GE has been driven by technology throughout its entire 111-year history. Since 1900, a major source of this drive has been our corporate research center in Schenectady, New York. The center is now a global center and it has been growing ever since I assumed its leadership in 1992. We added people as the need for technology increased and today we have 15,000 people in R&D, about 15 percent of whom are in the corporate research center, which we consider the advanced research group. In 2002, we received about 1,400 patents.
We continue to think of ourselves as a high-tech growth company. Although the economy slowed in the late 1990s, I see no slowing in the speed with which we must move products to the marketplace, or in the pressures of cost reduction, competition and globalization. Indeed, I expect them to grow--right along with R&D. The world isn't going to get any easier, and if companies don't respond, they are going to die.
Such business and economic realities have always driven the R&D realities. Twenty years ago, technology was performance: How do you get an extra thousand pounds of thrust from a jet engine? How do you get an extra 0.5 mm of resolution out of a CAT scanner? How do you get another few degrees performance from a plastic? That's what research labs did. That's what GE's lab did.
As the world changed, performance remained important, but the world became so competitive that speed to market became just as important as performance. Moreover, if you couldn't get the lowest cost, you couldn't compete, and finally, if you couldn't get world-class quality, you couldn't compete. That's what happened to business, and that's what happened to R&D. Today, the people who didn't understand that are gone. Many R&D organizations disappeared during this time because they did not change the way they operated and forgot that speed to market of technology was a critical requirement.
Different Funding Models
The funding model has been an important driver of business and R&D realities at GE (see charts, next page). During the 1950s and '60s, most of the funding for corporate research came from the corporation. Upper management didn't care much what we did--life was easy, life was loose! About 30 percent of the funding came from businesses, or the federal government, and 70 percent came from the company. It was focused on basic research, on winning Nobel Prizes, and on long-term programs.
We retained the same funding model during the 1970s, although in response to a changing business climate the lab was being asked more often to help the businesses with their projects, especially exploration of the new electronics and computer applications. By the 1980s, however, the world had changed and in order that GE's lab survive, the company wanted it to be even more responsive to the businesses. Consequently, management changed the funding model so that the businesses funded the lab.
During this period, 70 percent of the money came from the businesses or the government, but they didn't have to give us the money. This was not some loose arrangement where you discussed it like gentlemen and continued to fund the lab. If a business wanted to fund a university, fund another company, or add its own resources, it could, and the central research lab would have gone away. In fact, when this happened, it was predicted that GE's research lab would disappear. But it did not.
What happened instead was that every scientist became a salesman. He went out into the divisions to try to find a contract here and there. In this way, the lab managed to survive through the 1980s, although not very strategically.
By the 1990s, the research started to be very focused, very strategic. For R&D, the overriding question became: How do you help the businesses? How do you become vital to the businesses with next-generation products that will win market share? …