1
2
Research basic to PhilipsResearch basic to Philips
OECD Workshop on Basic ResearchOECD Workshop on Basic ResearchOslo, October 29-30, 2001Oslo, October 29-30, 2001
Jan van den BiesenJan van den BiesenVice President, Philips ResearchVice President, Philips Research
3
ContentsContents
•• Introducing Philips and its R&DIntroducing Philips and its R&D
•• Shifting emphasis in Philips’ R&D interestsShifting emphasis in Philips’ R&D interests
•• Funding researchFunding research
•• Dividing labourDividing labour
•• Valorising resultsValorising results
•• Concluding remarksConcluding remarks
4
Global electronicscompany,
established in1891 as a lamp
factory
Shares listed onNew York,London,
Amsterdam andother stockexchanges
Multinationalworkforceof 212,390employees
Headquarters:Amsterdam
The Netherlands
Results 2000in millions EUR USDSales 37,862 34,864Net income 9,602 8,842
Sales andservicein 150
countries
Royal Philips ElectronicsRoyal Philips Electronics
5
# 3 in Medical Imaging
# 1 in Lighting # 1 in Shavers
# 1 in LCD Display Systems
# 3 in Consumer Electronics
# 3 in Optical Storage
Selected global market positionsSelected global market positions
6
Invented by PhilipsInvented by Philips
7
Technology focusTechnology focus
StorageStorageDisplayDisplay
ConnectivityConnectivity
Digital VideoDigital Video
8
Philips R&DPhilips R&D
•• R&D costs: R&D costs: 7.3% of sales (EUR 2,766 million)7.3% of sales (EUR 2,766 million)
–– Including nearly 1 % of sales for Philips ResearchIncluding nearly 1 % of sales for Philips Research
•• R&D staff: R&D staff: 22,00022,000
–– 19,000 in Product Divisions and Centre for Industrial Technology19,000 in Product Divisions and Centre for Industrial Technology
–– 3,000 in Philips Research 3,000 in Philips Research
•• Strong IPR portfolioStrong IPR portfolio
–– 70,000 patent rights70,000 patent rights
–– 22,000 trademark registrations22,000 trademark registrations
–– 6,000 design rights 6,000 design rights
9
Aachen [400]
Briarcliff Manor [250]Suresnes [180]
Redhill [260]
Shanghai [100]
Eindhoven [1650]
Philips ResearchPhilips Research
Total staff of nearly 3,000 includes branch labs inTotal staff of nearly 3,000 includes branch labs in•• BangaloreBangalore (India) (India)•• Hamburg (Germany)Hamburg (Germany)•• LeuvenLeuven (Belgium) (Belgium)
•• MonzaMonza (Italy) (Italy)•• Taipei (Taiwan)Taipei (Taiwan)•• Xi’an Xi’an (China)(China)
10
Philips Innovation Centre Philips Innovation Centre BangaloreBangalore
11
Philips Research Labs Philips Research Labs Xi’anXi’an opened opened
12
ContentsContents
•• Introducing Philips and its R&DIntroducing Philips and its R&D
•• Shifting emphasis in Philips’ R&D interestsShifting emphasis in Philips’ R&D interests
•• Funding researchFunding research
•• Dividing labourDividing labour
•• Valorising resultsValorising results
•• Concluding remarksConcluding remarks
13
LIGHTINGLIGHTINGIlluminationIllumination DischargeLamps
DischargeLamps
CONSUMERELECTRONICS
CONSUMERELECTRONICS
X-rayimagingX-ray
imagingImage-
intensifierImage-
intensifierMEDICALSYSTEMSMEDICALSYSTEMS
Light BulbLight Bulb
X-ray TubeX-ray Tube
TWTPlumbicon
TWTPlumbicon
ELECTRONICCOMPONENTSELECTRONIC
COMPONENTSOscilloscopeOscilloscope
Picture TubePicture Tube
Radio ValveRadio Valve PolyGramPolyGram
Domestic Appl.& Personal CareDomestic Appl.& Personal Care
AudioAudio Loud-speakers
Loud-speakers
FerroxcubeFerroxcube
TelevisionTelevision Line OutputTransformersLine Output
Transformers
Growth based on ResearchGrowth based on ResearchBuilding on “combining glass, metal and vacuum”Building on “combining glass, metal and vacuum”
14
Philips Research 1914 - 1945Philips Research 1914 - 1945
•• Period of growth and diversificationPeriod of growth and diversification
•• Gilles Gilles HolstHolst hired to start hired to start
Research on Jan. 2, 1914Research on Jan. 2, 1914
•• Research guided by Research guided by Holst’sHolst’s 10 Commandments 10 Commandments
#8: #8: Don’t budget per project and don’t give Business Don’t budget per project and don’t give Business
Groups financial authority over research programmesGroups financial authority over research programmes
15
Philips Research 1945 - 1970Philips Research 1945 - 1970
•• Period of expansionPeriod of expansion
–– “Research leads to new products”“Research leads to new products”
–– “The sky is the limit”“The sky is the limit”
•• Appointment of Appointment of Hendrik CasimirHendrik Casimir
–– Theoretical “Theoretical “CasimirCasimir effect”: applicable after 60 years? effect”: applicable after 60 years?
–– Science - Technology spiral: innovation is Science - Technology spiral: innovation is nonlinearnonlinear
•• Ample room for basic researchAmple room for basic research
–– Physics, materialsPhysics, materials
16
Philips Research 1970 - presentPhilips Research 1970 - present
•• Research much more tied to industrial activitiesResearch much more tied to industrial activities
•• 2/3 of Philips Research geared to Product Divisions2/3 of Philips Research geared to Product Divisions
–– Contract research introduced in 1988Contract research introduced in 1988
•• 1/3 of Philips Research kept more exploratory1/3 of Philips Research kept more exploratory
–– Corporate fundingCorporate funding
•• Emphasis shifted from physical sciences to multi-Emphasis shifted from physical sciences to multi-
disciplinary work on devices, systems and softwaredisciplinary work on devices, systems and software
–– Theoretical & Experiments Physics Groups terminatedTheoretical & Experiments Physics Groups terminated
17
Balanced portfolio of research projectsLong-term goals with short-term deliverables
Balanced portfolio of research projectsBalanced portfolio of research projectsLong-term goals with short-term deliverablesLong-term goals with short-term deliverables
Am
bit
ion
of
Pro
ject
pro
po
sal
Time to Deliver
Long-Range Technical Objective
18
Technology alone is not enoughTechnology alone is not enough
•• Some statistics from literatureSome statistics from literature
–– 60 % of R&D projects reach technical completion60 % of R&D projects reach technical completion
–– 10 % of R&D projects earn economic profit10 % of R&D projects earn economic profit
•• Main lesson: business analysis at start of innovationMain lesson: business analysis at start of innovation
improves probability of economic successimproves probability of economic success
–– Adapting innovation to results of business analysisAdapting innovation to results of business analysis
–– Preparing other parts of company for dealing with innovationPreparing other parts of company for dealing with innovation
Assess economic potential as soon as possible!Assess economic potential as soon as possible!Assess economic potential as soon as possible!
19
Transfer ofskilled people
Transfer ofskilled people
Creating value is keyCreating value is key From technology-rich company to rich technology company
Brand image&
Customersupport
Brand image&
Customersupport
Transfer toexisting Lineof Business
Transfer toexisting Lineof Business
Creatingnew Line ofBusiness
Creatingnew Line ofBusiness
RESEARCHRESULT
S
LicensingIPR
LicensingIPR
Selling know-how to third
parties
Selling know-how to third
parties
Spinningout new
businesses
Spinningout new
businesses
RESEARCHRESULTS
20
Why basic research lost its relevance to PhilipsWhy basic research lost its relevance to Philips
•• Firms invest if expected return exceeds cost of capitalFirms invest if expected return exceeds cost of capital
•• Basic research (Basic research (FrascatiFrascati definition) no longer creates definition) no longer createsenough value to warrant active involvement by Philipsenough value to warrant active involvement by Philips–– Shorter product life cycles leave less time to recoup R&D costsShorter product life cycles leave less time to recoup R&D costs
–– Competitive pressures reduce times-to-marketCompetitive pressures reduce times-to-market
–– New basic discoveries in ICT take longer to become applicableNew basic discoveries in ICT take longer to become applicable
–– Innovation requires much more than basic research aloneInnovation requires much more than basic research alone
–– ICT dynamics make long-term research riskierICT dynamics make long-term research riskier
•• Basic research remains of indirect interest to PhilipsBasic research remains of indirect interest to Philips–– Education and training of good researchers at universitiesEducation and training of good researchers at universities
–– General advancement of scienceGeneral advancement of science
21
Philips’ windows on world of S&TPhilips’ windows on world of S&T
•• Partnering with other R&D actors hasPartnering with other R&D actors has
economic and strategic advantageseconomic and strategic advantages
–– Increases added value per employee by 6%Increases added value per employee by 6%11
•• 1000+ R&D partnerships in recent/current European1000+ R&D partnerships in recent/current European
programmesprogrammes
–– EU Framework Programme, EUREKAEU Framework Programme, EUREKA
–– Including 370 partnerships with universities and research institutesIncluding 370 partnerships with universities and research institutes
•• 200 research contracts between Philips Research 200 research contracts between Philips Research EindhovenEindhoven
and universities or institutesand universities or institutes
•• 30 part-time professors from Philips Research30 part-time professors from Philips Research
•• Numerous students, R&D trainees, Numerous students, R&D trainees, postdocspostdocs1. A. Poot and E. Brouwer, Ministry of Economic Affairs, The Hague, 2001
22
Flexible displaysFlexible displays
Non rectangular, flat displays
Display on flexible devices
Conformal, curved displays
Rollable displays
Wearables
23
ContentsContents
•• Introducing Philips and its R&DIntroducing Philips and its R&D
•• Shifting emphasis in Philips’ R&D interestsShifting emphasis in Philips’ R&D interests
•• Funding researchFunding research
•• Dividing labourDividing labour
•• Valorising resultsValorising results
•• Concluding remarksConcluding remarks
24
Rationale for public funding of R&DRationale for public funding of R&D
•• R&D boosts economic growth [OECD/DSTI, 2001]R&D boosts economic growth [OECD/DSTI, 2001]
–– 1 % more public R&D generates 0.17 % productivity growth1 % more public R&D generates 0.17 % productivity growth
–– 1 % more business R&D generates 0.13 % productivity growth,1 % more business R&D generates 0.13 % productivity growth,
in addition to extra private returnsin addition to extra private returns
•• Public support for R&D is justifiedPublic support for R&D is justified
–– For basic research because of public good characteristicsFor basic research because of public good characteristics
–– For business R&D because of positive externalitiesFor business R&D because of positive externalities
•• Public support compensates for spill-over to societyPublic support compensates for spill-over to society
–– Social return on private R&D is at least double of private returnSocial return on private R&D is at least double of private return
–– ICT is increasing social return on R&D, but not necessarily privateICT is increasing social return on R&D, but not necessarily private
return [Luc return [Luc SoeteSoete, MERIT], MERIT]
25
Public funding for private R&D: a balancing actPublic funding for private R&D: a balancing act
ProPro•• Correcting marketCorrecting market
failuresfailures•• Stimulating R&DStimulating R&D
and growthand growth•• Creating welfareCreating welfare
Contra• Distorting
competition• Destroying
welfare
GATT Agreement of 1994 and EU State aid rules of 1996impose restrictions on public funding for R&D
• Fundamental research: 100 % max • Precompetitive development: 50 % max
• Industrial research: 75 % max• Beyond first prototype: 0 %
26
Outdated distinctionsOutdated distinctions
•• WTO and EU rules build on linear innovation modelWTO and EU rules build on linear innovation model
–– Separated, sequential stages from fundamental research throughSeparated, sequential stages from fundamental research through
industrial research and industrial research and precompetitiveprecompetitive development to first development to first
prototypesprototypes
•• Successful innovation requires cyclical process withSuccessful innovation requires cyclical process with
interaction between knowledge creation and applicationinteraction between knowledge creation and application
–– R&D stages have blurred and become partly concurrentR&D stages have blurred and become partly concurrent
•• R&D definitions in WTO and EU rules hamper effectivenessR&D definitions in WTO and EU rules hamper effectiveness
of governmental programmes to stimulate R&Dof governmental programmes to stimulate R&D
–– Outdated straitjacket doesn’t fit reality of business R&DOutdated straitjacket doesn’t fit reality of business R&D
27
ContentsContents
•• Introducing Philips and its R&DIntroducing Philips and its R&D
•• Shifting emphasis in Philips’ R&D interestsShifting emphasis in Philips’ R&D interests
•• Funding researchFunding research
•• Dividing labourDividing labour
•• Valorising resultsValorising results
•• Concluding remarksConcluding remarks
28
deliverablesdeliverables
go
als
go
als
short-termshort-term
sho
rt-t
erm
sho
rt-t
erm
long-termlong-term
lon
g-t
erm
lon
g-t
erm
academicacademicresearchresearch
industrialindustrialdevelopmentdevelopment XX
industrialindustrialresearchresearch
Dividing labour in R&DDividing labour in R&D
•• Enhance applicability ofEnhance applicability ofacademic researchacademic researchthrough interaction withthrough interaction withindustryindustry
•• Leave near-market R&DLeave near-market R&Dto private sectorto private sector
29
ContentsContents
•• Introducing Philips and its R&DIntroducing Philips and its R&D
•• Shifting emphasis in Philips’ R&D interestsShifting emphasis in Philips’ R&D interests
•• Funding researchFunding research
•• Dividing labourDividing labour
•• Valorising resultsValorising results
•• Concluding remarksConcluding remarks
30
Patenting policy for public researchPatenting policy for public research
•• BayhBayh-Dole Act (1980) enabled/urged patenting of results-Dole Act (1980) enabled/urged patenting of results
from federally funded research by US universities andfrom federally funded research by US universities and
public research institutespublic research institutes
–– Licensing now provides considerable income (?)Licensing now provides considerable income (?)
•• Controversial AWT report ( Dutch S&T Advisory Council)Controversial AWT report ( Dutch S&T Advisory Council)
recommends academe to leave patenting to industryrecommends academe to leave patenting to industry
–– Proper use of knowledge is key, not licensing incomeProper use of knowledge is key, not licensing income
–– Fair price to be paid for knowledge from academiaFair price to be paid for knowledge from academia
31
ContentsContents
•• Introducing Philips and its R&DIntroducing Philips and its R&D
•• Shifting emphasis in Philips’ R&D interestsShifting emphasis in Philips’ R&D interests
•• Funding researchFunding research
•• Dividing labourDividing labour
•• Valorising resultsValorising results
•• Concluding remarksConcluding remarks
32
Concluding remarksConcluding remarks
•• Research is basic to Philips – The Technology CompanyResearch is basic to Philips – The Technology Company
•• Basic research has lost direct relevance to PhilipsBasic research has lost direct relevance to Philips
•• R&D definitions in restrictions of WTO and EU on publicR&D definitions in restrictions of WTO and EU on public
funding do not match reality of innovationfunding do not match reality of innovation
•• Reviewing definitions of R&D is neededReviewing definitions of R&D is needed
•• Is basic research closer to new products in biotech?Is basic research closer to new products in biotech?
–– In biotech, European Commission describes basic research asIn biotech, European Commission describes basic research as
“research that can have many indirect commercial applications but“research that can have many indirect commercial applications but
that is not necessarily commercially applicable itself” that is not necessarily commercially applicable itself” [COM(2001)454][COM(2001)454]