SM: So, for a startup, the cleaning up of the dirty energy is a more viable problem to solve for the next 50 years. If you were running a company which was going to go after that market, what process would you follow? PC: First you have to figure out what you can do that nobody else can do. You have to find what you are a pioneer of. The next thing you have to do is get strong patent coverage. The particular products or service you provide, based on your proprietary technology has to have a price to cost relationship which is handsome – 2:1. Then you can afford to develop the product; if you have a projection of what it is going to cost to develop the product. As an executive, I usually take that and multiply that by 2 or 3 because I know it is going to take longer and cost lots more money than even the most conservative projections. You have to count on the fact that it will take more time and money.
SM: Both the cost and the time projections get expanded, double or triple the original estimate? PC: Exactly. If it is still promising you can start.
SM: How do you manage the research and development process? PC: What I like to do is not very popular today. I like to have a central research organization that knows the whole field of technology in which you are working. They penetrate the key technical issues that you need understand for development of future products.
In my case it was radiation chemistry and we had to penetrate it on almost an academic basis. We understood exactly what happened when high energy electrons hit a polymer and we learned how we could change the effect. We knew how to develop an irradiated polymer that does things you want it do to by placing chemical additives in the polymer to trick the electrons into doing what you want them to do.
That knowledge developed by the central research organization can then be used by the divisions who are concerned with developing a product the customer wants. The development process is done by an industrial division, working on a particular market. For example, at Raychem we did it for the telecom market, and we did it for the energy market, and we did it for the aerospace market. They are all separate divisions; they all had different sales and marketing people whose job it was not only to sell to the customer but to know what the customer’s problem was.
An example of this is the first product we made; an electronic hook-up wire which was much lighter than the existing electronic hook-up wire and we could charge a price that was twice what the competitor’s product was. Instead of having a 30% margin we had a 60% margin. That is what the role is of the various divisions; they take a technology that is available from the research areas and make it available as a product or a series of products that the customer needs and can afford to pay for. The market division is really commissioned to go out and solve the problem for the customer. It has to be something the customer wants badly and therefore will pay highly for it.