and effective innovation. Similarly, Engineering Re- search Center solutions will have to keep intimately in touch with changing market, organizational, and process needs of users. Not maintaining this orientation properly has been the bane of European industrial research institutes for decades. HEALTHCARE COSTS AND THE FUTURE OF INDUSTRY In the last few years certain nonproduction costs of industry have begun to soar. Health costs have doubled as a percentage of GNP since 1960 (Figure 61. Healthcare costs, now included in fringe benefits of major 1,200 - _ 800 v' ~ 400 o o 4,200 u, ~ 3,000 o O 1,500 cat of up o · 04 12 10 7.5 LO TOTAL COSTS _' (current $) _ PER PERSON COSTS (current $) ~ $1,1 90 ,. BILLION/ - - $/ % OF GNP 54 _ 1960 1965 1970 1975 12.5% REAL COST/ PERSON (1972 $) 1980 1985 1990 1995 YEAR FIGURE 6 Rise in healthcare costs since 1960. $1,000 ~ o $500 0 cat

156 CHALLENGES OF A TECHNOLOGIC~f Y COMPETITIVE WON companies, today often exceed the companies' total profit figure. And in some cases work-related health hazards or health liability claims can be- come large enough to bankrupt major companies (like Johns-Manville and the owners of the Three Mile Island facility). Carcinogens, Mutagens, and Litigation Since virtually any chemical substance can be proved carcinogenic or mutagenic if given in massive doses to test animals, there will be increasing tendencies to look to employers to compensate for real or imagined injuries on the job, from products produced, or from wastes dispersed into the environment. Because nearly all products will face such problems, the Engineering Research Centers have a genuine opportunity to help find more benign solutions, where costs can be efficiently absorbed across a broad spectrum of industry. If solutions are not found to these haunting problems, our litigious society can easily close down the very industrial complexes that have provided such great service, power, and wealth in the past. In economic terms, these problems will be at least as pressing as those of production cost containment and quality improvement within the next 15 years. Leaks into the aquifers of Florida and the Silicon Valley have proved that the economies of entire areas can be destroyed by small-scale chemical intrusions into water supplies. Increasing evidence is accumulating on the health effects of atmospheric pollutants, including carcinogenic particles, leads, aerosols, and acidity. Maps of cancer incidence suggest that living around industrialized cities seems to be dangerous to human health. Com- plicating action is the long delay between an initial environmental insult and its identification as a recognizable cause of disease. Thirty years elapsed before a correlation was observed between men's smoking and cases of lung cancer, with the pattern tragically repeated later for women. Similarly, there are many products in use now-hair dyes, drugs, flavor enhancers, paints, component and process chemicals whose long-term effects cannot be evaluated yet. The businesses that produce these products in all good faith today may be bankrupted years from now in order to pay the unforeseen costs of present decisions. Significant work is needed over the next decade and a half to develop better mechanisms for measuring pollutants, for reducing health risks, and for fairly sharing the natural risks of modern life. Using electronics capabilities, advanced monitoring and sensing systems can be built directly into production processes. In addition, health management on the employer's premises can be improved by automated tests that can be made unobtrusively. The Engineering Re- search Centers may offer a new vehicle for employers with similar prob- lems to engage in joint research projects, and perhaps ultimately in joint

JAMES BRIAN QUINN 157 waste-disposal efforts, to improve their practices and lower their (and the nation's) health costs. National Healthcare Costs Annual U.S. healthcare costs will probably exceed $~:.2 trillion in the mid-199Os, creating enormous national overheads and great challenges for new technologies and systems to contain these costs. New technologies will increasingly allow people to live for months or years through situations they could not have survived a few years ago. As previously deadly diseases are increasingly eradicated, an ever greater percentage of the population will reach late retirement ages. The margins of our productive sectors will have to be expanded to cover these increased national over- heads, despite the crushing effects of low-cost foreign competition. This may in fact be the greatest of all engineering challenges. Without appro- priate solutions, our society will have to make some difficult choices about who lives on, or be bankrupted by its successes in healthcare. BIOTECHNOLOGY Fortunately, technology has provided a dramatic new capability that may balance some important negative trends. Biotechnology has revolu- tionized medical research and is on its way to revolutionizing healthcare, foods production, chemicals production, and waste processing, possibly ameliorating many of the problems mentioned above. Bacteria have al- ready proved to be remarkably helpful in cleaning up many environmental insults, and will doubtless be more so when they are deliberately bred for this purpose. Similarly, as research develops new knowledge about the natural chemical protective agents of plants, animals, and humans, it should be possible to prevent and cure many diseases that have been intractable in the past. Harnessing the diagnostic potential of genetic engineering has already led researchers to claim that more progress has been made in cancer research during the last two years than in all preceding history. If the genes that produce antibodies (or other defensive agents) for living systems can be found, cloned, and switched on, experts believe they may be able to produce highly specific entities to attack almost any human, animal, or plant disease diagnosed. When combined with better sensing, moni- toring, and early diagnostic capabilities at job locations and disposal points, they should offer much-enhanced future prospects for environmental and human health improvement. Genetic techniques should also have a major impact on production processes. Agricultural researchers anticipate locating the genes that affect

158 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD specific inherited plant traits, and then developing plants or seeds with these desired characteristics, thus short-circuiting the years of selective breeding needed to achieve similar results. Plants with desired traits (like bulkier tomatoes, corn with stronger stalks, easier-to-harvest fruits, and even nuttier-tasting wheats and corns for breads) can readily be conceived. Before the year 2000, many researchers also expect to create some grains and legumes that can fix their own nitrogen fertilizers, as the soya plant does today. Although extraordinarily difficult to achieve, such a devel- opment could have dramatic effects on less developed countries' food production and energy imports. By the same date, however, and with higher probability, genetically engineered vaccines and hormones should vastly improve animal husbandry and prevent some deadly livestock dis- eases, like hoof-and-mouth disease and shipping fever. In the chemical industry many claim that biotechnology will allow smaller-scale, less energy-using, and less waste-producing plants for many products. Virtually any petrochemical derivative or organic chemical is potentially producible by biotechnology. Fructose, amino acids, and an- algesics are at the top of the list for large-scale biotechnology operations. But "bugs" or their brethren, yeasts and cells are also able to produce indigo dyes, cleaners for river barges, safe noncorrosive substitutes for road salt, and effective leachates for processing minerals such as copper, sulfur, and uranium. Biotechnologies are young, and the above examples only suggest the range of their possible applications. Their effect on the scale, diversity, and location of agriculture and industry is likely to be profound. Surprises will abound as technologists rapidly expand our un- derstanding of the possibilities and limits of biological systems that have been mutating since life began. PROSPECTS AND CONCLUSIONS Technological progress over the next 15 years offers great hope for a better world future. The prospects I have alluded to represent minimal advances. Surely inventions and discoveries will unleash new, brighter potentials. We simply do not know what these are now. To realize these potentials takes political foresight and wisdom we have not always been blessed with. Food and energy developments require massive investments on a worldwide scale. These will only occur if nations see their interests as intertwined, rather than polarized by religious or political ideologies. Populations can be controlled, fed, and made wealthy, but only by nations willing to innovate, to make social investments, and to educate rather than build monuments, perpetuate myths, and create war machines.

JAMES BRIAN QUINN 159 Our traditions of independence, entrepreneurship, freedom, and indi- vidual rewards have made the United States the greatest technological innovator in history. These forces- supported by an expanding base of scientific understanding should continue to serve private needs well. But for each pound of goods we produce for our wealthier society, the Law of Conservation of Matter says we must also ultimately produce a pound of waste. Managing the by-products of progress will require new infra- s~uctures, public investments, and planning on a scale we have never before achieved. Business and government will have to work hand in hand in developing new mechanisms that will deal with these needs as well as our private ente~pnse system has dealt with our traditional product and service needs. The Engineering Research Centers are an encouraging de- velopment in attacking some important problems, and we Rust that their successful launching will lead to the kinds of technological solutions this country so genuinely needs by the year 2000. REFERENCES Clarke, J. F. 1981. An interpretive overview of the United States magnetic fusion program. Proceedings of EKE 69(8) (August):869-884. The Economist. 1984. China notes that Marx is dead. Vol. 293 (7373/7374) (Dec. 22, 1984):56. The Economist. 1985a. Oil and the dollar: the odd couple. Vol. 294 (7376) (Jan. 12, 1985):56-57. The Economist. 1985b. Solar power: a sunrise industry. Vol. 294 (7385) (Mar. 16, 1985):97. The Economist. 1985c. International investment banking: a survey. Vol. 294 (7385) (Mar. 16, 1985):1-88. Electric Power Research Institute (EPRI). 1981. A Review of World Hydrocarbon Resources Assessments. EPRI EA 2658. Palo Alto, Calif. Food Policy. 1984. Ten years after the World Food Conference. Vol. 9(4) (Nov.):278 et seq. Frisch, J. R., ed. 1983. Energy 2000-2020: World Prospects and Regional Stresses. Report of the World Energy Conference. London: Graham & Trotman. Goldhar, J., and D. Burnham. 1983. Concept of the manufacturing system: present and future approaches. Pp. 92-104 in U.S. Leadership in Manufacturing. National Academy of Engineering. Washington, D.C.: National Academy Press. Jelinek, M., and J. Goldhar. 1984. The strategic implications of the factory of the future. Sloan Management Review. Summer, 1984. Kahn, H., and A. Wiener. 1967. The Year 2000: A Framework for Speculation. New York: Macmillan. Quinn, J. B. 1983. Overview of current status of U.S. manufacturing. Pp. 8-52 in U.S. Leadership in Manufacturing. National Academy of Engineering. Washington, D.C.: National Academy Press. Revelle, R. 1976. The resources available for agriculture. In Foods and Agriculture. Sci- entific American Books. San Francisco: W. H. Freeman. Simon, J. 1981. The Ultimate Resource. Princeton: Princeton University Press.

160 CHALLENGES OF A TECHNOLOGICALLY COMPETITIVE WORLD Talaysum, A., M. Hassan, D. Wisnosky, and J. Goldhar. 1984. Scale vs. scope: the long run economies of the CIM/FMS Factory. Chicago, Ill.: Illinois Institute of Technology. Monograph. Vernon, R., and W. Davidson. 1979. Foreign Production of Technology Intensive Products. Washington, D.C.: National Science Foundation. Vining, D. R. 1985. The growth of core regions in the Third World. Scientific American 252(4):42-49. World Bank. 1985. World Development Report 1984. New York, N.Y.

Goals and Needs of U.S. Industry in a Technologically Competitive World ARDEN L. BEMENT, JR. INTRODUCTION Today the United States is being strongly challenged by its international trading partners for world markets. We feel deep concern at the erosion of our great basic industries, such as steel, automobiles, and other heavy manufacturing. These industries have been the backbone of our past eco- nomic strength. We are also concerned that many of our recently formed high-technology industries are being placed in the category of "endangered species" by the targeting practices of our world trading partners. We now find ourselves at a crossroads, and must decide whether our current busi- ness strategies, institutions, structures, and laws will continue to sustain our high standard of living. As Simon Ramo (1984) has pointed out, "the international race for technological superiority is as ferocious as any cold war battle, and it is fundamental to deterring a hot war. To win can enable a nation to be master of its fate while also enjoying the fruits of superiority in technology. To lose badly can be a catastrophe." The government is now calling on the scientific and engineering com- munities to respond to global competition, to make use of emerging tech- nologies to create new products, processes, and management systems. The establishment of the Engineering Research Centers is a major element of this national response. To envision the goals and needs of U.S. industry through the year 2000 is both a presumptuous and a hopeless task, since in retrospect many of the interesting technologies developed during the past 15 years represent significant discontinuities from the past. By any measure the pace of 161 \

162 GOALS AND NEEDS IN A TECHNOLOGICALLY COMPETITIVE WORD technology development is accelerating. I find it hard to ponder what furler acceleration could occur as our thinking processes are improved with the aid of advanced computers and software. Predictions even out to 15 years must be seen as highly speculative and probably useless. Nevertheless, there are persistent trends that will nurture the new growth industries. As John Naisbitt (1982) observed, we are restructuring our society to emphasize information over industry, decentralizational over centralization, telecommunications over printing, entrepreneurial activities over managerial ones, and an integrated global economy over a national one. The 1980s will be a period of uncertainty, during which people will have numerous options and will exercise their options with greater intel- ligence and creativity. There will be increasing challenges for large com- panies to be more forward-looking in analyzing the future and in effecting changes. They will have to develop stronger insights into selecting po- tentially successful technologies and into helping their businesses adapt. Before looking to the future of American industry, however, I believe the past and present should be put in perspective. In spite of the apparent demise of some of our major industries, as a nation we have been successful in developing new industries over a sustained period of time. Some of the trends we have seen~include the following: · the creation of new jobs at a phenomenal rate nearly twice the rate of Japan · a steady and continuing increase in manufacturing productivity · an industrial output that, as a percentage of gross domestic product, has been remarkably stable over the past 30 years, averaging about 24 percent in spite of two major wars, oil crises, at least two major recessions, and a determined antigrowth, antitechnology movement. A great deal of credit for these achievements must be given to the skill of our work force and to the successes of our management methods, entrepreneurial vitality, willingness to take risks, and technological con- tributions to productivity. However, global competition now compels us to improve our performance further dramatically in most instances-at all stages of technological and business development. To excel in this competition we must change our attitudes and outlook. We can no longer assume that "what's good for the United States is good for the world." Also, we must change our engineering philosophy from one that teaches "If it ain't broke, don't fix it" to one that teaches "If it's working, even well, then improve it."

ARDEN L. BEMENT, JR. 163 FORCES IN OPPOSITION While exponential changes are taking place in technology over time, much slower changes are occurring in world cultures, social habits and traditions, government institutions, and global policies. In fact it has been the strong desire to preserve social traditions and institutions that has caused technological revolutions to be spread over many decades, even after industrial expertise and commercial feasibility have been well es- tablished. Therefore, one can expect that most of the goals and needs of U.S. industry through the year 2000 will be driven by technological rev- olutions that are already in progress and in various stages of maturity. The more prominent include microelectronics, telecommunications, bio- technology, medical diagnostics and implants, and synthetic materials. There is growing concern that the broadening gaps in educational levels among U.S. citizens will result in a widening social stratification as the information revolution occurs. The ability to access and manipulate in- formation will be a key survival skill in tomorrow's society, and lacking it could constitute a formidable barrier to upward mobility. The accelerating pace of technological change will also bring about new issues, concerns, frameworks, and challenges to which global policies and international relationships must adjust. International tensions, such as we are experiencing now in our trade relations with Japan, could intensify as nations accelerate their efforts to capitalize on new technologies, and especially if leadership for managing change is lacking. Ruben Mettler (1982) points out that "all nations have an essential stake in a more unified, open and balanced world economy . . . A healthy world economy that depends on expanding trade won't just happen, we have to make it happen by an increasing effort to cooperate, to resolve our differences construc- tively . . . and to reduce trade barriers even when it hurts . . . We need new leadership, new strategies, and perhaps new institutions and structures that will enable us to leapfrog across the dismal swamp in which we find ourselves." U.S. industry is being challenged more now than ever before in the face of growing international competition, not only to plan strategically, but also to manage strategically. Yet the effectiveness of such strategic plans and actions depends critically on industry's ability to reliably forecast future changes in technology and the environment. Nearly all the environmental factors to which industry must respond are subject to dramatic change. Some forces are dynamically opposed, so that the possible outcomes of an event can be dramatically different de- pending on which force should dominate. Consider, for example, the following forces in opposition.

164 GOALS AND NEEDS IN A TECHNOLOGICALLY COMPETITIVE WORLD First, students of the Kondratieff "long-wave" theory of economic activity argue that as a result of growing world overcapacity we are nearing the end of a long-wave cycle, which will bring about sharper depressions, higher unemployment, shrinking profit margins, more burdensome debt loads, and hyperinflation. Other modelers argue that the current rate of new job creation in the United States, spurred on by new technologies and thriving entrepreneurship, will be sustained and will counter the next long-wave downturn, bringing about serious labor shortages in some re- gions of the United States over the next decade. Which model is a planner to believe and a manager to act on? Second, in the coming years there will be a general leveling of tech- nological competence among the highly industrialized countries. An ever- increasing fraction of technological advances will occur outside of the United States. The United States will be required to adopt a fast-follower rather than a leadership strategy in some technologies, not only out of necessity, but also out of economic advantage. Furthermore, many mul- tinational corporations will be marketing to the more than 600 million people of the highly industrialized countries. In contrast to these trends, however, there is growing pressure on the United States government to protect employment by means of industrial policy, to control the flow of technological information, to protect emerging technological industries, and to pursue a policy which advocates United States domination in all of the sciences and technologies, under the assumption that it might even be possible to do so. Third, many major technological industries in the United States are seeking partners in other countries in order to achieve a broader base for capital investment, technology inputs, skilled labor, and market access. Examples of such consortium strategies can be found in the automotive, aircraft, nuclear, communications, and electronics industries. In opposi- tion to these trends the industrialized countries are attempting to achieve greater national control of new technological enterprises through targeting practices, the erection of nontariff trade barriers, and the nationalization and subsidization of industries. In the United States, the dismantling of major corporations by applying antitrust legislation, which was created for an isolated domestic economy, seems also to be counter to the growing internationalization of competitive forces. Fourth, worldwide telecommunications systems linked to teleports and backbone connecting networks linked to major finance and industrial cen- ters are emerging. These systems will further internationalize the conduct of world banking, trading in world stock exchanges, and marketing and distribution. More than ever before money flow will be equated to infor- mation flow, and investors, the ultimate owners of production capacity, will become more highly distributed around the globe. Opposing these

ARDEN L. BEMEN7, JR. 165 developments are the growing controversies among nations over privacy of information, access to and rights to monitor information flows across borders, and government control of the technical means of information transfer. These examples represent only a few of the socioeconomic and political forces that can dramatically alter the environment for technological change and industrial growth in the future. These forces do not represent new challenges to the engineering community, but they most likely will become more critical determinants of how an industrial enterprise flourishes in an increasingly competitive world. Fortunately, some of the emerging technologies may offer new pathways around some of these barriers. For example, they will permit past patterns of doing things, but in new, unconventional ways. They will provide new options for improving life-styles through added convenience, while still preserving social habits and traditions. They can make complexity more intelligible to all by using high technology to make products and services simpler to use. These technologies can bring new flexibilities to managing change. They can open up additional opportunities for wealth while at the same time conserving existing wealth. For these reasons I believe it is critically important for the newly selected Engineering Research Centers to include in their curricula the study of how technological changes in their fields should be managed in the face of prevailing social, economic, and political forces. U.S. INDUSTRY IN TRANSITION The law of dynamic competitive advantage requires that American in- dustry constantly introduce new products, processes, and services if it is to remain at a high level. This will require either devising new technologies or using existing technologies in innovative ways. I believe the information revolution has the greatest potential for chang- ing the course of industry in the next 15 years, primarily because it is already doing so. New information technologies are already linking the factory with the office and the home, and are bringing about changes in the industrial value chain. The value chain in this context consists of those activities that add value in the industrial enterprise: materials and services; product design and development; production; distribution, marketing, and sales; and after- market operations. Information technology is dramatically changing the relationships among the links of this chain. First, information technology is making the interfaces among the links more transparent and superfluous. For example, product and manufac- turing engineering are already being merged into single engineering units

166 GOALS AND NEEDS IN A TECHNOLOGICALLY COMPETITIVE WORLD in many manufacturing divisions. Common data bases are also being designed to accommodate information flow all along the value chain from order entry to production scheduling, factory routing, inventory control, and final customer billing. Second, information technology in the form of direct terminal linkups is extending the value chain to include suppliers at the leading edge and users at the trailing edge. These extensions of the value chain to suppliers and customers are stretching around the world to facilitate world sourcing, marketing, and distribution strategies. Third, information technology in the form of privately owned local and long-distance telecommunications networks is permitting a greater number of bypasses, or shortcuts, through the value chain. Therefore, it is be- coming more cost-effective to allocate noncritical operations to external suppliers and service companies, to distribute knowledge-worker assign- ments throughout a company, and to implement nationwide and worldwide production and coproduction strategies. United States industry is already exploiting economies of scope in ad- dition to the previously achieved economies of scale. As a result, service and production industries are becoming more interdependent. Also, by- passes are being sought in marketing, transportation, distribution, and warehousing to force greater convergence of manufacturing costs and final retail costs. For example, the increasing use of telemail ordering from the home is already bypassing the distribution link. Also, integrated transportation companies are emerging. Through the use of distributed information networks they can select the optimal delivery method, use storage buffers along the delivery chain to best advantage, and provide continuous traceability of the transported items. These changes, plus the full implementation of "just-in-time" inventory management by United States industries, will make it increasingly cost-effective for more foreign companies to locate their production facilities in the United States in order to sell to United States markets. THE FACTORY OF THE FUTURE The factory of the future is not a new concept; it has been evolving for more than 30 years. It is generally imagined to contain highly integrated manufacturing cells consisting of machine tools, robots, automated ma- terials handling systems, distributed sensors, and a number of digital controllers. In general, these cells would be controlled by a model-driven computer-aided design and manufacturing (CAD/CAM) data base. Ad- ditional control programs would be introduced into the cell to provide diagnostic functions that anticipate breakdowns and provide cell control throughout upset conditions, with or without human intervention. Ideally,

AR1DEN L. BEMENT, JR. 167 material stock and information would be fed into flexible manufacturing cells and parts would come out. Such highly tuned cells are considered the key to attaining increased productivity and quality, reduced lead time for producing a new product, improved reliability of production, and reduced manufacturing costs. To be complete, however, the factory of the future must be a fully integrated system rather than just islands of automation. Integrating the factory of the future will depend on the following kinds of control: · adaptive control for machining cells · real-time control of material and information on the factory floor · production planning control, including scheduling, inventory control, material requirements planning, and capacity adjustment. Although several plants around the world approximate the factory of the future, most of these currently face major barriers to implementing a fully integrated, computer-based control system. These barriers include: the cost and complexity of available software; the lack of interfacing standards; the lack of appropriate control algorithms and models for system integration; and the lack of expert systems for optimal scheduling and routing. For a number of reasons, then, fully automated factories are likely to be the exception rather than the rule even by the year 2000. In industries that have frequent model changes, the time and cost necessary to program new software for such changes may be prohibitive. In some plant layouts the manufacturing cell operators, assisted by data displays and decision aids, may be able to control production more economically and with a greater dynamic span of control than a hierarchical computer control sys- tem might. Finally, in some cases full automation may not be warranted because it will not contribute sufficiently to the value of the product to justify the investment. In the future some emerging technologies, many of which are already in use, will add substantial value to manufacturing operations: · Net and near-net shape fabrication methods will reduce materials use and minimize metal removal operations. · Improved cutting tools, tool wear sensors, adaptive grinders, and improved abrasives will greatly increase the speed of metal removal op- erations. · Advanced lasers will speed up drilling, cutting, and welding and . . . . Jommg operations. · Plasma deposition and buildup processes will replace some mechan- ical assembly operations with chemical assembly procedures. · Advanced surface modification techniques using physical and chem

168 GOALS AND NEEDS IN A TECHNOLOGICALLY COMPETITIVE WORD ical vapor deposition, ion implantation, and directed energy beam an- nealing will impart better wear, abrasion, and corrosion resistance. · Improved computer methods of process modeling and simulation will speed up process design and automation. · National data bases on the properties of materials, based on funda- mental behavior models, will greatly reduce the time required to test and evaluate the use of new materials. · Automatic tape-laying machines and advanced polymers will make possible the manufacture of high-volume composite parts. · Highly agile, coordinated robots will be increasingly used in assembly operations. Moreover, the cost structure for manufacturing operations could change dramatically over the next 15 years for small and medium-sized companies. Because of the prohibitive costs to these companies of hiring the talent needed to revamp their manufacturing technology, "specialty houses" are being established to respond to their demand for technical help. In the future such houses may offer not only engineering consulting services, but also control, communications, and inspection modules; software; equipment rebuilding services; machine tool rentals; and data-base man- agement services. Through these services some manufacturers may opt for a higher ratio of variable to fixed costs, so as to respond more quickly to changes in the business cycle and in technology. Furthermore, as steel- collar workers displace blue-collar workers, direct labor may become more widely regarded as a fixed cost. THE STEEL INDUSTRY OF THE FUTURE The steel industry is in a state of ferment, in spite of the restructuring, downsizing, and refocusing of large, integrated steel mills going on today. New technologies are emerging that will enormously improve quality, productivity, and product performance while reducing energy and capital costs. New information technologies, which can improve the understanding of steelmaking processes and help eliminate processing defects, can greatly improve quality, productivity, and production costs. The steel industry and the federal government have set a standard for cooperation in estab- lishing programs in advanced sensor development. These programs prom- ise to provide sensors that will withstand hostile environments, to make possible the continuous analysis of liquid steel chemistry by laser spec- troscopy, and to permit monitoring of temperature distributions throughout large, hot bodies. Microprocessors are also being applied to real-time process analysis and control so as to improve production yields and product compliance

ARDEN L. BEMENT, JR. 169 with engineering standards. The use of x-ray tomography can permit better dimensional control of mill products, and reduce the amount of excess steel given away to the customer through lack of control. New, in-line nondestructive characterization methods, which can detect defects in in- candescent steel during production, will eliminate the need to cool down steel at intermediate breakdown stages for cold inspection. New concepts in steelmaking under pilot development around the world are signaling future dramatic changes in the industry. One potential break- through is the substitution of coal for coke in the direct reduction of iron ore. The development of improved refractories that are less reactive with liquid steel, as well as improved pouring methods, advances in deoxidation practice, and more extensive use of vacuum degassing and ladle process- ing, will lead to cleaner steels. These steels will have a lower content of sulfur and other undesirable residual impurities, lower retained oxygen content, and improved inclusion control. The steel industry has already achieved major advances in productivity and cost reduction by installing continuous casting facilities. It appears that gains from future developments will be even greater. The continuous casting of thin slabs and strip, which will eliminate the need for primary breakdown mills, hot strip mills, and reheat furnaces, will result in further dramatic reductions in capital and operating costs. Improvements in the chemical homogeneity, microstructural refine- ment, and porosity control of these near-net shape products will be pro- vided by continuous magnetic stirring and rapid cooling during the solidification process. The development of dual-phase steels, which has enabled significant weight reductions in automobiles, has been a major success story for the steel industry. However, the full potential for strength improvements and property uniformities needed by the automotive industry for improved formatility is only now being made possible by the installation of contin- uous heat-treating lines. Finally, parallel advancements in electrogalvanizing technology, to pro- vide improved laminated and alloyed zinc coatings for corrosion protec- tion, will greatly extend warranty times against cosmetic damage and coating perforations. I see the next 15 years as extremely challenging for the steel industry- certainly a time in which the industry can demonstrate to the nation that technological revolutions also come to mature, basic industries. CONCLUSION In looking at the future of U. S. industry I tend to be optimistic. The United States is still the strongest nation in technology in the world, and

170 GOALS AND NEEDS IN A TECHNO f OGIC~Y COMPETITIVE WORD we are getting better at using this technological strength competitively. As Ruben Mettler (1984) observed, "Global competition compels all of us to improve our performance in all aspects of our businesses. This includes making use of all that technology can bring to our products, processes and management. The challenge is not whether to optimize technology but how to develop and select what's best for our purposes, how to control the cost of using it, and how to finance it, all the while earning enough profit to continue to invest and compete in world markets on a sustained basis." A major part of this challenge is to remain aware of technological developments around the world. Our universities represent the best means for doing this. Our great research universities combine the functions of education and basic research. They have long been lodestones for the best scientific and engineering students, faculty, and researchers from around the world. As a result, our opportunities for exchanging ideas and being exposed to the world's technologies are greatly enhanced. These oooor- tunities should be nurtured rather than restricted. The number of models for university-industry interactions have prolif- erated in recent years, easing the connection between the industrial re- searcher and the university investigator. While the Ministry for International Trade and Industry (MITI) develops the national strategies for targeting technologies for economic growth in Japan, the United States has already decentralized this process. Most state development offices are preparing regional targeting strategies with the close participation of business and university leaders. To add to our present Silicon Valley, they are actively planning the architectures for biotechnology, polymer, microelectronic, and intelligent manufacturing valleys, using a great diversity of institu- tional models for technology development, transfer, and reduction to prac- tice. The Engineering Research Centers sponsored by the National Science Foundation are centers of excellence that can provide impetus to our national engineering research. Most important, these Centers have a re- sponsibility to provide leadership in developing the new curricula that will educate future engineers who can translate our visions into reality. Notwithstanding the progress already made, the nation still has a major task ahead that of reequipping our university engineering research lab- oratories. It is not enough for our universities to model industrial processes and manufacturing operations with computers or simple prototypes. They must also have facilities of a scale sufficient to support the development of advanced industrial process equipment, machine tools, metalworking equipment, control systems, instrumentation, and software. In my university experience I have sensed how the excitement and challenge of electronic devices, microprocessors, advanced sensors, ro

ARDEN L. BEMENT, JR. 171 hots, control systems, and artificial intelligence have contributed to at- tracting top students to engineenng. If our public and private sectors cooperatively support and sustain the enthusiasm of this talent, our nation will go a long way toward meeting its goals and needs in a technologically competitive world. REFERENCES Mettler, R. F. 1982. New private initiatives for expanded world trade. Address before the Japan Society, New York, June 23, 1982. Mettler, R. F. 1984. Charles M. Schwab Memorial Lecture. Address before the American Iron and Steel Institute, New York, May 23, 1984. Naisbitt, J. 1982. Megatrends: Ten New Directions Transforming Our Lives. New York: Warner Books. Ramo, S. 1984. U.S. technology policy: an engineer's view. National Academy of En- gineering. The Bridge 14, no. 3 (Fall 1984):5.

A Mature but Rejuvenating Industry: Expectations Regarding the Engineering Research Centers W. DALE COMPTON The question of the proper relationship between engineering practice and research has been effectively addressed in a number of papers. I have a somewhat similar conflict in concepts to discuss namely, the expec- tations of an industry that is at once mature and rejuvenating. After all, maturity means "having attained the normal peak of natural growth and development," while rejuvenation refers to change. So I am discussing the rejuvenation of something that is mature: ele- ments of industry that are trying to return to their adolescence, in a sense, and to recapture a greater flexibility and a greater capability for innovation. It is in this context that one may ask, what do these industries expect to gain from the Engineering Research Centers (ERCs)? It is useful to reiterate a few points made in other papers. While it is difficult to generalize about any large segment of an industrial complex, we can find some common traits among a number of our mature industries, including the automotive industry. First, mature industries are experiencing increased competition from overseas suppliers. The reasons, as Professor Quinn's paper points out, are relative labor costs, the relative value of currencies, tax policies of various governments, and even the targeting of markets by other govern- ments. A second characteristic of mature industries is the growing need to meet demands on the part of customers for improved product quality. The reason? The customer simply will not accept poor-quality products, let alone shoddy products. Perhaps a more important certainly an equally important reason is that producing a high-quality product costs less than 172

W. DALE COMPTON 173 repairing a poorly manufactured product. This relates directly to the total cost of manufacture. The third common characteristic is an increased use of technology as a tool for improving competitiveness. The reason? Technology must be used to offset some of the local advantages of overseas competitors. There are few alternatives, and furthermore, through technology the U.S. man- ufacturer may be able to offer a variety of products that can more effec- tively compete in the marketplace. How are the mature industries attacking these problems? How are they achieving cost reductions? Basically, every aspect of the business is being examined. New management tools are being used, and as I have noted, technology is increasingly being used to help reduce costs. Quality is being upgraded. We now understand far better than before that a product must be designed to meet the customer's needs. It must be designed so that it can be manufactured; and it must be well manufactured. Therefore, the entire process from product conception to final manufacture must be understood to be an integrated system. . . Flexibility Is being emphasized. Many of our mature industries have large capital facilities. The steel, aluminum, glass, automotive, chemical, and aircraft industries are all examples. We are learning that facilities must be designed to accommodate change at a more rapid rate than we ever experienced before. Today it costs the automotive companies between $700 million and $1 billion to build a new engine plant. This is a sizable percentage of the $2 to $3 billion it costs them to create an all-new vehicle. We simply have to build flexibility into our facilities so that those in- vestments have a longer period of use. It is appropriate to ask how an Engineering Research Center no matter how big, no matter how good-can help with the efforts toward cost reduction, quality, and flexibility? First and foremost, ERCs can offer faculty and students an understand- ing of the total system and its complexity, from product conception through design and development to final manufacture. Furthe~ore, they can pro- vide a broad understanding of productivity and how it translates into competitiveness; they can demonstrate that productivity is important in all phases of the process, not just in the final stage called manufacturing. The ERCs provide an opportunity for an in-depth look into the total system. As Roland Schmitt has noted, they provide that laboratory experience for engineering students that has been missing for far too long. Second, through their research the ERCs can furnish industry with improved general techniques and tools tools to handle, to manipulate, and to control large and very complex systems. By way of example, consider the case of a large company that may be carrying an inventory exceeding $1 billion. With the cost of money today,

174 a MATURE B UT REJUVENATING IND USTRY that inventory costs around $100 million a year to maintain. Inventory needs are determined by a large number of factors e.g., the options that one offers in the product, the reliability of the supply base for materials, and the distance between the supplier and the factory that uses those materials. To elaborate on the point about options: if you look at an automotive assembly plant, the normal line produces about 60 vehicles per hour; that translates into roughly 400,000 vehicles a year. Thus, one of the Ford Escort assembly plants could build roughly 1.2 million vehicles over three years. With the option content that is currently available for the Escort, that plant could operate for nearly three years and never build two identical vehicles. A natural question arises: How much do those options actually cost? The simple answer is that we are not certain. We simply do not have adequate tools to determine the value of eliminating a particular option or the cost of adding another one. We have some general guidelines, but we really do not have a sufficiently quantitative description of the system to be able to offer that kind of analysis. Another example of how the ERCs can be invaluable in the area of tools and techniques concerns the technology of robot installation, as Dr. Hackwood emphasizes in her paper. We regularly make decisions as to whether certain welding processes are going to include robots. Now, some design changes are made in automotive vehicles each year. Those changes may require modifications in the assembly process. If the assembly line has a robot in the line at a point at which the line must be changed, it frequently costs more to move the robot than it did to buy it in the first place. Such factors may be critical in deciding the level of automation that is to be introduced. Cost trade-offs have to be made. These examples emphasize the need for better tools, for better models, and for better simulation techniques for designing the product and man- ufacturing it. We welcome the trend that we see toward revamping the industrial engineering curricula in this country. The new emphasis on modern manufacturing can make great contributions in training people to help attack these problems. I hope that the list of topics generated for the 1987 ERC program announcement will contain a number of generic issues that are directly relevant to our so-called "mature" industries. I also hope that we will be generous in our interpretation of relevance, and not make too great a distinction between mature and emerging industries and their relationships to the ERCs. To illustrate this need for applying general criteria, I wonder how many of the six currently funded ERCs would be readily identified as relevant to the mature industries. Probably not many, and yet they all are. From an automotive point of view, the composites being studied at Delaware

W. DALE COMPTON 175 are the materials of the future, not just for hang-on panels, but for structural items. The systems work at Maryland is of direct relevance and of great importance to the understanding and control of our total systems. The effort on integrated circuits manufacturing automation under way at Santa Barbara is of direct interest. The automotive industry will continue to be one of the very largest users of integrated circuits. We design our own circuits; we have to know how they are going to be manufactured. The computer-based intelligent manufacturing systems work at Purdue is of obvious importance. The effort on networks at Columbia has long- term implications for our industry. As a multinational company, Ford has a communication problem that is immense, particularly as we move toward an all-electronic system and away from a paper system. Finally, the bio- technology effort at MIT can impact the development of new fuels, new materials, new adhesives, and so forth. Thus, in making those lists I hope the National Science Foundation will be careful about compartmentalization. Relevance is sometimes difficult to gauge. We should not expect the ERCs to solve specific, immediate problems. That is industry's task. But the ERCs can help create a new state of mind in students-a new outlook and a new approach so that they will be better able to solve those problems when they join us. Rejuvenation is a traumatic experience, but for some of us in the mature industries the alternative is even less attractive. As our mature industries strive to become more competitive, we need new employees who have experienced some of the aspects of a rejuvenated engineering education and a rejuvenated research experience. That, it seems to me, is what the ERCs are all about.

A Growth Industry: Expectations Regarding the Engineering Research Centers LARRY W. SUMNEY The Semiconductor Research Corporation (SRC) welcomes the estab- lishment of the Engineering Research Centers (ERCs) by the National Science Foundation (NSF). These Centers offer the potential for strength- ening the engineering capabilities of the United States and enhancing the competitive position of this country in important segments of industry. No industry is more aware of the need for strengthening its competitive position than the integrated circuit industry represented by the SRC. Through the SRC, the integrated circuit industry has established "centers of ex- cellence," with some similarities to ERCs. At the same time, those uni- versities that have been selected to operate an ERC have been given a unique opportunity. If they do not use this opportunity to develop improved institutional environments for applied research, we will all lose. The functions and complexity of integrated circuits continue to increase, and are the key elements for systems that will allow us to understand, manage, and control information and activity in many areas of human endeavor. For this reason we tend to equate the integrated circuit industry with the information technology industry, and to believe that United States success in integrated circuits will be central in future economic growth. The integrated circuit industry looks to the universities for three important resources: well-trained graduates, new ideas, and high-quality research results. University research centers that have a concentration of effort, experience, facilities, and skills are the primary source of such resources. These centers supplement much larger research efforts in industry and government laboratories that are generally more strongly focused on goals and products. 176

LARRY W. SUMNEY 177 OPPORTUNITIES FOR ERC UNIVERSITIES There are three overlapping opportunity areas that a university operating an ERC should address: motivation, management, and growth. The motivation opportunity is related to the structure of the university and its reward system. Most universities are now structured around dis- cipline-oriented departments, and a faculty member's stature and rewards are strongly focused on personal achievements as determined by peers within the discipline. However, progress in engineering research often demands strong interdisciplinary collaboration and the subordination of individual goals to those of a team. The careers of some faculty members have been adversely affected when they gave priority to such collabora- tions. Such experiences predestine a research center to a limited existence. A new approach to motivating the best faculty to participate in Center research may do more than anything else to make an ERC successful. A second opportunity relates to the stature of a Center within the uni- versity. Research centers in general are all too often supported by de- partment chairmen only until they in some way threaten the departmental control of funding or staff. Then the support may erode, and the center ends up with inadequate staff or resources, and ultimately disappears. There must be strong motivations for continued departmental support of research centers, encouraged by university administration. Despite the fact that universities have been widely recognized as sources of expert con- sultation on management, it is generally accepted that universities are poorly managed. Historically the university has been a loose confederation of scholars. In the modern world, universities have become big businesses. The annual research expenditures at MIT are about $200 million, and there are more than 50 U.S. universities at which they exceed $5 million. For most of these funds the university has the contractual responsibility. It fulfills the responsibility by delegating the responsibility to faculty members. Re- sponsibility for performance and deliverables are placed completely in the hands of the performer, with minimum, if any, oversight. Results are predictable. Contractual requirements are often neglected and research commitments left unfulfilled. On the other hand, the quality of the research product depends largely on the freedom of the individual faculty member. If increased management were to decrease the quality of research, it would be the equivalent of shooting oneself in the foot. The Engineering Research Centers will depend on good management to be productive. That follows from the problem-solving nature of engi- neering research. The opportunity is for universities, perhaps calling on some of their expert consultants, to find mechanisms for better manage

178 A GROWTH INDUSTRY ment of their enterprises while preserving their research quality. Fifty percent of academic research expenditures in engineering are concentrated in the 14 top schools. In research related to integrated circuits, the SRC identifies 6 schools in the top tier of research capability. One objective of the SRC, and of the NSF in establishing the ERCs, is to elevate the research productivity of additional universities. This is a challenging goal, almost too challenging. The research environment that attracts excellent faculty and the best graduate students to a given school evolves over a long time, and requires both strong technical leadership and a committed institutional structure. The universities at which ERCs are being located should, in a few years, be among the top universities in their technical areas as well as in broader areas of engineering research. CENTER OPERATIONS The specific attributes that a research center requires to meet the ex- pectations of its constituency include a unique purpose, goal-oriented research, problem identification, effective dissemination activity, and good management. The university model for a research center is often to define an area of interest and to gather faculty participation within this area. The specific agenda then is defined by the interests of the faculty and is often a rela- beling of ongoing research. The SRC model for a research center includes defining a unique goal or purpose, defining a research vehicle for dem- onstrating progress, establishing the relevance of various research tasks, and an effective management structure. Under the contractual aegis of the center the SRC at times supports research unrelated to the focus of the center, but this is separately reviewed and evaluated. The uniqueness of the center goal recognizes that increased benefits will result if different centers work on different things, and that there are an adequate number of macroengineering problems to provide a unique problem for each of the centers the SRC can establish. In our view, the goal of an Engineering Research Center should be more than that of defining an area of research. For example, the SRC-Cornell Center for Microscience and Technology has as its goal the demonstration of 0.25-micron silicon technology in a configuration compatible with a 16-megabit dynamic random-access mem- ory (DRAM). The goal orientation of the research is perhaps what should distinguish an ERC from materials or science research centers that are more funda- mentally oriented. The goals for the various research tasks performed within the ERC and their relevance to the Center goal should be clear. The goals should be assigned target dates, as in an industry research

LARRY W. SUMNEY 179 project. This arrangement would provide excellent training for students by providing realistic discipline. Problem identification is a core concern of Engineering Research Cen- ters. History is rife with solutions to nonexistent problems, and we are increasingly aware that much research merely repeats prior research. Lack- ing omnipotent information bases, the Engineering Research Centers must build strong external constituencies for their research in order to remain relevant and useful. The opportunity here is to define a role for universities in engineering research that does not compete directly with that of industry, but which contributes in important ways to industry's generic research base. At the same time, the Engineering Research Centers must deviate from the traditional university mode of addressing collections of small problems to focus on the larger, more complex, and more important problems of today's industry. To take an example from SRC research, a large problem is the efficient and rapid transfer of data among the parts of a multimegadevice silicon chip, while a small problem is to identify a better interconnect material. Through interactions with the industry that uses research results, real industry problems can be identified. Effective dissemination may require going an extra step before research is usable by an industry. This may consist of carrying the research to a more advanced state or presenting it in a different form. The SRC has found that joint meetings of university and industry specialists, special short courses to help transfer newly developed technology, and the SRC electronic data base are effective additions to the normal channels of technical communication. Most important, the interaction is not neces- sarily between peers, as is normally the case among university researchers, but may entail a specialist communicating results to a nonspecialist or to a specialist in a different field. These types of communication are more difficult. Center management is crucial to the ERC's success. In the past a major failing of research centers has been that a center became too dependent on the personal attributes of an individual director; if he decided to go somewhere else, the center ceased operation. The director must have the respect of the center's investigators and sufficient authority to focus the research on the defined goal; yet a management structure that provides continuity and stability must also be developed. EXPECTATIONS OF A GROWTH INDUSTRY The integrated circuit industry is a growth industry. Often an industry downturn such as we are now experiencing really means that revenues are flat rather than increasing 20 percent a year. An unfortunate attribute of a modern high-technology growth industry is that there is ample com

180 A GROWTH INDUSTRY petition both nationally and internationally. Until recently, the United States had a comfortable hold on two-thirds of the world market for semiconductors. Now both the fraction and the comfort level are lower. A growth industry looks to the Engineering Research Centers for added input and support so as to compete more effectively and to continue growing. The three bases of these expectations are ideas, graduates, and research results. Some discussion of each of these bases is in order. It has been observed that the best ideas in any field often come from outside the field simply because the internal researchers know too many things that can't be done. This is a simplistic statement, but often true. Excessively specialized knowledge often inhibits innovative thinking. In addition, the nonspecialist often may know of developments in other fields that can be applied to the problems at hand. University-situated Engi- neering Research Centers have access to a wide variety of knowledge, and their staffs are not exposed to some of the inhibiting constraints found In industry. For these reasons many seminal ideas have originated in university laboratories, and it is natural that we look to the Engineering Research Centers for results. It is important, of course, that Center research address ideas that are applicable to real industry problems. Graduate students entering industry have spent five years focusing on a given subfield of their discipline. They have performed original research and gained considerable perspective. An industry employer benefits when a graduate's field of concentration is directly applicable to the industry's technology base. Through the employment of the graduate, technology is transferred from university research to the industry. If the field of con- centration is not a directly related field, little if any technology transfer occurs. Although graduates can and do change areas of specialization with ease, there is a big difference when a career becomes an extension of university research. Thus the alignment of the Center's research with the needs of a client industry becomes more important. The high value of the graduate to the industry also increases the incentive to involve as many students in the research as possible. As one figure of merit, the SRC has used the ratio of total contract costs to the number of graduate students participating in the research. Research results are difficult to evaluate because often they pass through many hands before finding final application. The applicability of university research varies widely from field to field. In the field of integrated circuit technology, for example, the software engineering from computer-aided design efforts is often directly applied by industry. This is also true of system architecture, as in the Intel commercialization of the Cal Tech hypercube architecture. In process-related research such as dry etching, ion implantation, and low-pressure oxidation it is sometimes difficult to track a given result to its eventual application. As a result, advances in . . .

LARRY W. SUMNEY 181 processes and device technology may have many sources. For the Engi- neering Research Centers it is important to understand the means by which research results will be transferred and applied to particular fields. In conclusion, the Engineering Research Centers and their universities have the opportunity to make a significant difference in the engineering research world and in their client industries. Strong institutional support and attention are required for these opportunities to be realized. The entire engineering community will be watching with anticipation for the results.

Biotechnology and the Healthcare Industry: Expectations for Engineering Research STEPHEN W. DREW The United States holds a commanding lead over other nations in the biological sciences, especially in the area of molecular genetics. Yet while opportunities in the worldwide market for commercial biotechnology are exciting, the United States faces severe engineering limitations that affect its ability to maintain world dominance in this field. Other papers in this volume describe engineering research in fields that enable us to place complex robotics and advanced telecommunications systems in composite- material vehicles that can orbit the earth in 90 minutes. Other research has led to systems that produce solid-state devices capable of processing up to one trillion bits of information in a second, and which, as aggregates, begin to approximate human intelligence. In stark contrast to these striking synthetic creations, we live in a biological world in which the engineering of biochemistries has barely begun. HEALTHCARE: THE PHARMACEUTICAL INDUSTRY Domestic expenditures for healthcare in all categories exceeded 10 percent of the gross national product for the first time in 1983. One of the major healthcare industries, pharmaceutical manufacturing, focuses on the discovery and development of drug treatments for the prevention, cure, or moderation of disease states. The U.S. pharmaceutical industry participates in a world market for human and animal healthcare drugs that exceeded $35 billion in 1983, and which is expected to maintain steady growth. The United States is a net exporter of pharmaceuticals, although the rate of net export growth has slowed in recent years in the face of increasing international competition. 182

STEPHEN W. DREW 183 Biotechnology associated with new drug discovery, drug design, drug synthesis, and scale-up to manufacturing is an integral part of this industry. Biology has always played a central role in the discovery of new drugs. Furthermore, the engineering of biological systems has played an impor- tant role in drug manufacture, accounting for roughly 23 percent of annual sales. Biological routes to new products will become more and more important as we move toward the new century. The pharmaceutical industry has been the first to feel the impact of a revolution in the biological sciences. The enabling science and evolving technology of genetic recombination have been the most evident aspects of this revolution; they have catalyzed an explosive growth in our knowl- edge of how disease states evolve, advance, and can be counteracted or prevented. New, more effective discovery screens (testing strategies) for pharmacologically active compounds have been developed, and a wide variety of compounds with the promise of high medical and commercial value have been identified. Startling advances in molecular biology have spurred the growth of biotechnology, but the insights, opportunities, and challenges are by no means limited to molecular genetics they reach far beyond the current applications of molecular genetics. A full partner in the intense research in new biology, and fueled by unfolding insights into the mechanisms, advance, and control of disease, the pharmaceutical industry is hurtling toward the future. ENGINEERING RESEARCH IN BIOTECHNOLOGY While basic research in the biological sciences has accelerated dra- matically in recent years, engineering research in biotechnology has lagged seriously in the United States. The current focus of engineering research on process development and scale-up to manufacturing has kept pace with new product discovery, but the "margin of comfort" between the com- pletion of process development and licensure has dwindled. The trend toward more complex product chemistries, higher product purities, and increased product stability will only exacerbate this problem and make process economics even more uncertain. The challenge to the engineering community is clear: we must increase engineering research in biotech- nology to keep pace with the explosive growth in the biological sciences. Manufacturing Engineering research in the manufacture of biological products has focused on four major areas: (1) bioreactors, (2) product recovery, (3) process control and optimization, and (4) drug delivery systems.

184 BIOTECHNOLOGY AND THE HEALTHCARE INDUSTRY Through more than 40 years of experience there have evolved techniques for the scale-up of classical submerged fermentations (the vast majority of which are aerobic). The industry currently has substantial fermenter (bioreactor) capacity designed, for the most part, for slow, low-density fermentations. Much of the equipment is more than 20 years old, but continual upgrading has kept it usable. Still, most of this capital equipment ultimately limits process performance because of a poor-to-marginal de- sign capability for mixing viscous fermentation broths or for achieving high oxygen and/or heat transfer rates that would allow faster, higher- density fermentations. Many of the new recombinant DNA microorgan- isms possess characteristics that could, biologically, support rapid, high- yield fermentations. As new products from such hosts move toward man- ufacture, major improvements in bioreactor design will be required. Many questions both new and old remain unanswered in this mature field ~ . . 01 Inquiry. The technique for recovery and purification of low-to-intermediate mo- lecular weight (500 to 5,000 daltons) compounds is also fairly well de- veloped. Nevertheless, there are many opportunities for improvement through a better understanding of the principles of liquid/liquid and solid/liquid separations applied to these delicate drugs. Extraction, crystallization, and chromatography are old friends to the biochemical engineer; but the need for higher purities, lower costs, and minimum environmental impact will demand a level of performance that is not currently available. The recovery and purification of macromolecular products presents spe- cial challenges that are only partially met by today's engineering tools. The activities of biopolymers whether physical, chemical, or immu- nological depend on precise conformation, starting with primary struc- ture and proceeding in many cases through quaternary structure. We know very little about the factors in product recovery that influence macrom- olecular folding (or misfolding), and even less about the potential for post- biosynthesis restructuring or modification of proteins and other biopoly- mers. The requirement for high purity is particularly demanding, since nonproduct macromolecules may possess physical and chemical charac- teristics that are quite similar to the product of choice. Process control technology in the pharmaceutical industry has kept pace with the advances in the chemical process industries. In most cases the control capabilities for batch operations exceed those in other industries. Yet while process control of bioreactors is rapidly maturing, the directed control of discrete cellular biochemistry in bioreactors is grossly immature. Optimization of microbial processes has proceeded in a largely empirical fashion over the last 40 years. The efforts have been remarkably suc- cessful, but the pace of development ultimately limits the potential of bioprocess engineering. Engineering research can help by focusing on the

STEPHEN W. DREW 185 kinetics, thermodynamics, and pathway coordination of microbial pro- cesses. Some valiant efforts at bioprocess modeling and structured optim- ization have been made, but much more fundamental work is needed. The development of systems for drug delivery has become an important area for engineering in the pharmaceutical industry. Engineering research on the movement of molecules in human and animal systems is required so that more effective ways of maintaining optimum dose, minimizing side effects, and directing drugs to their targets can be found. Drug Design and Synthesis The use of aerobic fermentation in the biosynthesis of pharmaceutical agents is well established, and many of the comments above relate to this route to new drugs. The advent of powerful new techniques of genetic recombination makes possible the synthesis of exotic mammalian proteins in simple microbial cells by using classical fermentations. Drug modifi- cation by single-step biotransformation (hydroxylation, group elimination, etc.) is well known, if infrequently applied. Unfortunately, the process engineer has taken a predominantly advisory role in the development of these chemistries, in contrast to the leadership role taken in scale-up of the process. The power of biochemical synthesis is too appealing to allow this trend to continue. The future will see increasing constraints on commercial synthetic chem- istry. While chiral synthetic technique breathed new life into the organic synthesis of new drugs, the trend toward more complex chemistries is likely to continue. Goal-oriented engineering research can help to identify biochemistries that can extend the range of more classical organic chem- istries. Biochemistries that can spare the use of expensive (and occasionally toxic) solvents and reagents are needed. Biochemistries that function ef- fectively at high substrate concentration in organic solvents or in mixed aqueous/organic systems are needed. Biochemistries that function over a wider range of temperatures are needed. Opportunities in the engineering of process biochemistries abound, not just in the commercial-scale synthesis of drugs, but in drug discovery and drug design as well. If any criticism can be leveled against the biochemical engineering community it is that we are not sufficiently in tune with the chemical potential of biotechnology. We need to focus more intensely on the application of process biochemistry. New Drug Discovery The traditional challenge of biochemical engineering has been to scale- up a single process to large volumes for commercial manufacture. The

186 BIOTECHNOLOGY AND THE HEALTHCARE INDUSTRY engineering challenge in new drug discovery is to scale-up discovery screens designed for small-volume samples so they can handle a very large number of samples. The scientific bases for new drug discovery have been developing at a terrific rate in recent years. Insights from mode-of-action studies, identification of factors in mammalian biochemistry, structure- activity analyses, and other kinds of knowledge have supported the in- vention of a myriad of novel, highly selective screens for new drugs. By contrast, the engineering research aspects of new drug screening are vir- tually undeveloped. Fundamental problems in heat, mass, and momentum transport, in the kinetics of receptor-site assays, and in the micromani- pulation of samples and reagents await resolution. Challenges in the uni- form cultivation and preservation of an extremely wide variety of microorganisms at very small scale await engineering analysis. A quantum jump in the discovery of new, life-saving, natural product drugs will require more than the new biology; it will require engineering research. CONCLUSION: THE NEED FOR ENGINEERS AT THE INTERFACE The life science interface with engineering is no longer latent. Clearly the next generation of bioengineers must have a broader and deeper knowl- edge of the life sciences. At the moment biocatalysis, biochemistry, mi- crobiology, and molecular biology are a few of the areas needing particular focus by engineering students. The educational opportunities in bioengi- neering systems research are immensely important in this regard. The Engineering Research Centers will bring together engineers and life sci- entists in an environment primed for discovery. The study of the application of science is easy to anyone who is master of the theory of it. Louis Pasteur

Challenges for Government NAM P. SUH Several papers in this volume discuss engineering issues in the context of the year 2000. The future is very pertinent to the Engineering Research Centers (ERCs) and the National Science Foundation. The NSF is one of the few investment organizations we have within the federal government. The returns on investments we make today usually are not realized for 10 to 20 years, which means we are looking at the year 2000 when we talk about current NSF programs. In that context, much of what these papers have to say is relevant and thought-provoking. Essentially, what they discuss can be grouped in two categories: problems and opportunities. The problems and opportunities Professor Quinn writes of are very much to the point. He says that we will have a major increase in the world's population; and that, in turn, has a number of implications. He notes that the gross national product of China has grown at an annual rate of 7 or 8 percent over the past several years. If we extrapolate that rate of growth to the year 2000, China's standard of living will be quite high. When that happens, China's natural resource requirements will be larger. If the Chinese standard of living reaches even 10 percent of ours, China's need for materials and other natural resources is going to be about 30 percent of that of the United States, since the population of China is four or five times as large as ours. In order to deal with this essentially global problem, we must begin serious inquiries into the more effective utilization of materials and energy through creative fundamental research. Are our institutions ready to deal with these major issues of mankind? In spite of the fact that we are facing major problems in the world, our educational institutions are not producing enough people who can deal with the large systems issues involved. 187

188 CHALLENGES FOR GOVERNMENT Where there are problems, there are also opportunities-opportunities to improve infollllation technology, to create new manufacturing tech- nologies, and to foster emerging technologies such as biotechnology, to name a few. We even have opportunities in critical technologies and in such mature industries as steel. A major goal of the ERC program is to link problems with opportunities. In this linking process all of us have a role to play. The ERCs must choose important engineering problems that require a cross-disciplinary approach, and provide solutions and manpower. The ERCs and their industrial partners must identify the problems that hold the key to our future technological progress. The role of government is not to dictate what the community should work on and what it thinks are the important problems. Instead, it must rely on the community to develop a consensus about the areas requiring research emphasis. However, government does have an important role to play. The role of NSF is that of a catalyst. It is an enabling agent that helps the universities to accomplish their goals. It is also a facilitator: it can make the collab- oration between the universities and industry easier. Indeed, it can help the university people to fulfill their dreams for excellence in higher ed- ucation. In addition to these roles, the NSF must protect and promote the public interest. The ERC program enables the NSF to fulfill all of these roles. In his paper Dr. Hall states that the NSF is not going to micromanage the ERCs. NSF's policy is formulated in the spirit of the role of catalyst: we would like to promote the goals of the ERCs, but we would like to let the ERCs decide what they ought to do by letting university people and industrial people jointly establish their common agenda. NSF's strategic plan for the ERCs consists of the following elements. First, we would like to establish between 20 and 25 Centers during the next two or three years. Next year we are planning to establish six Centers, if our budget wins the support of Congress. If not, we may have to decrease the number of new starts. Second, NSF plans to establish management teams for the ERCs within the NSF, and to render assistance to the ERCs to ensure their success. We will do whatever we can to help, and we will provide the Centers with whatever they need to achieve their goals. Third, NSF plans to secure for the ERC program the support of Congress, the Office of Science and Technology Policy, the Office of Management and Budget, the National Science Board, and the engineering community at large. I will be spending a great deal of time trying to articulate the need for this type of Center. Finally, as the funding agency, the NSF plans to monitor the progress of these Centers and to make sure they carry out the goals set forth in their proposals.

NAM P. SUH 189 The NSF is also working to find ways for state governments to fund some of the ERCs within their own states. Once the state governments establish the infrastructure for research at their state-supported institutions, it will be easier for those schools to acquire NSF funding, since they will be more competitive. In addition to these plans we have a number of other complementary programs within the NSF Engineering Directorate. We have been sup- porting individual researchers through single-project programs, in which we support one researcher or a group of researchers. This kind of grant may also be used to establish or upgrade the academic research infra- structure. For example, if a university is interested in establishing a bio- technology program, it does not have to rely solely on the ERC program. We have a research program for biotechnology which is designed to help universities in establishing their academic infrastructures. We also have very successful programs that have promoted cooperation between industry and universities i.e., the Industry/University Cooperative (IUC) Re- search Programs and the IUC Center Programs. These programs have established a large number of successful cooperative research centers in the past. We must strengthen these programs in the years to come. The NSF is planning new initiatives for FY 1987. The new programs deal with engineering manpower, facilities, access to federal and national laboratories, and generic engineering systems. In developing these plans we need the ideas and counsel of the engineering community to ensure that the new initiatives are executed in a most effective and rational way. We hope that the Engineering Research Centers established so far will become role models for successful ERCs. Other institutions can then emulate them and develop equally successful ERCs in the years to come. However, we are realists. We don't expect that every one of these Centers will be successful. But if only a few of them succeed we can use them as role models in establishing new ones. We have a great deal to learn. If some Centers fail, stones should not be thrown at the whole concept. In the final analysis, no government can be greater than the people it represents especially with the form of government that we have. Con- tinuing support for the ERC concept will be essential to the continuing support of ERCs. With the support of the entire engineering community behind the ERCs, I think Congress will continue to look favorably upon this endeavor in the years to come.

Implications and Challenges for Industry JAMES F. LARDNER The recommendations of the National Academy of Engineering to the National Science Foundation (NSF) about establishing Engineering Re- search Centers reflect the concern of many business and academic leaders that U. S. engineering education today does not meet industry's real needs. I believe that much of the blame for this situation lies with industry (although academe has too often been a willing and active contributor). In accepting, without complaint or comment, the conventional products of U.S. engineering education; in helping create shortages of qualified engineering faculty by hiring talented faculty members away from teach- ing; and, in ignoring the dearth of adequate research into manufacturing itself, industry has contributed to the problem it has finally identified and would like to see corrected. Why is it that industry apparently has acted against what clearly were its own best interests? I suggest the reason is found in the essence of traditional U.S. manufacturing culture. During most of our national in- dustrial development, American manufacturing companies enthusiastically embraced the principles of specialization and division of labor to address the increasing complexity of products and of the manufacturing environ- ment. For a long time this approach worked. As the techniques of specialization and division of labor were refined, manufacturing became increasingly efficient. Ideas and materials were transformed into products using fewer resources per unit of output. Pro- ductivity increased, and with it the wealth of the nation. At the turn of the century this view of industrial organization was dignified by Frederick W. Taylor with the term "scientific management." Unfortunately, this 190

JAMES F. LARDNER 191 approach to dealing with complexity turned out to be neither very scientific nor very good management, but that fact was not recognized for another 70 years. What the division of labor and specialization finally caused was the "dis-integration" of manufacturing. Continued growth in the complexity of products, processes, and the environments of manufacturing operations all led to additional specialization and to greater and greater division of responsibility. Unfortunately, we have only now begun to recognize that the solution we adopted with such confidence has resulted in inefficient, unresponsive organizations that are difficult to manage, resistant to change, slow to adopt new technologies, and suffering from formidable commu- nication problems. These negative and unexpected results have caused thoughtful industrial managers to consider reintegrating manufacturing so as to survive in an intensely competitive world. (I hope it is by now agreed that manufacturing spans the range of activities from product concept and design to support of the product in the field.) There is a powerful case to support the conclusion that the organizational culture in a large part of U.S. industry has caused too many American companies to be late in identifying needed changes in manufacturing management, and late in educating manufacturing management to use resources effectively enough to survive in international competition. Growing recognition of the cause and nature of this problem has led some perceptive individuals to argue for significant changes in the way we educate engi- neers. These recommendations have been eloquent and forceful. The ques- tion is, are they valid? Should we seriously modify the way we educate engineers? The answer, I think, is "yes and no." "Yes" for some engineering students, but "no" for the rest. Many of us who helped develop rec- ommendations for establishing the NSF's Engineering Research Centers feel strongly that a solid foundation in engineering fundamentals remains an essential part of a quality engineering education. We also think that the Centers can help fill a critical void in engineering education for some engineering students. The Centers can become a unique and major factor in advancing the concept of manufacturing as a science. Important features of successful Centers would be multidisciplinary research, substantial in- dustry involvement in identifying areas for research, industry support for projects selected, and development of a codified body of new knowledge and instructional material about manufacturing and manufacturing prob- lems. This should create an environment in which the problems and ben- efits of integration can be studied, and where the lessons from past failures can be learned. Clearly, industry has a vital interest in supporting these . . . . n~t~at~ves. However, the challenge for industry goes beyond simply supporting the

192 IMPLICATIONS AND CHALLENGES FOR INDUSTRY Engineering Research Centers financially if the Centers are to achieve their objectives. 1. Industry must help define the environments for valid manufacturing research. Most engineering campuses have had difficulties in attempting to create realistic manufacturing environments to challenge both students and faculty. 2. Industry must help identify and define manufacturing research needs that offer intellectual challenges to the academic community, that are commensurate with established research activities on university campuses, and that will withstand the scrutiny of peer review. In the past, given the emphasis on specialization and division of labor, industry was generally content to accept and support research projects selected and defined by a principal investigator. Now, as industry struggles with the task of rein- tegration, problems increasingly are seen as multidisciplinary, and the lack of research to help solve them is of growing concern. Industry has a responsibility to make this concern known and understood. 3. Industry must recognize the need to support university programs to recruit and retain adequate numbers of qualified engineering faculty. With- out sufficient qualified, motivated faculty, the Centers cannot succeed. 4. Industry should be prepared to support the development and pub- lication of instructional material based on manufacturing research findings. The apprenticeship method of teaching engineers about manufacturing simply isn't sufficiently rapid, nor is it as effective as it needs to be if we are going to change our manufacturing culture to survive new global . . competition. 5. Industry must find ways to provide real-world situations for con- ducting research, and to make available selected, experienced industry representatives for research projects. 6. Industry must provide constructive input into program evaluation in order to enhance the contributions of research findings and of the graduates the Centers produce. 7. To contribute to the success of the enterprise, industry must rec- ognize, hire, and reward graduates of the Engineering Research Centers, offering opportunities commensurate to the potential these individuals have. These will be new and difficult challenges for industry. It has not been a hallmark of U.S. industry to look to academic research for help with problems as fundamental and broad as the reintegration of manufacturing, or for insights into how manufacturing organizations might be reorganized to make this reintegration possible. Industry has not traditionally turned to engineering schools for help in managing manufacturing, but there is

JAMES F. LARDNER 193 increasing evidence that in evaluating the changes considered schools may be the preferred resource. Finally, it is important to remember that industry and academe operate by different time scales. Everyone involved in the ERC effort knows it will be some time before the products of the Centers whether graduates or research findings will be available to industry, and even longer before these products will have measurable impact on industry results. For the interim, industry will have to "wing it," to depend on expe- rience, common sense, and intuition to steer an uncharted course. Despite the absence of immediately useful output applicable to industry problems, management needs to maintain a belief in and provide support for the ERC concept until the first results can be evaluated. Today's situation reminds me of a time in my naval career when I was "in destroyers," operating with a carrier task force. I don't know how they do it today, but back then when we changed the fleet axis, the destroyers would race through the maneuvering ships at high speed on an approximate course, chosen to avoid collisions, to get close to their new screen stations. Only as they approached their new stations did the fine maneuvering begin. Varying course and speed slightly but continuously, if successful they dropped in, right on station, exactly where they be- longed, and their captains lost no promotion numbers. I think industry today faces a similar situation. We are changing from where we were to where we have to be, and we have no time to spare. As we move closer to where we want to be, we will require special skills and knowledge that can put us right on station. I think these can come- to an important degree from the Engineering Research Centers, and I believe these Centers deserve industry support.

Challenges for Academe H. GUYFORD STEVER I have the last word in this volume; but those universities that will host the Engineering Research Centers (ERCs) will have the last word on whether the Centers are successful. In these pages many leaders of American industry, government, and academe discuss how important the Centers are to the nation's future. I think it is the concept itself that is most important- that of pooling our engineering research efforts on a bigger and broader scale. Teams of engineers and scientists from many disciplines, from both academe and industry, working together, with the cooperation and support of govern- ment, to target problems of importance to our competitive future that is an exciting idea. It is not a new idea, of course. It has been tried before, but usually on a smaller scale and with less clarity of purpose, less sense of urgency. However, there is often a great gulf between ideas and reality. The message running through these papers is: The Centers are needed, and we must make them work! But those in academe, especially, know well what the real problems will be. Larry Sumney suggests some of them. Young faculty members will be wary, maybe reluctant to participate be- cause of their fears about unknown (or perhaps too well known) threats to their careers. Cross-disciplinary research is usually not an accepted route to advancement; in many institutions that battle has yet to be fought. When I was the newly appointed president of Carnegie-Mellon Uni- versity, a group of professors came in to see me. These were distinguished professors from different departments who wanted to start what we called 194

H. GUYFORD STEVER 195 then an interdisciplinary center. I listened to them. Their ideas were just great, and I was quite excited about it; but at the end of the presentation they said, "Now, we have to find someone whom we can bring to the university to lead this center." I said, "Stop right there. When any of you strong people in your disciplines who have all these good ideas are willing to risk your career to lead this effort, then I will go along with it." About a year later, two of them came in and took the responsibility. They changed their careers. I think they are very happy today that they did, but the fact is that they took a risk. Graduate students are also going to have to take a risk. Many of them may be quite excited when they notice all the drum-beating that has accompanied the ERC program. But some will look at the situation and conclude that the disciplinary approach to education is still very strong. Existing departments may not readily accept the ERCs. The resistance may not surface until the going gets tough for one reason or another; but retrenchment into the disciplinary fold has always been the instinctive . . response In such circumstances. Another problem is what happens if, after the seed funds are withdrawn and the ERC has becomes self-supporting, the Center encounters a down- turn in the nation's economy. Industry funding may diminish. What hap- pens to the ERC then? Will it be a case of "last to arrive, first to leave"? What can we do to make the world safe for ERCs? Changes will have to occur, of which the first will be a change in "campus sociology." As James Lardner's paper points out, some indus- tries are already wrestling hard with this requirement in their own context. They can't avoid it their improved performance demands this adaptation. But universities have so far not accepted the proposed mode. The dis- ciplinary structure has remained essentially intact, preferring instead to split off new disciplines to accommodate the explosion of knowledge and the emergence of problems such as the environment, or new technologies such as the computer. That approach is no longer completely sufficient. Of course the disciplines must continue to be strong. But, as we are already seeing in efforts such as MIT's new Interdepartmental Biotechnology Program, the cross-disciplinary approach must increasingly be reflected in the organizational structure of science and engineering. Schools must figure out a way to accomplish research goals of a cross- disciplinary nature while still maintaining strong disciplinary depth. The reward system will have to be modified to accommodate this requirement. That is a challenge that every school will have to address in terms of its own particular situation, its own "culture." If the schools fall short of that, in Larry Sumney's words, "we will all lose."~ According to the National Science Foundation's program announcement for FY 1986, one of the four criteria upon which the next round of ERC

196 CHALLENGES FOR ACADEME proposals will be judged relates to this very thing: a concern for the "effect of the research on the infrastructure of science and engineering." Any proposal demonstrating a commitment to this kind of change is likely to be a stronger proposal, in the eyes of NSF. Second, schools will have to alter their relations with the outside world. Faculty consulting and small-scale cooperative research with industry are fine, and should continue. But they are not enough. Universities will have to open their doors in new ways, defining strategies for making and cementing ties with state and local governments, other schools, and com- panies large and small. These ties should be stable, long-term, and mu- tually beneficial. Third, and perhaps most fundamental, a sensitivity must emerge in the university community regarding the needs of the nation, regarding the situation of the nation with respect to economic and competitive fortunes to which engineering holds a very important key. The Engineering Re- search Centers are being created to improve our national technological productivity and competitiveness. This can only be done through a systems approach to real-world problems not through abstraction and analysis for its own sake. A new generation of engineering students has to be educated to think and function in the cross-disciplinary context. I think the ultimate challenge in all this lies with the individual, as it always does when change must take place. As I have pointed out, the young faculty members who work in the ERC programs will have to be courageous people. They will have to be committed to goals and methods that the power structure may not share, that even many of their academic peers do not share. Graduate and postgraduate students who participate in the ERCs will also need to have commitment. When they have finished their education they will have a major decision to make: whether to go into industry or to join a faculty. The latter choice may be the only avenue by which real change can be brought to the disciplinary structure, since those individuals will have come up through the new system. Academic administrators who want the ERCs to succeed will have to have the commitment necessary to push against disciplinary barriers and to protect the ERCs from adverse pressures. Industry managers will have to be ready to be committed to the success of the program, even when continued support is painful to the company. They may have to convince boards of directors and, ultimately, stock- holders, and persuade them to share that commitment. In many cases, the academic institution has to make a commitment to individuals if they are going to take the risk of participating. Some will participate no matter what, because they share a conviction about what these Centers represent. Yet their fate is in the hands of people who will

H. GUYFORD STEVER 197 be difficult to persuade of that vision, that commitment. This is where we can clearly see the fragility and the vulnerability of the fledgling ERCs. By funding these six Centers, the National Science Foundation has taken the first strengthening steps toward a new approach to engineering research, education, and practice. I am willing to bet very strongly that the initial impetus has been and will continue to be very well received by the Congress and the administration. I cannot conceive of an administration that would resist this kind of approach now or sometime in the future, and therefore I think it is on very good ground. But the battle is by no means over for the ERCs. In wartime the tank units have to select a point tank for every one of their advances, and it can be imagined what chances that point tank has to take. It is the same with the ERCs. We have only a few point units out there, and we had better make sure that they are very well supported by everyone concerned. Eventually we will have a larger number of units, and then we can sit back and let them compete in a rough-and-tumble world. But we had better make it a good world for them for a while.

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Within the past decade, six Engineering Research Centers opened on university campuses across the United States. This book reviews the lessons learned as the centers got under way, and examines the interrelationship among universities, government, industry, and the research establishment. Leaders from business, government, and universities discuss in this volume the challenges now facing American industry; the roots and early development of the research center concept; the criteria used in selecting the six centers; the structure and research agenda of each center; the projected impact of the centers on competitiveness of U.S. technology; and the potential for further research in biotechnology, electronics, robotics, and related areas.

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