How GE Is Reinventing Invention

Vice-President Scott Donnelly is overseeing a $100 million R&D makeover

Not long after Jeffrey R. Immelt took over as chief executive of General Electric Co. from Jack Welch, GE unveiled a new corporate identity. "Imagination at Work" replaced the slogan "We Bring Good Things to Life." and GE kicked off a campaign focusing on its leading-edge technology, including space-age windmills made with exotic new materials and medical-imaging systems capable of rendering three-dimensional views inside a patient's body.

Now, GE is injecting fresh energy into its focus on invention. The thrust is taking shape at the company's corporate research and development center on a ridge overlooking the Mohawk River in Niskayuna, N.Y, just south of Schenectady. Scott C. Donnelly, GE's senior vice-president for global research is overseeing the center's renovation. Worldwide, GE is spending $212 million to update company labs. The $100 million centerpiece will be state-of-the-art "wet labs" that are being grafted onto the original complex, which was built after World War II, and last upgraded 20 years ago. The new labs will help GE scale up research in genomics, proteomics, and nanotechnology. There's also an Adirondack-style lodge that can accommodate 40 execs and scientists. Ordered up by Immelt himself, this woodsy meeting center is designed to turn ordinary strategic planning retreats into invention incubators. "We're turning up the heat on the whole culture of innovation," says Donnelly.

In a corporate culture as famously quantitative as GE's, managing the vexingly intangible process of innovation will be a challenge. Donnelly, who took over at Niskayuna in 2000, trained for the task during a three-year stint as vice-president for technology operations at GE Medical Systems. In his current post, Donnelly manages a $359 million annual operating budget (up 4.3% from 2002), as well as a 2,300-person global research staff, including 550 at R&D centers in Shanghai, Bangalore (India), and Munich. Industries editor Adam Aston visited Niskayuna to learn more about Donnelly's efforts to upgrade and internationalize GE's R&D.

What's the research focus at the new facilities?

The new wing is dedicated to what we call wet chemistry -- that includes organic chemistry, biology, and other life-science disciplines. We've always had a few biologists around. But with the molecular medicine work, we're seeing a huge increase in the number of people in those areas. Historically, GE's role in medical imaging has always been about physics -- from William Coolidge, who invented the X-ray tube in 1913 [which made possible the first mass-produceable X-ray machines], to computed tomography, magnetic-resonance imaging, and digital X-rays. Now the future of health care looks like one big chemistry experiment. It's looking at actual biological functions, on a molecule-by-molecule level.

What's going on in areas beyond health care?

I'd say the advances will continue to come from material sciences. Look at detector materials -- the first medical X-ray tube -- or superalloys or advanced ceramics or thermal barrier coatings that make it possible to run aircraft engines and power systems at higher temperatures and higher efficiencies. All those kinds of things are fundamentally materials breakthroughs.

Are you also rethinking the way the businesses engage with the R&D process?

On a quarterly basis, we want to get the CEOs [from each GE division] -- along with their top technology advisers and their marketing guys -- together for a day or so with the top scientific specialists here. These are usually very rich, highly strategic, discussions and the technology piece is just a part of that.

How do these sessions help?

Look at John Rice at GE Power Systems. He's running a $20 billion business. They came here with their top leadership team and spent some time talking about hydrogen energy. We talk about what-ifs: What if hydrogen really takes off and begins to transform the energy sector? How does GE fit into it? Where should we be investing? We're an energy infrastructure company. We provide capital goods and services to that whole sector.

Has GE's R&D budget grown as a result of this reorientation?

The overall amount of R&D spending GE has been committing grew to $2.6 billion in 2002 [from $2.3 billion the year before]. The $100 million investment going into this lab will pay for a brand-new wing of labs, plus we're refurbishing the existing ones, which were built in the late 1940s and early 1950s. And we see some head count growth here. We've also grown in places like Bangalore and Shanghai.

Is it a challenge to integrate communication and research efforts from different regions?

Culturally, it's just not an issue. GE is a global company. We research and design stuff, we make stuff, and we sell stuff all around the world. Just walk through the halls here for a while. We have people here from over 40 countries, from China, India, Europe, Eastern Europe. When you see a list of names on a project, I dare you to figure out who's where.

Yet there are growing worries about the flow of tech jobs to low-cost sites offshore. Do costs affect the allocation of research work between the U.S. and Asian research centers?

Yes, we do get a cost advantage. Is it the primary motivator for me? Absolutely not. It's access to the greatest technical talent we can get. It's the ability to grow our net amount of R&D researchers. I don't get brownie points from Jeff [Immelt] at the end of the day by saying I spent less on R&D. What we get the money for is to come up with the big ideas. And another factor is the facilities, the capital requirements. Whether I have to buy a scanning electron microscope for New York or China or India, that's the same amount of money wherever you put it.

How do you choose what to do where?

The way we try to run the global labs is what I call "geographically transparent." The location is kind of irrelevant. On a given project -- say a turbine -- the manager might have six blocks [more specialized subprojects that are tackled simultaneously]. One of those blocks might be in Bangalore -- that could be fluid dynamics modeling. And another of those blocks might be in Shanghai -- that could be a materials-science problem. And the other four could be here. The challenge is how to maximize the amount of R&D given the skills we have at different centers.

Are there strengths in one center that don't exist elsewhere?

To a degree. But it's not what you might guess. A lot of people equate India with software -- that's not our game. In India, what we have are PhDs in organic chemistry and physics, mechanical engineers, and so on. This is not a coding shop. We have people there doing world-class analytical modeling of turbines -- the emulation of a fan blade or a bird strike or a hail ingestion into a jet engine. This is at the cutting edge of computational complexity. In China, core material sciences are very strong. So is the knowledge of advanced manufacturing processes. If you want to explore different ways of making something, you might have a team there that's really focused on exploring the optimal way to manufacture a material.

Great industrial R&D operations seem to be in decline. A few of the most famous -- like Xerox PARC [Palo Alto Research Center] -- failed to fulfill their promise. How do you avoid a similar fate?

GE's got a great history of R&D along with the likes of IBM's Watson Research Center, Hewlett-Packard in Palo Alto, and the great Bell Labs. It's true a couple of the labs had brilliant people with huge passion. But they didn't capitalize on it because they didn't figure out how to take that resource and benefit the business.

It's one of the things we're very sensitive about. And I wouldn't advertise us as perfect. We put an enormous premium on trying to figure out how not to have people off working exclusively on "wild blue yonder" kinds of stuff. We need some of that, but our ultimate measure of success is this: What is the impact on our business? Of course, you have to be patient. It can take 5 years or 10 from the time somebody comes up with that new molecule for a business to use it.

Ultimately, though, the culture here is such that if your invention doesn't end up going to the marketplace with a GE sticker on it, then we've failed. It's that simple. Getting patents, publishing papers -- these are all important things, and I give the guys kudos for doing all that. But at the end of the day, I still sit down every year with Jeff [Immelt] and say: "Look, here's the stuff." If the aircraft engine guys, or power, or medical, can't tell the business side what was born out of this place and the impact it's having in the business, then we're not relevant.

    Before it's here, it's on the Bloomberg Terminal.