Two years ago, Hewlett-Packard (HPQ) embarked on an ambitious overhaul of its storied research labs, responsible for some of the most momentous computing innovation of the last 40 years. Now, HP Labs Director Prith Banerjee is turning his attention to HP's half-dozen international labs, aiming to generate cutting-edge development from scientific outposts in Asia, Europe, and the Middle East.
During a January meeting of 19 HP research managers, Banerjee urged labs in China, England, India, Israel, and Russia to work more closely with one another, and with HP's product engineering groups, Banerjee says. His goal is to produce more inventions that can be turned into technology that goes on to generate revenue for the company. Signaling its emphasis on international research and development, HP is opening its seventh lab in Singapore on Feb. 24, establishing a research hub in a key country in HP's fastest-growing region. It's the first lab opened under Banerjee, who joined HP in 2007.
Banerjee has asked Singapore lab director Chris Whitney, a longtime HP hand, to work closely with the heads of company labs in Bangalore and Beijing. The Singapore lab will collaborate with HP labs in Bristol, England, and Palo Alto, Calif., on research into cloud computing, as well as with HP's services and software groups. Whitney plans to split his time between Singapore and Palo Alto to stay in touch with developments at HP's headquarters.
Starting in 2008, HP redoubled efforts to get labs to produce more commercially viable work. It has narrowed its focus, pared unpromising projects, and subjected researchers to more stringent productivity measures.
HP is taking the refining process global. On Jan. 4, Banerjee named Min Wang, a former research manager at IBM's (IBM) Thomas J. Watson lab in New York, as the new director of HP Labs China. HP closed a Tokyo lab last year. Banerjee rejiggered HP Labs's performance evaluation system to more accurately measure high-quality research. The company also shortened the amount of time it takes to present findings to a review board. "Gone are the days of the labs of 30 years ago, where there was no pressure and you did whatever you wanted to do," says Banerjee, sitting at a table overlooking a leafy courtyard below his office, which is down the hall from the preserved work spaces of HP founders William Hewlett and David Packard.
Hewlett-Packard operates one of the few remaining university-style research labs in U.S. industry, along with IBM and Microsoft (MSFT). The labs are designed to foster innovation by looking five and 10 years into the future. But industrial labs have also been criticized for failing to commercialize enough of their work.
In May 2008, Banerjee, a former academic and founder of two chip design companies, undertook a top-to-bottom reorganization of HP Labs aimed at turning more of its research into useful technology. "This was a five-year plan I signed up for with [Chief Executive] Mark Hurd," Banerjee says. HP has sped up commercialization of technologies from its labs in areas including digital printing, flexible displays, and oil exploration. The company on Feb. 10 announced a deal to sell seismic sensors to Shell (RDS.A).
There have also been missteps. "Not everything has gone according to plan," Banerjee says. For instance, researchers were able to decipher Banerjee's performance evaluation formula, which considered technology licensed outside the company, papers published in journals, and the amount of technology transferred to product groups. Once they did that, some employees ratcheted up the number of papers they wrote, and focused on the least complicated technology, he says. "As with all smart scientists, people figured out how to game the system." HP changed its research evaluation process last month.
Overseas R&D Spending
HP Labs is also focusing more of its overseas research on commercially applicable technology. The Singapore lab, located in a state-of-the-art government-owned research facility called Fusionopolis, will focus on creating new software for cloud computing, and designing large data centers that pool computing power in "clouds" users can access over the Internet. The work aims in part to meet the needs of telecom companies such as Verizon Communications (VZ), Vodafone Group (VOD), and Singapore Telecommunications, according to HP.
Singapore, China, and South Korea are the fastest-growing countries for overseas R&D spending by U.S. companies, according to a Jan. 18 report from the National Science Foundation. Singapore is a transportation, financial, and technology hub for many HP customers in Asia, where sales grew 26% during the company's fiscal first quarter, which ended Jan. 31, outpacing increases elsewhere. "If you look at HP and ask where this company is going to grow, it's not in the U.S., it's not in Western Europe, and it's not in Japan," says Henry Chesbrough, a professor at the University of California at Berkeley and executive director of the Haas School of Business's Center for Open Innovation, which studies changing corporate research practices. "Their growth is going to come in these … overseas markets" like China, Southeast Asia, and India. Singapore can be a window onto Asia, Australia, and even the Middle East for technology companies, Chesbrough says. "Its vantage point suits HP very nicely."
HP will need to take care to hold on to its most talented scientists in Asia, Chesbrough says. The Chinese research labs of IBM, Microsoft, and Google (GOOG) have experienced high annual turnover rates as local companies lure away their stars, according to Chesbrough.
Since Banerjee's January meeting, Singapore lab director Whitney has been in touch with Beijing director Wang about informally sharing more of their findings. "We're not going to sit down and write a process for how to institutionalize" knowledge-sharing across labs, he says. But "when that enthusiasm comes from your boss, it percolates through the organization."