Tuesday, 19 November 2002 8:30 am
In my column on Monday, I argued that we are in the midst of a trend reversal, from a world led by the private sector to a world led by the public sector. Will government requirements, rather than consumer and business requirements, once again drive high tech?  Will government funded R&D once again eclipse commercially funded R&D in electronics, computers, communications, and software?

During the Second World War, R&D in the US was driven almost 100% by the needs of the war effort, i.e. by government contracts.  After the war, consumer and business products benefited from the wartime inventions, and most new  R&D was still driven by government contracts.  Even as late as the 1960’s, as much as 40% of the corporate information technology R&D in the US was paid for by government contracts, although a shift of leadership towards business uses was starting to become apparent.  IBM, for example, introduced in the 1960's the System 360 - the first major computer line designed specifically to business specifications rather than government specifications.  

In the 1970’s the first computers designed for consumers were introduced, and government funded R&D dropped to 20-30% or corporate R&D. By the early 1990’s, with the Cold War over, many computer, software and telecommunications equipment companies had dropped out of government contracting altogether.  Their abandoned government contracting divisions were consolidated with the remaining defense contracting specialists into a handful of surviving defense contractors.  Even the government-owned National Labs were encouraged to perform commercial R&D. By the 1990’s, the computer industry had completely transformed itself from a government-driven market using government-financed R&D into a consumer and business-driven market with mostly privately financed R&D.  The best and brightest of the land who had once spent their waking hours in war games and weapons development now were busily designing new ways of shopping for consumers.

September 11, combined with significant softening of demand in the commercial and consumer markets, has reversed this trend.  Government requirements in homeland security and weapons systems will once again drive corporate R&D programs, while consumer and business requirements become secondary.  Government-owned research labs will once again will be focused on government's needs. Consumer and business technology will once again be the result of spin-off technologies from government R&D programs. 

This reversal could manifest itself as a gradual increase in government contracting and decrease in consumer and business markets, or it could manifest itself suddenly if there is a bloody war  or never-ending series of terrorist attacks.  

As a tech executive you should be seriously looking at reinvigorating your government contracting arm and giving that arm a priority position at the your corporate decision table.   You should also should be devising plans on how to leverage dual-use (i.e. defense and commercial use) technology developed on the government's nickel, both originating from your own labs and from  government labs, into your consumer and business products.  

The winners in this new game of developing and leveraging government-funded dual-use technologies will be those who take advantage of this shift to rethink their development, funding, venturing, partnering and staffing approaches.  Spinouts, joint ventures, spin-ins, and innovation-on-demand approaches need to become part of your corporate vocabulary.