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CENTRALIZATION OF FEDERAL SCIENCE ACTIVITIES
TUESDAY, JULY 29, 1969
HOUSE OF REPRESENTATIVES,
Washington, D.C. The subcommittee met, pursuant to adjournment, at 10:07 a.m., in room 2325, Rayburn House Office Building, Hon. Emilio Q. Daddario (chairman of the subcommittee) presiding.
Mr. DADDARIO. This meeting will come to order.
We have two witnesses as we proceed with our hearings on Centralization of Federal Science Activities. The first is Dr. Sam Lenher. Will you come forward, please, Dr. Lenher? He is vice president and adviser on manufacturing and engineering of E. I. duPont de Nemours and Co., Inc., and is also a member of the research management advisory panel of this committee, which over a long period of time has been of inestimable help to us.
We are pleased to have you here, again, Dr. Lenher, and especially to have you here as a witness. It has been quite a while since you have given us testimony, and we are anxious for you to comment on this particular subject.
STATEMENT OF DR. SAMUEL LENHER, VICE PRESIDENT AND ADVISER ON MANUFACTURING AND ENGINEERING, E. I. DU PONT DE NEMOURS & CO., INC.
Dr. LENHER. Thank you, Mr. Daddario.
Let me begin by saying that it is a pleasure to be here and participate in these hearings. The organization and management of science is an important and complex subject, especially with the scale of technical efforts as large as it now is in this country and with budgetary constraints requiring increased thought about national priorities. Moreover, in recent years we have seen, among some segments of the population, growing skepticism about science and technology-skepticism not so much about the content of science as about its applications and the manner in which priorities are determined.
In this context, your review of the science programs and activities of the Federal Government is particularly significant, and I am glad that you have chosen to reopen discussion of the subject.
Congressman Daddario asked me to describe the methods which the Du Pont Co. uses to manage its research and development activities, and to offer whatever observations I might have about the organization of Federal science.
I have no illusions, certainly, that I can provide answers to the many questions involved in the ordering of research and development goals, the allocation of resources and the coordination of a multiplicity of programs. We have by no means solved all of these problems in our company and industry, and the approaches we have taken may not be appropriate or workable for government.
Mainly, my intention is simply to describe the rational and administrative structure that have been developed in Du Pont, a corporation that has sponsored, over a period of about 65 years, an increasingly diversified research and development program. Although most of my experience has been in industry, I have been exposed to academic and Government-sponsored science, and do have a few thoughts on these subjects.
I would like to explain, in broad terms at least, how Du Pont categorizes research and development activities, how we direct these and relate them to one another, and how we evaluate projects. But first, I would like to say a word about the kind of business we are in, and the place in it occupied by research and development.
We are part of an industry with an extraordinary range of interests and technologies. Chemistry and chemical engineering are still the focal points of this technical activity, but Du Pont and other leading chemical manufacturers are also pursuing extensive projects in such fields as biology, solid state physics, electronics, and the agricultural sciences. Our interest range from synthetic fibers to heat-resistant films and insulating materials for spacesuits and spacecrafts, from electronic microcircuitry to refrigerants for quick-freezing food, from pesticides for increasing crop yields to broadspectrum antiviral agents.
We are part of an industry in which the application of vigorous, continuous, and costly scientific research is vital to growth and even to survival. New discoveries are at the heart of our new commercial opportunities. They also make some of our older products and processes obsolete, and can leave us with large, expensive plants and facilities that are useless.
Unlike some industries, the chemical industry finances most of its own technical effort. In the past 10 years, about 85 percent of the chemical industry's expenditures for research and development have come from its own resources. Because we are much more dependent on technology than the more labor-intensive industries, we have placed very substantial sums in research and development. The chemical industry has spent more than $13 billion since 1959 for research and development. These expenditures have grown at practically the same rate as those of industry in general, even though technical work in a number of industrial sectors has been greatly stimulated by the infusion of Government funds.
Our primary orientation is toward the civilian marketplace, with each company striving to earn profits by offering customers products and services that are better or less expensive than those offered by competitors. There is unquestionably a great deal of overlap and duplication of technical effort, but in general it is more productive than wasteful. There is strong incentive for real originality, as opposed to "me too” research, and because we are using our own facilities and capital, we are free to approach research and development on our own terms, with our own objectives.
Apart from the Savannah River laboratory and plant, which Du Pont operates at the request of the Atomic Energy Commission for a fee of $1 a year, Du Pont does comparatively little direct business with the Government. Our research and development contracts from the Government in the last 10 years have totaled about $19 million.
Du Pont regards research and development as important as manufacturing and sales. All are judged and justified in terms of business purpose. In the case of research and development, we have no problem finding that business purpose. About half of our present sales come from products developed in our laboratories in the past 35 years.
Currently, we are commercializing new products at a rate of five or six a year. We are spending more than a quarter of a billion dollars a year on research, development, and allied technical activities. We have about 2,800 scientists and engineers engaged in direct research, and about 1,700 others in closely related activities. In the vicinity of our corporate headquarters in Wilmington, Del., we operate several laboratory complexes, and we have more than 50 other laboratories around the country. Our total investment in research and development facilities exceeds $300 million.
Traditionally, research has been categorized as "basic" or "applied.” We no longer segregate our expenditures this way. We find that those terms are not particularly helpful in practical application, and we pay little attention to them in administering and evaluating technical budgets.
Instead, we categorize research and development according to business purpose: Improvement of established business, exploratory research, and new venture development. In any of these categories, there might be some very esoteric basic research going on, or some very practical development studies, or both (as is usually the case). The key question is, where would success in this area take us?
Is the effort really designed to improve existing products and processes, to develop new processes for our products, or to develop new products to replace existing ones? If the purpose is to keep us competitive in our going businesses, we label it as such, no matter how theoretical the technical work involved.
Our exploratory research includes much that is on the periphery of present technology, and much that is greatly removed from it. We seek new scientific knowledge of potential interest to the company. We attempt to translate to our needs the newest findings and theories of science, and add what we can to the fund of basic knowledge. In doing so, we are trying to establish a base for wholly new business ventures or for revolutionary modifications of existing businesses. Much of this work is highly speculative and sophisticated, and may not bring us any commercial products for years; on the other hand, we always have practical engineering projects underway that are associated with this advanced work and that also are charged to the exploratory account.
We identify as new venture development those research and development activities that are fairly well advanced, that concern fields that are new to us, and that warrant intensive development to commercialization. They are not yet ready for full-scale manufacture, but we see what we think are real prospects, and set them up separately to be sure they are adequately nurtured.
We feel this classification scheme readily reveals how much of our technical effort at any given moment is going into support of our present business posture, and how much is being invested in prospects for the future. It also serves to focus management attention on new development projects that are near the take-off stage and beginning to require major outlays of money. This is an important feature, and I'll return to it later.
Last year about 60 percent of our research and development money went to improvement of our established business. The remainder was divided almost equally between exploratory research and new venture development.
Our research and development effort, like the company itself, is markedly decentralized. We have 11 manufacturing, or industrial, departments, each covering distinct market areas. The departments are largely autonomous. Their general managers have full responsibility for maintaining the present and future health of their business areas, and each has his own organization for research, development, and technical assistance to sales. These are supplemented by staff, or central, technical groups—the central research, development, and engineering departments. All of these organizations generate their own technical programs, work out their own budgets, and run their own facilities. In addition, we have a separate laboratory for the study of industrial medicine and toxicology, to assure that our products can be made, transported, and used safely.
The industrial departments, which are immersed in the markets and sensitive to their needs, have primary responsibility for the technical efforts to improve our established business. They also conduct exploratory research directed toward creating future products for their business areas and carry on new venture development related to these areas.
The central research, development, and engineering groups conduct the more speculative exploratory research, the long-range projects which have broad implications and which could take us in new directions. They do work and provide services that cut across departmental lines and fill the gaps not covered by the industrial departments.
Under our system, an industrial department is free to spend on research whatever portion of earnings the head of the department feels he can afford and should spend to maintain and strengthen his business. The department head has full responsibility for his business area, and this requires that he continually redefine his operations as market needs change. It requires him to envisage new needs, both short term and long term.
Our textile fibers department is a good example of this continual redefinition of operations. The department was formed in 1920 to make rayon, based on technology already established. This soon led us into the production of acetate, shortly after the technology for spinning this fiber was developed by Europeans. Then came nylon, the first truly synthetic fiber. It was an outgrowth of the fundamental research program that Du Pont undertook in 1927. The scientists involved were not trying to create a specific product. They were simply studying polymerization-how and why small molecules unite to form "giant” ones. Because of our experience with rayon and ace