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"Basic research only" has become a battle cry for those who would like to slash funding for federal scientific research and development programs. But following that war path would be a serious misstep if the goal is-as it should be-to get an effective return on the federal scientific investment. In fact, federal support for the development part of R&D is already woefully insufficient to ensure that the benefits of research advances are fully realized. Basic research is just the first leg on the journey to the marketplace for new technologies. For many projects, that basic research is federally funded and motivated by societal goals such as promoting health, environmental quality, and safety. The final leg of inserting the technology into product manufacturing processes is privately funded and motivated by customer demand and profit motives. In between, however, is an inadequate mix of public and private funding. Those middle stages of technology transfer become a virtual "valley of death," with the roadside strewn with the bones of once-promising technologies that never reached the useful product stage. In recent years, cooperative research and development agreements that mix public and private effort have begun to lay foundations for bridging the valley of death. However, public-private cooperation for technology development must be greatly expanded for a cost-effective balance of research and development to be achieved. If the development side is further curtailed by budget cutting, the valley of death could become an uncrossable chasm for too many potentially valuable technologies. I like to look at technology development as a series of five stages. Each stage is an increasingly complicated maze full of dead ends that prevent a large percentage of the potential technologies that enter one stage from advancing to the next. Navigating through the entire process-from basic research in the lab to commercialization-usually takes 13 to 20 years. The National Renewable Energy Laboratory (NREL) in Golden, Colo., which started as the Solar Energy Research Institute 19 years ago, illustrates the challenges of maneuvering this five-stage technology development journey. Research on many renewable energy technologies, including solar cells and ethanol, that were initiated at NREL at the outset is just now reaching the critical fourth and fifth stages of technology transfer. After years of laboratory and engineering success and progress, the fate of NREL's innovations depends on how they mesh with industry goals and market trends. The final stages of the technology development process will determine whether these innovations become economically useful products that also further the societal goals, such as energy independence, that inspired the original research. The first stage in the process is the actual basic research. Work is performed mostly at universities and national laboratories and is largely done with public funds. This basic research screens ideas, builds a knowledge base, and establishes strategic intent for those ideas that make it through this preliminary stage. Ideas that pass the test of basic research enter the second stage-a focused research phase-in which technical concepts are developed and feasibility is proved. This stage focuses critical expertise on the idea. Research partnerships, first between universities and government laboratories and later with business, are also built. Those research ideas that make it through this stage become potential technologies. The challenge of the third stage is to actually demonstrate the technology, proving the concept by building a bench-scale prototype. Researchers begin to seriously involve business partners. They also begin to think about economic criteria and other factors that would determine whether the technology would be attractive for commercial production. At this stage, business may start to pick up a substantial share-but by no means all-of the costs. It is also frequently critical at this point to take that extra step necessary to demonstrate or modify the budding technology to sell the concept to the prospective industrial partner. Unfortunately, government funds begin to dry up at this stage. Laboratories and universities are forced to be highly creative in finding funding-the steepest slope of the valley of death. NREL scientists have turned to special development funds that the laboratory set aside specifically to bridge this funding gap. However, these funds are very limited, which makes competition for resources tough. These obstacles make this particular maze a more restrictive filter than it need be. I strongly advocate greater government support for work at this stage. In the fourth stage, the baton is passed from scientist to engineer to validate the potential for manufacturing the technology at the commercial level. This is the stage at which pilot plants get built and industry starts its own in-house engineering. Substantial effort is directed toward meeting customer demands such as durability, quality, and cost reduction. As might be expected, this stage screens out lots of good ideas that are difficult to put into commercial practice. While the bulk of the funding burden shifts from public to industry sources, the prospective technology is still very much within the valley of death. Innovations that make it to this stage face one of the biggest obstacles in the technology-transfer journey: sparking and maintaining the interest of corporate America. Because industry must respond more to customer demands, such as performance and low cost, rather than societal goals such as energy efficiency and environmental protection, it is generally reluctant to devote much time or money to unproven new technologies. The fourth stage is the point at which the trade-off between market forces and societal goals becomes most evident. For the last several years, the United States Department of Energy (DOE) and other federal agencies have made concerted, highly successful efforts to build government-industry partnerships to help maneuver through the fourth stage. Such cooperative research and development agreements provide the impetus needed to encourage industry to take on new and unproven technologies that serve the public interest. While these technologies may mean growth in the long run, they do not fit within immediate business objectives and profit picture. NREL and other national laboratories have had excellent success with such cooperative activities and are now gearing up to try spin-out ventures and other such aggressive, nontraditional devices that go beyond basic research. If this sort of cooperative activity geared toward bridging the valley of death is curtailed in the name of budget cutting or avoiding intrusion into the domain of private enterprise, promising technologies developed at government expense to serve public purposes will have much less chance of making it to the market. The passage from the fourth to the fifth stage is one of the most critical on the road to market. After 10 to 15 years of research and engineering, a technology that makes it to this point has been proved feasible. With luck, it can be picked up right away for commercialization. But now it is entering the realm of market forces, and if it is not at the right place at the right time, the technology can languish, perhaps exceeding its shelf life and getting stale. Its fate depends on whether business feels that the technology can make it in the marketplace. New technologies are now out of the valley of death in terms of R&D funding but are at the point at which public policy plays a big role. Government intervention-in the form of tax incentives; pollution regulations; and demonstration programs that promote health, energy efficiency, environmental quality, safety, or other public objectives-makes the market more attractive for a technology that serves those objectives. This can tip the balance enough that businesses will want to take the substantial risk of going on to the fifth stage and into production. The fifth stage is one of actually inserting the technology into product manufacturing processes-deployment, if you will. These three to five years are totally in the hands and pocketbooks of industry. Expenditures in this stage dwarf what has been spent on R&D to this point. An example from the automotive world illustrates this clearly, but the story would be similar for pharmaceuticals or other major industry. Even "business-as-usual" changes require substantial investment of resources. For example, the Chrysler Corp. took 39 months, used 850 people, and spent $1.6 billion to develop its LH sedans. Most of this effort was for modest modifications and redesign of existing technology, not for a dramatically new technology. Richard W. Marczewski is manager of the technology and business ventures office at the National Renewable Energy Laboratory in Golden, Colo. The National Renewable Energy Laboratory (NREL) is operated for the Department of Energy by the Midwest Research Institute. Imagine the outlay required to make a genuinely new technology-such as a totally new type of engine-marketable. Some critics have labeled as "corporate welfare" the approximately $150 million that DOE is investing with General Motors Corp. and the Ford Motor Co. on the first four stages of R&D for hybrid vehicles that combine electric motors with small, efficient combustion engines. But if the automakers proceed into the fifth stage, they will likely be spending $4 billion to $6 billion each on the many new technologies involved. Despite the $75 million or so that each company will have spent and the matching funds from DOE, the research may not advance into that final stage. The CEOs of the automotive giants have other factors to consider. When automakers are simply changing body design or choosing new paint colors, they face substantial risks from customer acceptance, the whims of the economy, and possible regulatory changes. Adopting major changes with unproven technology obviously multiplies the risk many times. New technologies designed to meet societal goals face a long and difficult road from government-supported basic research to industry deployment. The public investment in basic research is not realizing its full return because the development stages along that road are seriously underfunded. Development is appropriately a domain for joint public-private activity, not an area for which industry wants-or will accept-exclusive responsibility. Further restricting government support will only reduce the value of basic research and open doors for other countries that are willing to support development work. Increased federal support of development work is necessary for the public to get a much bigger bang for its R&D investment buck.

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Richard Marczewski

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January 1997

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