CHEMTECH
February 1998
CHEMTECH 1998, 28(2), 6-11.
Copyright © 1998 by the American Chemical Society.

The art of creating a flexible R&D organization

This organizational approach enhanced the productivity of Dow's Polyolefin Research Laboratory to levels not seen in four decades.

James K. Pierce

Organizational practices that increase industrial innovation have been reviewed (1). Techniques to increase R&D productivity also have been studied extensively (2). Several factors for achieving success in an industrial laboratory were described in a fascinating history of one of Dow Chemical's most innovative and productive laboratories, the Physics Lab, which operated between 1924 and 1950 (3). In this article, I describe a modern Dow laboratory that has effectively adopted the practices of the Physics Lab, added some new practices, and as a result, reached a high level of research productivity.

Success from Dow's labs
In the first half of this century, the Dow Physics Lab developed several of the company's well-known trademarked products, including SARAN wrap, STYROFOAM, and STYRON polystyrene. Since 1990, the Dow Polyolefins Research Laboratory has been compared with the Physics Lab because of the important inventions it has produced (4). New polymers bringing tremendous value to the polyolefins industry are based on constrained-geometry catalysts developed in the Polyolefins Research Lab (5). These new polymers include poly(ethylene--olefin) plastomers and elastomers; unique ethylene propylene diene monomer (EPDM) elastomers; enhanced polyethylenes; and ethylene-styrene interpolymers. At Dow, the combination of catalyst chemistry and polyolefin process science is trademarked as INSITE Technology. The significance of this technology was recognized when the inventors of a key patent stemming from it received the 1994 National Inventor of the Year Award (6).

Throughout the past 30 years, the Dow Polyolefins Research Lab has produced important new technology, including high-efficiency Ziegler-Natta catalysts in 1975 and octene copolymer LLDPE in 1978. Since 1990, however, the number of patents based on INSITE Technology--and the speed at which those inventions have been developed and commercialized--has increased markedly. The magnitude of this growth is illustrated in Figure 1 (below). The size of the laboratory's research staff did not change significantly during this period, so experienced researchers in the laboratory were asked what they thought had caused the increased innovation and productivity. Together, they cited more than 20 factors, but nearly every respondent mentioned

clearly defined goals,
a sense-of-urgency culture,
communication, and
flexible allocation of resources.

The leaders of any efficient organization are aware of the first three of these success factors. The team must know its mission; each member must be highly motivated to achieve the team's goals; and employees at all levels must constantly seek to understand the status and plans of the organization. The fourth factor, however, is not as familiar, but its use has dramatically increased the speed of implementation of new technology.

Figure 1. Dow U.S. patents...

Simply defined, flexible allocation of R&D resources is "getting the right people on the right projects at the right time". As circumstances change and new opportunities appear, the resources--people and equipment--available to a research organization are realigned to solve critical problems quickly. Laboratory managers must know the skills of each individual in the organization; then, they must determine which skills are required to solve a given problem and put the right people together on a project team.

This flexible, team-based approach to discovering and implementing technology broke with tradition at Dow. Twenty years ago, Dow R&D management promoted the "whole job concept", whereby the individual researcher was expected to execute all facets of a project. The researcher was expected to discover new technology, develop it in a miniplant or a pilot plant, implement it at the production scale, and optimize it after implementation. For businesses in which modest growth was expected or encouraged, the whole job concept worked well because it provided incremental improvements in plant productivity; however, for businesses that had obvious growth opportunities, this approach was too slow. With the discovery of constrained-geometry catalysts and with the first patents filed in the late 1980s, the polyolefins business was poised for growth, and Dow needed a different organizational approach to achieve success.

The old way: Process-based R&D
Traditionally, the Dow R&D laboratory was organized in a hierarchical scheme; an organizational chart of the old Dow Polyethylene Lab is given in Figure 2. The lab was divided into three principal functions: research, made up primarily of laboratory scientists and pilot-plant engineers; operations, which encompassed services such as computer support and regulatory affairs; and technical service and development (TS&D), which consisted primarily of development engineers.

Figure 2. The hierarchical R&D laboratory.

The research function was further organized into process groups. Individuals in each process group were associated with either product or process development and were bound to their groups. For example, if a new product were discovered in process group A, only the researchers in the product development group associated with process group A would be expected to bring it to commercialization. Individuals in other product development groups would not work on the project, even if their projects were of much lower value. Researchers were subject to "chains of organizational structure" (7). Senior scientists were scattered throughout the organization. The commercial function also was organized by process groups, making the system even more rigid. Sales and marketing people jealously guarded the resources dedicated to their particular business. The laboratory was staffed to support every facet of the business, but as a whole, this process-based organization lacked flexibility.

Moving to skill-based R&D
We needed the flexibility to move people to high-priority projects. Putting the right abilities together to maximize effort on the best opportunities required structuring the laboratory on the basis of skills, not products or processes. A skill-based R&D organization does not group people by products, markets, applications, or geographies; rather, it assembles groups according to technical skills.

Torres et al. presented a theoretical representation of such a skill-oriented organization in which the laboratory is represented by a circle (Figure 3) instead of a pyramid (8). We combined the elements of a skill-based scheme with names from a traditional organizational chart to create Figure 4. This organogram, as it is called in Europe, shows the four major skill groups in polyolefins research at Dow: catalyst, product, process, and characterization. Within each major skill group, smaller skill sets may be defined (e.g., the materials science group under product design). One feature about this laboratory is rather unusual: The lab is led by a manager-scientist partnership. Because managing a lab is neither completely administrative nor completely technical in nature, each of the major skill groups is led by a manager and a senior scientist who share the challenges of business, people, and technology. The manager-scientist partnerships from every major skill group make up the tactical leadership group (the center of Figure 3).

Figure 3. The workings of a skill-based laboratory.

Figure 4. A skill-based laboratory.

How flexible allocation works
The first step in deciding how to apply a laboratory's R&D resources is to prioritize potential projects. In a process-based R&D organization, one or two managers decide priorities; however, in a skill-based lab, the task falls to the tactical leadership group. This group--managers and senior scientists from the major skill groups--identifies, quantifies, and prioritizes the lab's work. The strategy for the business (the "what") is the responsibility of the business leadership, but the strategy for achieving the business goals through research (the "how") is the responsibility of the tactical leadership group in the lab.

Net present value, which is the present value of cash inflows minus the present value of cash outflows, is used as a tool to quantify opportunities. The net present value of each project under consideration is calculated and used to guide the tactical leadership group in prioritizing. After priorities are set, the group (or a team selected by the group) identifies the critical issues of the project, establishes expected time lines for the project, and determines the skills and capital equipment required to complete the project.

The second step in allocating resources is to assemble a project group under the leadership of a project champion. The champion often is a member of the leadership group but could come from anywhere in the organization. People with the right skills from any group in the lab--and even outside the organization--are brought together to create a team that will handle the critical tasks for the project. This formation takes place horizontally, across functions of the skill-based organization (Figure 4). The team operates in a "boundaryless" environment without regard for group, geography, or previous assignments (7). Appropriate equipment is also acquired and pooled.

The emphasis at the group formation stage is on speed because, as Jack Welch the CEO of General Electric said, "Speed, more often than not, ends up being the competitive differentiator" (9). In addition, development speed affects profitability more than any other factor involved in new product development (10). However, the flexibility required for ad hoc team formation and the emphasis on speed bring about several problems, including difficulty with ownership issues, uneasiness with the fast pace, and the temptation to neglect scientific reporting.

The definition of ownership is unclear in a skill-based lab. When a company operates using the whole job concept, ownership is clear because individuals, not teams, are responsible for projects. So, Dow addresses ownership issues by encouraging team-building activities and team recognition. Discomfort and uncertainty can arise from what one technician has described as the "nutty pace" of the lab. Projects can die quickly using flexible allocation of resources, but they can succeed just as quickly, too. Still, most people feel that the satisfaction of success makes the fast pace worthwhile and a slow pace intolerable. Because the pace of a project is so fast, people may be tempted to shortchange the scientific reporting. For the sake of good science, however, all individuals should be encouraged to make reports a priority, not an option. Scientific reporting is encouraged at Dow by including it as one of the objectives in the performance review process.

A third resource allocation step has resulted from people's concerns about operating in a flexible environment. Although many have claimed that self-directed work teams are effective, the supervisor-employee relationship has been retained in the skill-based organization. These relationships are formed vertically, within functions (Figure 4). Personal attention to employee satisfaction is important, especially in a fast-paced environment. Supervisors and employees are encouraged to discuss topics such as goal setting, performance evaluation, and career counseling.

TO SIDEBAR: Flexible allocation in practice

Speeding development
Once a business has set its strategy, flexible allocation of R&D resources can allow the fast development and implementation of value-generating technology. Most laboratories have more opportunities than resources. The flexible allocation method requires the organization to focus on a few projects and drive the right ones to completion. The projects with the highest net present values win resources in proportion to their value, and because each project has a relative richness in resources, the many activities required to validate its concept can run in parallel. The business will have the information necessary to make a "Go/No go" decision much more quickly than if it had to wait for all the activities to be done in series. Projects can succeed quickly or be killed just as quickly.

A second way to speed development is to leverage skills beyond the laboratory. As described in the athletic shoe midsole example (see sidebar, Flexible allocation in practice), skill sets outside the laboratory can be sought and applied. Appropriate people from universities, consultant firms, and even customer firms can be added to a project team.

The third way to speed development involves the so-called soft skills. Diversity is exploited by combining not only hard skills (technical knowledge) but also soft skills (work styles). Combining individuals with complementary styles--for example, subject experts with people who can integrate broad areas of technology--can accelerate a project's development time because work can be done concurrently. Placing known project starters with people who can develop and finish projects also can bring about results more quickly. When deciding who to bring together in a project, managers should consider hard as well as soft skills so that the project team can capitalize on the strengths of its members.

Value is the key
The key to laboratory productivity using flexible allocation of resources is a focus on value. In summary, the steps are as follows:

Identify lab goals and prioritize them based on value.
Define the critical issues associated with the goal, and initiate the project.
With an appreciation of the value of speed, establish expected time lines.
Identify skill and equipment requirements.
Assign people to the project team in such a way that their skills can be shared.
Monitor progress toward meeting the goal; be ready to shelve or halt the project if it stalls.

Organizing the laboratory on the basis of skills instead of process, product, or market brings about the flexibility to realign researchers to take advantage of major new opportunities. Laboratory leadership by managers and scientists in partnership has increased the speed of development through a faster analysis of the value and challenge of each project.