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Battelle:International

Partnership Strategy

Richard C. Adams

Senior Vice President, Battelle

February, 2007

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Agenda

• Battelle Overview

• Forces Driving International Partnerships

• Next Steps for Battelle

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Battelle: World’s Largest Non-Profit R&D Organization

Pacific Northwest National LaboratoryRichland, Washington

Corporate HeadquartersColumbus, Ohio

Brookhaven NationalLaboratoryLong Island, New York

Oak Ridge National LaboratoryOak Ridge, Tennessee

National Renewable EnergyLaboratoryGolden, Colorado

Idaho National LaboratoryIdaho Falls, ID

$3.7B in R&D; 20,000 employees worldwide

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Non-profit, charitable trust Distributions that provide “the greatest

good to humanity”

Purposes: “Creative and Research Work”

“Making of discoveries and inventions”

Better education of men and women for employment

Governed by a self-perpetuating Board of Directors

For over 75 years, we have been engaged in scientific discovery and refining approaches to

translating discovery into practical applications

Battelle’s purposes, defined in the Will of Gordon Battelle, focus on innovation

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This approach has helped Battelle expand its role in US laboratory management

Lockheed Martin

U of California (TBD)

U of California (TBD)

U of California

U of Chicago (TBD)

Battelle/MRIBattelle/

Stony Brook

Battelle

Battelle/UT

Battelle Energy Alliance

20051995

U of California U of California

U of Chicago

MRI

AUI

Battelle

Lockheed Martin

Now the leader in management of the energy and science national labs

$2.8B in managed R&D and 15,000 affiliated staff

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Integrated S&T and Business Strategies Generate Battelle Signatures

Homeland SecurityHomeland SecurityNational DefenseNational Defense

Energy/EnvironmentEnergy/Environment

Health and Life SciencesHealth and Life Sciences

Management & Operationsof R&D Laboratories

Management & Operationsof R&D Laboratories

Advanced MaterialsAdvanced Materials

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Battelle Ventures – an independent seed/early stage venture fund

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International Partnerships

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Forces Driving International Partnerships

• Changing geography of science and technology

• Changing nature of technology innovation

• New perspectives on what it takes to be a globally preeminent R&D organization

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R&D: Increasingly a Global Enterprise

• R&D is widely recognized as key to creating competitive advantage, economic growth, wealth and social benefits

• Growing international markets

– Global R&D expenditures will likely increase 3-4 times over the next 20-25 years

– US and European shares will decline

– Largest growth in Asia (increase from ~30% today to over 50% in 2030)

Projected Shares of Total World R&D, 2030

Rest of World7%

Other Asia20%

India10%

China18%

Former USSR3%

Japan4%

Other West7%

W. Europe13%

US17.7%

Projected Shares of Total World R&D, 2030

Rest of World7%

Other Asia20%

India10%

China18%

Former USSR3%

Japan4%

Other West7%

W. Europe13%

US17.7%

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Dissatisfaction with returns on R&D Investments

• Public sector R&D investments– Expensive and inefficient operations

– IP of limited value

– Limited translation to commercial value

– Limited investment in and development of human resources

• Private sector R&D investments– Focusing on “engines” or “platforms” to drive future business

– Increasing focus on outsourcing and in-licensing

– Looking for technology fusion opportunities

– Cost driving reductions in size and scope of R&D

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Changing Nature of Technology Innovation

• Higher value (and increasingly complex) products are responsible for most of the growth in global trade

• Innovation of higher value products increasingly a product of technology fusion

• Innovation processes are increasingly complex and based on:– Clear market targets

– Self organizing teams

– Trust among a diverse array of organizations (not just R&D)

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International R&D Partnerships:Key to Success

• Growing focus on international collaborations– Too expensive to go alone

– Technology and knowledge – a two way flow

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New Perspectives on what it takes to be a Globally Preeminent R&D Organization

• Partner first and partner often– e.g., joint Global Research Alliance

• Gain access to the best technology and ideas wherever they are located

• Develop an enhanced understanding of global challenges and local perspectives– e.g., global climate change, biofuels in Asia

• Gain access to high quality and well trained scientists and engineers wherever they are located (sometimes at a substantially lower cost)

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In Sum ……

• Ultimately, a global perspective is critical to achieving a substantial positive impact on the world – this is what drives Battelle

• And, not unimportantly, a global perspective is also key to establishing competitive advantage for Battelle and substantial return on investment

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Next Steps

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International Path Forward

• Strong focus on Asia

• Established Battelle-Korea and Battelle-Japan earlier this year– Battelle-Japan – a joint venture with Mitsubishi Corp.

– Battelle-Korea – wholly owned subsidiary

• Next areas of focus is likely India

• Seek to build R&D operations with strategic partners

• Seek to tackle the tough challenges with global consequences

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Battelle International initiatives

Japan(Tokyo,2005)

Italy(Rome, 2005)

Korea(Seoul,2005)

India(2007/08)

Under One Roof Program Office

Organization Types

Mexico(Mexico City,

2003)

Geneva(Current)

UK(current,

2006)