Measuring the future
Bill Sullivan, president and CEO of Agilent, sat down with Electronic News/Electronic Business to talk about the company’s new focus, the recent divestitures, and the convergence of multiple disciplines in science. What follows are excerpts of that interview.
Q: What was behind Agilent’s decision to spin off your semiconductor and semiconductor test businesses, and how has the company done since then?
Sullivan: We made the decision in August 2005 to focus the company 100 percent on the $40 billion measurement market. In addition to that, we believe there are billions of dollars of additional opportunities associated with the measurement industry.
Q: So that became your single core competency?
Sullivan: Yes. That was what Hewlett-Packard was founded on, and we have since gone back to what we did the best. We made the decision to divest the semiconductor-related businesses because it’s a different business model. It’s a more volatile market, and the company was being valued on how we did in the semiconductor business, not our core measurement business. That’s what drove the decision. If you look at the last 10 years up until now, the growth rate of the core measurement business was higher than the growth rate of the semiconductor business, and the volatility was one-third of what the company had been over the past 10 years. We created Avago, which is a very competitive semiconductor company, and Verigy is a very competitive semiconductor test business. In the process, we’ve returned $5 billion in cash to our stockholders.
Q: From a research standpoint, have those divestitures had any effect?
Sullivan: It’s hard to argue with being a focused organization. Our core competency is measurement science. It always has been. Our semiconductor component effort was driven out of the needs of Hewlett-Packard. Now, moving forward, we are focusing 100 percent of our efforts on measurement science. We have reorganized our central research lab, focusing on electronic measurement, life sciences measurement, and new measurement technologies such as in the nanotechnology area and homeland security.
Q: Many of the new technology developments are being measured in Angstroms. Does that raise the cost of research?
Sullivan: We’re spending about 12 percent of our overall expenses on research and development. This is competitive in the industry. We also have a worldwide footprint for our research, so we are developing research in Southeast Asia, China and India to supplement our activity in Japan, the United States and Europe. Clearly, this is an industry that requires high R&D at the leading edge to remain a supplier of choice.
Q: But there are lots of unknowns at the leading edge of technology. How do you choose the right direction for your R&D investment?
Sullivan: One of the key roles of our central lab is to look at macro trends in various markets and to anticipate and be there with these trends moving forward. It’s well documented that with Moore’s Law physics and biology are coming together. What we need to figure out are the best measurement techniques to allow scientists to innovate and commercialize. We have a whole team of people inside of Agilent Labs working with businesses, industry and academia to try to identify those needs—we’re very attuned to the top universities and government research in the world—and then we make our best bets for Agilent.
Q: Are there any roadblocks to what you can measure and what you can’t?
Sullivan: Will there be laws and technical hurdles to face? Yes. Are we even close to insurmountable barriers? I think the answer is no. When you go into life science, we’re only beginning to understand cell biology. Some people talk about molecular computing. From my perspective, we just have infinite choices. Agilent Labs just introduced the first measurement of micro-RNA, which was only invented five years ago. These structures are in the 10- to 15-nanometer range. I think you’re going to see discovery in the chemical, physical and life science worlds.
Q: How much of your business is coming from life sciences?
Sullivan: The company last year was essentially 70 percent electronic measurement (40 percent of that business was semiconductors before the divestitures) and 30 percent life sciences and chemical analysis.. However, our life sciences/chemical analysis business is the fastest growing part of our business. This year, you’re going to see life sciences becoming a larger percentage of our company. We just completed the acquisition of Strategene, which is a re-agent company that uses chemicals to react with a specimen to try to get better measurement results. Our number one investment and growth opportunity is in the life sciences area. This is a great example of where we can take some of the best analog and digital converters from our electronics expertise and apply it to this market to improve the resolution of the mass spec measurements of, for example, the detection of proteins. How do we take these measurement technologies and move them into these new opportunities? When you think about measurement, we always tend to look at the physical world—measuring a photon, electron or molecule. Our job is to turn it into the digital domain and digitalize it so that engineers, scientists and researchers have a different insight. That’s really where it’s going. About 70 percent of our engineers are software engineers. How do you digitalize it in such a way that they can seen nuances that help them in their discovery?
Q: Isn’t that modeling?
Sullivan: Modeling tends to be a very defined role, such as measuring a radar system or modeling a simulation of a wireless city. This goes further. How do you map out data so that people can see something they wouldn’t have seen consistently with their past models? The future is creating new models, but to do that you have to have the ideas and the concepts from the old models and visualize data so you can create new associations looking forward. That’s what so exciting about life sciences. It’s in its infancy, and it’s an associative science. People are making associations because they don’t have absolute models about how it works.
Q: Do you see Agilent moving into a different role in the future? You are bridging electronics, spectroscopy and massive data searches.
Sullivan: That is the bet of Agilent. Having the breadth of technology, can we bring this technology synergy with our financial strength to differentiate ourselves in this $40 billion measurement market? The market is highly fragmented with lots of different applications. Through an acquisition and through our technical support we’ve entered into the top atomic force microscope market. How do we bring sophisticated, complicated tools to the desk of the scientist at a competitive price to accelerate learning?
Q: We’ve largely been focused in the electronics industry on the atomic level. Is the subatomic level in your sights yet?
Sullivan: We’ve had a big debate about that internally. Nobody has seen it yet, and I don’t know when that will happen. But people are really smart. They will figure it out. The biggest potential is the continued understanding of cell biology and the very sophisticated mechanism of what goes on inside of a cell that results in disease. There’s a tremendous opportunity for us to measure that, visualize it and model it so people can continue making advancements. It’s basically how do you prevent chronic disease earlier in life.
Q: Much of this involves multiple disciplines. How do you bring together and train cross-functional teams?
Sullivan: It goes back to the leadership of the team, to be able to create a common focus and integrate the input moving forward. There’s been a lot of work on how a biologist thinks versus a physicist. We’ve spent a lot of time understanding where people come from and how they look at problems. There is a different way of looking at a problem. That lays on top of the core values of Agilent. If you look it from the legacy of HP—uncompromising integrity, teamwork, respect for the individual technical contribution—that’s the foundation. We put an enormous value on people working together for common purposes. If you put in a good leader built on a culture of understanding about how people think, it’s amazing what we can do. We’ve also cross-pollinated with some of the physicists moving across organizations to bring that discipline. But it’s the ecosystem you create. As I visit universities around the world, they’re the process of creating their own ecosystems to get these disciplines to work together and get the best out of them and advance the problem solving on very difficult problems.
Q: What sorts of issues are you seeing between different disciplines approaching a problem?
Sullivan: In the very simplest terms, the world of physics—in the physical world, not the atomic world—is very predictive. There are very clear equations of predictability. They tend to look for equation-based solutions. Biology is so complicated they tend to look at associations. If you look at a DNA array, does it turn green, does it express? You do mappings of DNA. The physicist says, ‘Where’s the equation?’ The biologist says, ‘We don’t have one.’ If you’ve ever seen the mapping of a protein that has mutated and is going to cause cancer and all the pathways, it’s very, very complicated. You tend to see more imaging and association and data to extract information and decisions moving forward.
Q: When you’re doing these measurements, are you looking for aberrations in a pattern?
Sullivan: Sometimes an aberration does not result in disease. You can go through 100 people and say chromosome 14 is bad and may cause cancer, but in fact only half the people get cancer. Why is that?
Q: Let’s go back a second and talk about the cross-discipline teams. What are the characteristics of the leaders of these teams?
Sullivan: The leadership model in Agilent is very simple. We expect the leaders of these teams to have absolute clarity of what we call strategic intent of where we’re going and how do we get there. The second element is how these individuals build the organizational capability to get there. At the end of the day, every company can have the same aspirations and goals. It’s the organizational capability that gets results. These leaders need an enormous amount of domain content to get credibility. They then have to attract the brightest and the best, and lead them to results. I personally believe the core of leadership is the ability to take personal risk. You have to integrate all these inputs and you have to make a decision. They also need to have passion—passion to win, passion to want to make a contribution—and they have to couple that with strong technical skills. It’s amazing what people can do when they’re bright and aligned there is the right capability on the team.
Q: Where are you finding these people?
Sullivan: We will be hiring close to 2,000 people this year. We have a concentrated effort in the universities to try to attract the brightest and the best. We also look out into the industry to bring in talent. We have brought in quite a few new business managers. Right now, our ability to attract people is very high.
Q: What other countries are starting to play a role in research?
Sullivan: The emergence of China and India are, in my opinion, the biggest economic disruption in the world. As a result, we have been aggressively building strong teams in these countries. That’s part of our heritage. Hewlett-Packard moved into Germany in the ’50s, Japan in the ’60s and Southeast Asia in the ’70s. David Packard had the first joint high-tech venture in China in the ’80s. So we have a long history of building strong teams in other countries.