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Technology Today® talks with a panel of SwRI experts in automotive emissions, nondestructive evaluation, mechanical systems, materials engineering, and engine design to find out what makes cooperative industry research an efficient means to an otherwise expensive end.
TT: Why should industry consider consortia research as an alternative to funding their own studies?
Ryan: There are a number of reasons. What industrial companies get from this type of program is a pooling of financial resources and a forum for addressing common goals, which makes for much stronger research. Participants get a chance to interact with each other and, while they often won't admit to it, I think that's one of the strong points of consortia. Generally, in a competitive role, they won't do that.
Bass: Industries are consolidating and, oftentimes, two people at the table will end up working for the same company. It gives those individuals an opportunity to form a relationship that may be beneficial to surviving such a consolidation. We recently had a consortium where the four member companies consolidated, leaving two companies.
Leverant: The downside of consolidation for us is that, when two companies consolidate, the new company doesn't double its contribution to the consortium. They expect to get what they're already getting for the original price per company.
Bykowski: Most clients realize that, depending on the number of members that join a consortium, they can obtain anywhere from five to 20 times a return on their investment. Even if they only benefit from a portion of the project, their return is still greater than if they solely funded the project.
There's also the subject of individual company resources, both personnel and equipment, in new areas a company may consider pursuing. In some cases, companies may have to hire people or purchase equipment to investigate a potential new market area. Consortia can provide information about the new market area that may cause them to conclude that a particular technology or approach is not feasible. Therefore, the company isn't burdened with excess personnel or equipment.
TT: Are consortium research ventures effective ways to seek solutions to broad research needs?
Bykowski: Yes, but you have to consider the precompetitiveness of the objective, as well as the potential market for the product, the regulations, and, in some cases, the politics. In many cases, there is a need to develop technology in response to regulations or in response to competition outside the consortia group. Each member is hoping to obtain a generic database from the consortium that they can take back and use to improve their product to increase sales or to respond to regulations, so it really depends on the objective of the consortium.
Fisher: I agree. With broad research needs, if you're talking about precompetitive work that is common to several clients, they can later specialize it to their own needs. Consortium research ventures are well suited to these types of applications. It may be because they have similar regulatory requirements or perhaps similar competitive pressures against other industries.
Bass: In addition to sharing costs so a company gets more research than they'd get funding a project on their own, members get an opportunity to interact. Sometimes ideas from one company will affect how another thinks it ought to approach its own problem. There's a sharing, not only of money, but of knowledge that makes the end product better than any one company could have achieved on its own.
Leverant: My experience is that clients come together when they have a very specific problem to solve. They have generally not been interested in broad research needs.
TT: Have you noticed a heightened interest among your clients to get other companies to cooperate in joint research?
Bykowski: Most definitely. Generally, there are two important aspects of consortia - the technical need and the cost effectiveness, or cost sharing. Once you have members aboard, they realize that the more companies participate, the more work can be funded. In some cases, if we can up the number of consortium members, we can reduce the price per member. Generally, the membership doesn't opt to reduce the price, it opts to expand the work effort. That makes everyone enthusiastic, and more companies want to jump on the bandwagon. The members become your salespeople.
Bass: Many times now you'll have a lead company that will round up interest from other companies before they come to us. That usually involves precompetitive technology. In a recent case, a major oil and gas company collected money from other interested parties and then contracted with us. We had a single contract and a single company to deal with on a contractual basis. That activity has since spun off into other projects for some of the companies that helped fund that program, so it's had a leveraging effect for both sides.
The Institute serves a unique role because we are independent. We don't have a vested interest in any of these companies. That puts us in a good position to do an independent evaluation of technology or to develop technology for industry. On the other hand, there's another kind of consortium where the Institute ends up as one of the members. That's getting to be more prevalent, where we have a vested interest in buying into a consortium. In some cases, the technology that's developed needs to have an organization that can transfer that technology into use. Sometimes we're the transfer agent. We helped develop the technology and we understand it well, so it makes sense.
Ryan: This interest in bringing in new members is to the level where in all the consortia I've been involved in, the clients have considered allowing new members into the group after the program started. There's that much interest in them having additional members to expand their scope of work.
TT: What are the problems inherent in joint research - those areas which clients seem most concerned about?
Bass: There's the problem of differing views from multiple companies, such that it's difficult to reach a consensus on what's to be done. Another problem involves the extra effort needed to contract among multiple organizations. Those two problems are fairly common, and most of it is easily solved with experience.
Fisher: Most of our consortia are funded on an annual basis, which limits the risk to each member. If a client's goals change or they are not happy with the consortium's direction, they can leave and there are no hard feelings.
Bob mentioned that there's been consolidation among the members of his consortium, and we've seen the same thing. That's something we didn't foresee in our contracts, but is something that we need to address because the trend is likely to continue.
We should also realize that, as a research and development provider, we too are facing the same trends of globalization, consolidation, and increased competition as our clients. We could also benefit by teaming with other research organizations. We have limited experience with that, but that will increase. I'm sure that will also lead to interesting contract issues.
Bass: Sometimes a group of companies has to use a product that doesn't perform well - it either fails or is inefficient. To evaluate that product, we'll form a consortium made up of the users, as well as the product manufacturers. To do our job, we often need information from the manufacturer, who is sometimes very sensitive about an evaluation of its product. That manufacturer often comes in with a biased viewpoint that makes the program difficult for us to handle in a fair way. That can put the members in two camps that don't have a common goal, yet the program is still valuable to both sides. Just by the nature of these cases, they often get acrimonious, but the Institute's unbiased status helps bring both sides together to focus on the technical issues generated by the project.
TT: Tell us about some of your more successful industry consortium experiences.
Bykowski: One of the most successful programs I experienced was in October 1984, after President Reagan signed the National Cooperative Research Act to limit damages from antitrust suits. That month, we solicited a proposal to study particulate trap regeneration mechanisms, and a consortium was formed. Initially, we needed 10 companies to participate at $30,000 per member, but by the time it ended three years later we had 28 companies worldwide with a combined research effort of $1.3 million. That program broke the ice for us and for companies that had never considered joining a consortium.
Fisher: In one case, clients got together and asked us to form a program. The interests of the clients matched almost identically and they, at that time, had no interest in competing. That was easier than what we see today, where companies that have similar interests tend, as a result of regulatory standards, to be potential competitors.
Bass: One of the earliest programs at the Institute was started for the natural gas industry in 1952 to develop a design simulator for compressor piping system performance. There were a lot of safety issues associated with new pipeline systems in those days. A group of companies came together and asked us to develop this simulation capability. Not only did we do that, but we also developed upgrades over subsequent years, and we generated royalties off that technology to develop even more technology needed by the gas industry. This was long before consortia programs became popular in the last decade or so.
Leverant: I would characterize one of our more successful consortiums as also being somewhat unconventional. In this case, an industry trade association determined that they had a problem driven by a regulatory agency of the federal government. The participants had absolutely refused to talk to each other about this particular problem, but they joined forces in the interest of safety and exchanged noncompetitive information. That was the genesis of a program we're running now for the Federal Aviation Administration.
I call this program unconventional because we didn't promote it to individual companies. I promoted the relevant capabilities to an individual who turned out to be the chairman of the committee that was deciding their approach. The committee wanted to have the program done by an independent organization, and Southwest Research Institute ended up being the one to do it.
Ryan: To sell a successful consortium, your objectives need to be precompetitive in nature, of common interest to the clients, and not necessarily profit motivated. An example would be emissions control strategies. Generally, developing this kind of technology does not produce revenue for the company, but it's still something they have to do. Our clean heavy-duty diesel engine consortium started in 1990 and was then made up of 17 industrial clients from around the world. It was to be a four-year effort, but the clients later said they wanted to keep going, so it's likely to end up a 12-year consortium.
TT: What happens when intellectual property results from consortia?
Ryan: We generally have contract agreements that give intellectual property rights to each member. The only stipulation is that everyone has to say they're willing to support the advancement of that intellectual property. Usually it's a patent. If there is a patentable idea, they share in the expenses of a patent application and have an equal share in the rights.
Leverant: Sometimes when consortia work is being funded by the government, as with the FAA program I mentioned, the Institute holds the rights to the intellectual property that's been developed because we're a non-profit institution. This is appropriate under current law as long as we give the government a royalty-free license.
Fisher: I'd like to emphasize something that we've found to be very important. No matter how the intellectual property is handled, it needs to be clearly stated up front in the contract so there are no misunderstandings.
In most cases, we follow the models that were mentioned before, but we've had others. For example, where we envision that the consortium could develop intellectual property that could be applied to an area that's not competitive with the consortium task, we may ask in the contract to use that intellectual property in other areas. That's a benefit to the members because, if royalties result, the members share the income.
Bykowski: One of the concerns that many of the members have about consortia is that they possess their own background intellectual property, and they are somewhat sensitive that by pooling resources, those resources may be made public or released to their competitors. We go to extremes to emphasize that members maintain their own background intellectual property rights. If anything is sensitive, we work within the consortium to protect their rights. Just because your company participates doesn't mean that your trade secrets are open to all members.
Bass: There are also confidentiality agreements. Those too need to be worked out up front so that there are no confidentiality violations.
TT: How often have you seen consortia research reach the commercialization stage and with what types of technology?
Leverant: I've seen commercialization happen in a couple of cases. We had a consortium in the late '80s and early '90s that had to do with the integrity of steam turbine rotors. Part of that program involved the development of a nondestructive inspection system for inspecting the disks on those rotors. One of our divisions ended up commercializing that capability.
Bykowski: In one case, we were evaluating different materials as part of a consortium to examine alternative diesel particulate trap media. One of the materials we identified and made prototypes of was a silicon carbide foam that resulted in a patent. The foam in its natural form wasn't commercialized, but in a different form it was.
Ryan: There's difficulty sometimes in determining whether these things become commercial because, when developing precompetitive technologies, the technology often gets embedded within the clients' own product. One example is model-based control. We developed a technique for controlling engines based on a model, and I believe that technology is now part of the 1998 strategies in cars.
Fisher: I've seen one variation on this related to some piping inspection equipment. In this case, we brought the work to a prototype level, then the clients used different commercializing agents so that each company controlled their own versions.
Bykowski: In the emissions field, there are generally two types of consortia objectives: feasibility and investigation. For investigating the mechanisms of a particular exhaust aftertreatment approach, a generic database is used to refine the product or create new products for an identifiable market. The other type, feasibility, allows you to look at the feasibility of a technology or an approach.
TT: Can you give examples of consortia that have failed and hazard guesses as to why they performed so poorly?
Bykowski: I've had some that have not lived up to their expectations as far as membership goals - the primary reason being that the topic of investigation was ahead of its time. Ten years ago, we started looking at using nonthermal plasmas to reduce diesel exhaust emissions. Shortly after, we tried to get 10 members to join a consortium, but we only got four. We went back to those four and asked if they'd like to continue, but with a reduced effort. They agreed, but if we had waited a few more years, we could have easily had the 10 members.
Bass: Sometimes the factors that cause consortia to be formed change. Business priorities change, financial situations change. That has caused problems for us in the past, where projects get shut down early or members are forced to drop out.
Another experience involved a large international consortium in the '80s, where the 14 members met at the beginning to decide on objectives. There wasn't a single focus, but rather multiple objectives. We spent three years and $3.5 million to solve each member's specific objective. All they remembered at the end was that $3.5 million were spent and all they got out of it was information pertaining to their specific interests. In hindsight, I wouldn't go into a program again with that many objectives. People are left unsatisfied when there isn't a common focus.
Fisher: In forming consortia, there's always the issue of proper timing to catch a group of clients who are wanting to start at the same time. That's awfully difficult, especially in some of our foreign cases. With them, their budget cycles rarely match our domestic cycles.
Leverant: We have one consortium under way that is suffering because it doesn't have enough members. One thing to keep in mind is that the Institute is not the only organization putting these consortia together. In this particular case, it turns out that there's another consortium which has taken a lot of potential members.
TT: What technical research challenges do you think are ready to be cooperatively addressed?
Fisher: I think this comes back to two trends that were mentioned, consolidation and globalization. Even though there has been some consolidation, companies are more and more feeling competitive pressures to cut costs. For example, though they've recovered somewhat from their low, oil prices are down in the petrochemical industry. That has led to incredible pressure for them to improve their maintenance. We've seen the same thing in the airline industry. That means we can organize consortia to help companies keep their plants or airplanes working longer, with reduced downtime and increased maintenance intervals.
Bykowski: Generally, any time industry is challenged there's an opportunity. The state of California has classified diesel particulate as a toxic pollutant. That statement challenges the engine and oil industry to respond. That's led to one of our more active consortium initiatives where we are addressing the issues of particulate characterization and sizing. If you ask people in industry what hot topics need responses, you'll find areas where consortia could help.
Bass: A big drive for consortia is for industries that have common regulatory requirements, such as in safety, health, and environment. Some industries have more of a need for consortia than others. Industries that have been called mature, like the oil and gas and petrochemical industries, have more regulatory requirements that could be helped with consortia. Contrast that with maybe the biomedical industry, which at this time is very entrepreneurial with a great deal of profit potential. There's probably not much opportunity within that industry for consortia work, but where it relates to regulatory compliance needs there may be.
Ryan: I'd like to try to generalize that a bit. I think the best opportunities for consortia are in those circumstances where the payback for a research and development investment is either perceived to be minimal, such as in response to regulatory changes, or that is relatively high risk, as in the development of speculative technologies.
Published in the Summer 1999 issue of Technology Today, published by Southwest Research Institute. For more information, contact Maria Martinez.