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Mass Transportation

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Two new ways to bore tunnels in the earth more efficiently navrge implications for subway bonding and the ultimate development of distance tube trains, which reach speeds of more than 500 ming an hour in some advanced designs Above Is thi lethsad of an experimer fa subterrane, a thermalbering Gevice in ted by a group I Los Alamos Scientific Laboratory in 1950 but just getting into serious development. In principle it is a projectile, heated internally by electric or nuc par power to upwards of 100 Contigrade, that melts its way ugh the hotest rock. Two-inch test holes have been driven through grate at thirty inches an hour, leaving behind a copress.c. obs dian-ike glass-lined tube, produced by the fusing of mc un ruck Larger nucle -heated subterrenes are expected to incred he boring.Lord and to fusa lager tunn's Belowid cocond promising earth-boring device, a erectron-bean. rock cutter, shown in an

engineer's rough sketch which is under development by Dr DW. Schumacher of Westinghouse Electric The electron Can, slicing through and ficting the rock face, packs the greatest ency of any rock cut is faster than the subterrane but requires auxiliary rock removing equipment.

The linear-induction electric motor, whose main principle and configura ay be pret is emerging as the basic new propulsion unit for advanced high-speed tray cluding bi Involving a concept developed ten years ago by Professor Eric La pena, Collag the linear motor is in effect a conventional rotary motor unretted and lay 56 runs as a strip along the track, white the stator is aiteched to the tai

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on a wheeled vehicle; the government has contracted with Grumman & uf

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far amounting to about $3 million, is pushing development of magnetohydrodynamics (MHD for short), an advane d system for generating electricity directly from a high-temper ature, high-velocity stream of ionized gases, derived from the combustion of coal, oil, or natural gas. With a potential efficiency of 55 to 60 percent --it would provide nearly a third more power per ton of fuel than conventional steam plants -MHD would greatly reduce pollution in large plats (see "New Ways to More Power with Less Fellution," FORTUNE, November, 1970).

Finally, there are new prospects in geothermal power, i.e., generating electricity from natural steam found in certain areas beneath the earth's crust. Sizable amounts of power are already being produced geothermally in the Big Geysers area of northern California (see "Power from the Earth's Own Heat," FORTUNE, June 1969). And legislative action in 1970 opened to leasing vast federal lands, mostly in the West, where most natural geothermal sources occur. Recent geological studies show larger estimates of the power available from these sources than was once anticipated.

The power can be had at substantially lower cost than anything from conventional coal or oil-fired steam plants, and with little or no pollution. One particular new project could further enlarge the prospects of geothermal power. The AEC proposes to use contained nuclear explosions to create deep underground cavities, into which water could be pumped and recirculated to produce steam (see illustration, page 68), thu making geothermal power more widely available over the U.S. The radiation hazard from deep, contained explosions is small and controllable; however, the environmental outery has been so loud that congressional funds for the project may not materialize.

In thinking about how large a priority to put on those new developments, it is perhaps worth noting that in 1971, when the Soviet Union took over first place in world steel produetion, it also finished constructing the world's first large prototype breeder reactor, threw the switch on the world's first successful MHD power generator (now fe.ding curent to Moscow), and announced the success of experiments in which a new thermionic method converts nuclar energy directly to electric power. The Russians also have eleven geothermal projects in operation-against only one in the U.S. The Commerce Department's Michael Boretsky conclud from his studies that they have about 50 percent more technical people than the U.S. has working on problems of nuclear and thermonuclear energy.

The blocking of a satellite

Perhaps the clearest example of technological lag is found in communications, and especially in the lng stalling of the domestic communication-satellite program a projected system for the wider, more diversified transmision of radio, TV, telephone, cable TV, data facsimile, and other services. The domestic satellite became technically feasible as early as 1965, when Communications Satellite Corp. put the nucleus of its highly successful international satellite system over the oceans. But since then there has been a massive disagreement about who should control the system--and what kind of system it should be.

After long study, the Johnson Administration proposed to support a single conglomerate entity, probably organized around Comsat. In the Administration's dying days, continued page 149

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however, it decided to hold off and let its successor make the final choice. In 1970 the Nixon Administration, after another six months of study, opted for a new approach-one that would throw the system open to a number of private competitors. Since then the prospective competitors have been winding their way through the tortuous review processes of the Federal Communications Commission, the independent regulatory body that must eventually arrive at a decision. The principal applicants are A.T. & T., Comsat, Fairchild Industries, Hughes Aircraft (working with General Telephone & Electronics), MCI Lockheed, RCA, Western Tele-Communications, and Western Union. It is still not clear when the FCC will reach a decision.

That competition might well bring a whiff of oxygen to such a situation was demonstrated two years ago when, after a six-year regulatory battle, an aggressive newcomer, Microwave Communications, Inc., won the right to operate a specialized microwave data link between Chicago and St. Louis in direct competition with A.T. & T., at rates some 40 percent below the Bell System's charges. The MCI authorization, the first ruling of its kind, signaled a coming proliferation of computer data-transmission networks.

The launching of a still more advanced, direct-broadcasting type of satellite (see "Cinderella in the Sky, "FORTUNE, October, 1967) has been blocked even more effectively. This advanced system, instead of relaying services to established ground networks or stations, as the currently projected domestic satellite is designed to do, would beam radio-TV programs or other services directly to homes, bypassing all ground-based stations and utility lines. A variant of the system in which programs would be beamed directly to community-antenna systems, seems to have a special appeal for the less-developed countries (where both transmission systems and individual TV sets are rare but community facilities are important). A satellite for broadcasting to community antennas will be launched and tested over the U.S. in 1974, then moved over India.

Chocks in the wheels of progress

There have also been major obstacles to the development of basi: new technology in the automobile industry. Ever since the drive for a nonpolluting and safer car began, the great, gleaming laboratories of the big auto makers have rolled out a succession of developments, new type engines, and experimental electric cars all of them seeming to prove only that nothing can socr. rup' we the present, polluting internal-combustion engine which may be just what the companies wanted to prove. General Motors has recently taken on the German Wankel rotary engine, which could indeed reduce polluting emissions somewhat, but which is still a cyclic internal-combustion engine, burning conventional fuels, and which has some peculiar problems of its own that preclude any early production.

The industry's general technological capabilities have raised a lot of questions lately. One sensational calamity was last year's forced recall of 6,700,000 Chevrolets, the largest recall ever, for repair of inadequate engine mounts that tended to break, sometimes spinning the car out of control. Another discouraging episode has been the two-year-old federal effort to get a bumper on U.S. cars that is able to withstand a fivemile-per-hour collision. Once bumpers were unashamedly sturdy appendages; under the stylists' ministrations they have continued page 150

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become only vestigial chrome strips. Their inadequacy has led to repair bills, typically between $250 to $500, for collisions at five to ten miles an hour.

Other countries are working more rapidly with the available technology at hand. West Germany, Japan, and England have active programs going to produce compact, light electric buses, cabs, cars, and vans; most of them use conventional lead batteries and would significantly reduce air pollution in major cities (to which the new vehicles are limited by their battery capacities). There is nothing like this going on in the U.S.

Most of the innovative work on batteries done in this country has been focused on high-energy density batteries. These would have perhaps ten times the energy of lead-acid batteries and might eventually serve as power sources for all-electric cars that would perform as well as present models-but would present little or no pollution problems. They might well be the "ultimate solution," for the automobile industry and the protectors of the environment. Unfortunately, it is hard to envisage perfection of the high-energy density battery in much less th in a decade.

There are a number of private and federal-contract efforts under way to modernize the old steam car, which would require a small, low-polluting combustion engine to supply the heat; there have been a number of breakthroughs but, thus far, none of the efforts look like big winners. Another group of projects is focused on low-polluting liquid bottled gas in conventional engines to fuel city buses and trucks; however, no work is being done on such exotic fuels as liquid hydrogen, which can burn in conventional engines with only water vapor as waste. Liquid hydrogen, in fact, is now competitive with gasoline in price, can be transported almost as safely, and contains more energy per pound than any known fuel. There are, however, formidable problems associated with the storage and handling of liquid hydrogen.

Doing without wheels

Rooted in the nineteenth century and long beaten down by the massive onslaughts of automotive, highway, and aircraft travel, the railroad industry might appear too old and too far gone to regenerate itself. The quasi-government Amtrak Corp, set up in 1971 to take over and slim down the nation's losing passenger lines, is so far only a holding company, requiring steady federal and state subsidies; the same railroads that rar, passenger service into the ground are still running the trains. Amtrak's only "star" is the New York-toWashington Metroliner, inherited from a prior government development program, and originally meant only to be a firststep demonstration of what higher speeds and cleaner and more tasteful coaches could do for passenger service. The electric-driven Metroliner still represents only a limited solution in railcar technology, circa the 1950's, and even it has run into a long round of delivery delays and motor-mechanical troubles. Only in freight do the railroads still have any real edge over their competitors (it has been sweetened by increasing equipment and higher rate subsidies).

Yet for nearly a decade there has been a ferment in the development of new ideas for rebuilding mass transportation. The premise of these developments is that only new, ultramodern, high-speed systems, attractive to passengers, can begin to reduce and balance out the ever increasing automotive congestion and pollution in metropolitan regions. The

range of proposals, experimental models, pr and new hardware coming into being has b On the more conventional si they include:autoraated, ntputer-controlled, self-service urban sysun.s; biglet-ser less noisy subway cars; and more advanced, high-speed ens muter trains. In the more exotic, long-distance intercity tal egory, new ideas range from wheel-less air-et sin trains de signed to go 250 or 300 miles an hour to magneticajý sor pended pneumatic-tube trains capable of re-ling spesis us to 500 miles an hour--all of which, however, are still in teenperimental-to-prototype stages.

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Ironically, the tracked air-cushion vehick film of air, was first displayed in a small exp mentals in the late 1950's by Ford Motor's research laboratory, an magnetic-suspension system was shown to work in preng early in the 1960's by Westinghouse. Neither comp.ryb.. any railroads interested in developing the system. But let systems were developed almost simultaneously in Earp where they have been pushed into the prototype stage, an will shortly go beyond that. The U.S. Department of Tra portation now has a $13-million program, with platy of re search and development contracts out, and hopes we canes. up to Europe.

The new systems involve entirely new principles in hy locity, wheel-less ground transportation and p. pulsion may well make the wheel-or-steel-rail obsok te ar pu traffic by the end of the 1980's. Conventional ralis com sibly get speeds up to 200 miles per hour; butic dosena. quire rebuilding, strengthening, and straig tem's entire railbed. It becomes more economic and som to build, instead, an entirely new system capable of run much higher speeds--and speed is the key to a viabe portation system for both passengers and freight.

Moving those highway funds

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There have been some recent omens sugge år, i la such systems may actually get built Tran (kvinnan N tary John A. Volpe is now advancing a formal prose transfer a part of the user-tax-based, $ö-brisonseyca te way trust fund to mass-transportation devol part though he is certain to meet stubborn resist highway lobby in Congress). Perilaps even s Henry Ford II came out early this year for a diversind way funds to mass transit (although he cautioned that the version should be small in the beginning and not test public a fortune"). But to rebuild a nation's entire tem after years of neglect is going to be a long, costly and it could well take the rest of the century.

It will also take a lot of goverament help. However, thes tory of transportation, from the Roman roads to the lust re road land grants of the nineteenth century, to the higi trust funds of the twentieth, has always involxdagoe d of subsidy, and there is no reason for Americans to ret that pattern now, especially in a period when transport: improvements depend so heavily on new teci ne czes

And there are a fair number of signs that the 17.8. ; ernment is more deeply committed to spurring such teele ogies than it has been in the past. President Nixon's sp message to Congress last month reaffirmed strongly the pri osition, already developed in the State of the Union and pu get messages, that government aid for techiel y sus datory in several different areas. It is clear crow guest present budgetary environinent, that no masive new sper ing programs are in the cards; but it is als lear that pace of technological change is now identified as a as that Americans can no longer just take for granted.

b. Article by Donald W. Collier, "The Creative Link Between Market and Technology," Chemical Technology, February 1975

THE CREATIVE LINK BETWEEN MARKET AND TECHNOLOGY

A recent Industrial Research Institute study of communications between Research and other departments showed those that were in the worst shape were these between Research and Marketing. I think that these are the departments that need to be in closest touch.

As we R and D people ta'k to ourselves, it becomes increasingly clear that while discovery is beautiful and necessary, it's not sufficient. Innovation, the process by which an invention of an idea is translated into the economy, is what really benefits mankind and, incidentally, stockholders. While identification of the new opportunity is the necessary starting point, we can't stop there we must think of it in the context of the innovation process and consider what else is needed to develop it.

Here I hope to touch on "why we need more innovation, what we know about the process, why most large companies don't do it very well, and conclude with some of the things we can do conceptually and organizationally to improve the process."

WHY INNOVATION

Let me first list some of the forces making it imperative that we don't do things in the same old way:

Consumerism and protection of the environment are making it necessary that we be more careful and resourceful about how we design our products and processes than we have been in the past.

Increasing stringency of antitrust enforcement means that we will have to generate more of our own innovations rather than acquiring.

Profit. New products and processes are essential if we are to relieve the profit squeeze. If our domestic competitors don't get us, foreign competition almost surely will.

And finally, as we enter what Herman Kahn calls the "post industrial society," (1) with its emphasis on the quality of life as well as its material needs, we will see a change in the next thirty years that is greater than we have experienced in the last 500 (2).

WHAT IS INNOVATION

Let's review some of the things that we know about innovation. First, let's break it down into its three steps (3) :

Determine what new technology will be needed

Generate the agreed-upon new technology, the traditional role of R and D. (The word "agreed" in that step is the reason why good communications between research and marketing are so vital to the success of innovation.)

Apply the new technology to the company's operations. (This requires the cooperative effort of many company departments and is where most of the hangups occur.)

The effectiveness of the overall innovation system is the product of the effectiveness of each of the individual steps. Thus our ideamanship can be 100% effective in identifying good new opportunities, but if Research doesn't really understand what technology is needed and/or the cooperation of the engineering, manufacturing, and sales departments is less than ideal so that the effectiveness of each of the last two steps is only 50% each, the overall innovation system is only 25% effective.

Another observation we can make is that with major innovations, the steps become an iterative process in that the attempt to apply the new technology usually generates needs for additional technology and this cycling continues until the innovation is fully commercial.

WHO INNOVATES

When it comes to major innovations, large companies don't do so well. A recent U.S. Department of Commerce study (4) of Technological Innovation: Its Environment and Management, documented this conclusion: First, it showed that most major innovations are generated outside the industry being changed.

Nylon was developed by a chemical company, not a silk company. Instant pictures were developed by Polaroid, not by Eastman Kodak or Ansco. Transistors were first put on the market by Texas Instruments, not by RCA or GE who

dominated the vacuum tube market, and xerography as a basis for copying, was pioneed by Haloid, now Xerox, not by Addressograph-Multigraph or Eastman Kodak, who dominated the copying field.

Second, this study found that small companies are more effective innovators than large. Polaroid, Texas Instruments, and Xerox were all quite small when they started their innovation.

Other studies have shown that more than half of the 61 important innovations of the 20th century have come from independent inventors, or small firms. Another study showed that two thirds of the important innovations during the 194655 decade also came from simi'ar sources. Still another study showed that of the 149 innovations in aluminum welding, fabrication, and finishing, only one in seven came from the major aluminum companies. Similarly, of the major innovations in the American steel industry, four came from Europe, seven came from independent inventors, and none from the American steel industry.

Third, they found that entrepreneurs tend to cluster-i.e., entrepreneurship breeds entrepreneurship. These are many small innovative companies around Boston, Palo Alto, and Washington, D.C., and few around Philadelphia, Kansas City, Atlanta.

The conclusion of this study was that the major barrier to innovation was one of attitude and environment, not antitrust, taxation, or capital availability.

AND WHO DOESN'T

Now let's see if we can understand why established companies with their large technological and financial resources have so much trouble in commercializing major innovations when they attempt to put them through their normal functional departments. I believe this is because the typical operating unit is organized to reject innovation, not to foster it (5).

In the first place, financial resources are usually allocated by discounted cash flows analyses which nearly always favor a near term incremental increase in the company's present business compared to returns anticipated several years hence from a major innovation, even though they are larger when finally realized. Engineering is charged with coming up with designs that will work reliably and safely. Large product liability exposures makes the typical product engineer one of the most conservative men in the business. He is extremely loath to risk his reputation on a new product or process requiring designs that have not been time tested with field experience.

Manufacturing achieves its highest efficiency when things can be as routinized as possible and put on an assembly line basis. This is the exact antithesis of what happens when a new product is introduced. To Manufacturing, the new product is a wrench in the gears of efficient operation.

Unions instinctively resist, head-on, any process improvements that reduce labor requirements. In addition, Unions take advantage of new products being put into the plant to loosen work standards.

Salesmen, whose compensation is usually determined in large part by sales revenue translated into commissions or incentive pay, know that in a real sense, time is money. They dislike using it just to educate themselves and their customers about a new product which, during its introduction, is likely to be sold at a lower rate per unit of sales time invested than the established product he knows. Finally, the general manager. His compensation is usually in significant measure determined by his profit-sharing bonus. In most companies, this is based on the annual return on invested capital that his unit achieves. Thus, it takes a pretty statesmanlike manager to take on the commercialization of a research project, the immediate result of which is to reduce his return on investment. Moreover, the uncertain benefits of the research project, if any, may not be realized during his tenure because of the high mobility of general managers in today's corporations.

This organizational inertia, coupled with the human animal's innate resistance to change, makes the innovator's row a tough one, indeed, to hoe.

The chairman of Texas Instruments, Pat Haggerty, states it another way (6). He says that as a company grows, exploiting its initial innovation, it finds it must have managers with administrative skills to ensure that the organization is efficiently run as the profit margin narrows and the product matures.

For the most part, innovators are poor administrators. Therefore, management tends to become more and more administrative in character as it grows, relegating the innovators to relatively low-level positions or so frustrating them that they leave, Thus, the company as an organization "forgets" how to innovate, for

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