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ExxonMobil Research and Engineering ExxonMobil Research and Engineering Breakthrough Research ExxonMobil Research and Engineering GCEP Breakthrough Research Workshop Monterey California November 11, 2005 Andy Kaldor V3

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ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Breakthrough ResearchExxonMobil Research and Engineering

GCEP Breakthrough Research WorkshopMonterey CaliforniaNovember 11, 2005

Andy Kaldor

V3

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Breakthrough Research

• Strong Corporate Drive to Develop Breakthrough Technology

• Breakthrough Research in all Sectors

• Process must be driven by ambitious targets connected to business needs / opportunities

Upstream

Breakthrough Program

URC centered

CSR Programs

DownstreamBreakthrough Program

EMRE centeredChemicals

Breakthrough ProgramChemicals centered

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Breakthrough Technology Is Inherently Episodic• There Are Few Breakthroughs to Be Had

Petrochemical Industry Breakthroughs

• Rotary Drilling• Seismic• Deepwater Development• Fluid Catalytic Cracking• Catalytic Reforming• Paraffin Alkylation• Butyl Rubber• Zeigler-Natta Polymerization• Metallocene Catalysts• Sterically-hindered Gas Treating• Synthetic lubricant

• Breakthroughs Explore the Unexplored• Practical, Out-of-the-Box Thinking Is Not a

Routine Activity• Innovation Techniques Exist but Are Still

Much More an Art Than a Science

Many notable examples of targeted breakthroughs

• Transistor• Semiconductor technology• Fiberoptics• NMR imaging• Drug discoveries

• Many examples where basic research and discovery lead to breakthroughs

• The significant difference is the time is takes to recognize the discovery and connect it to practical applications

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

XOM Breakthrough Approach

– Large Economic Potential – Proprietary Advantage– Technical Novelty

• Initial Project Qualifying Criteria:

• Generate Breakthrough Technology That Can: – Generate Step-Out Value– Change the Game– Offset Competitive Threats– Create New Business Opportunity

19 Projects

~ 135 Concepts Evaluated

2 Commercial

BTR Impact Screen

>1300 Ideas

Process Industry experience:3000 300 125 9 2 1Ideas Projects Commercial

ExxonMobil Experience

– Aggressive Goals – Structured Innovation Process – Extensive Root Analysis; Science and Business– Rapid and Improved Yield from Basic Science– Novel Approaches

• Manage Inherently Higher Risk:

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

XOM Breakthrough Research Process

ProjectEvaluation /

Approval

Blue Team

• Testable Hypothesis• Critical Show Stoppers• Phased Execution Plan

Peer Review

PROPOSAL

VolunteeredIdeas

Open Innovation,

ExternalInnovation

IdeaGeneration

Business / Technology Innovation Sessions

HolyGrails

Set By Senior

Business Executives

Proposal Development

Venture Team

Champion

GreenHouse/

Inventory

Research Guidance

OpportunityIdentification

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

BreakthroughTeam

facilitates processsystemsBreakthrough Manager

Budget for BT Programs Stage A through 1

Cross Functional LeaderBusiness Contact

Breakthrough Players

Research Guidancevalue proposition

research strategy/priority

Venture TeamOpportunity Identification

Value PropositionResearch Proposal

Critical PathExecution, staffing

Senior Business & Technology

Management (Blue Team)sponsors and supports

R&D programs

Lead Definition

Pre-Development Development CommercializationIdea

Generation

Gate C Gate 1 Gate 2Gate A Gate B

BT Project TeamExecute Project

Update Value PropositionMeet Gate Goals

Transform as needed

Gate3

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Venture Team Approach to Generate Proposals • Organized Around a Grand Challenge• Leader is Identified, EMRE-Wide Participation on Team• Research Guidance Aimed at Improving Ideas/Define Value Propositions• Objective is to Develop a Proposal for Breakthrough Program• Process:

– Solicit & Assimilate Information and Ideas, Including Business– Organize and Hold Brainstorming Sessions Within/Outside EM

• Consultants, Universities, Venture Co’s, Vendors, etc.– Evaluate Information, Ideas, Develop, or not, Proposal(s)

• Identify Champion(s) for Proposal(s)• Conduct Peer Reviews of Proposals

• Present Proposal to “Blue Team”– BTR Proposal Approved by Blue Team - Champion Forms Team,

Initiates Work

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Work flow to develop proposalsOpportunity Identification

Organize Venture Team• Agree on Focus• Timeline

“Follow the money” or Key Issues• Define the size of the prize, frame problem• What do we know/don’t know• Agree on key elements of problem• Prioritize key elements/size of problem

For each element• What are the real roots of problem• Follow the trail, drill down• Prioritize in terms of value and impact

if solved; difficulty• How many miracles needed?• What problem needs solution ?

For each element• Explore solutions to specific problems,

issues identified• Test if solution works does it actually

solve problem• Recycle • Generate and prioritize potential solutions• Assess potential solutions

Develop Research Proposal(s)• Develop plan, timeline, deliverables,

killer variables, etc• Critical path plan, prioritized• Develop staffing plan, bugdet, equipment

Project Decision• Funding• Go work it!

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Probability of success for technology system based on multiple innovations

known 1 known 2 known 3 unknown 1 unknown 2 unknown 3 unk1x2x3known 1 1.00 0.90 0.50 0.10 0.20 0.30 0.03

known 2 0.90 0.81 0.45 0.09 0.18 0.27 0.027

known 3 0.50 0.45 0.25 0.05 0.10 0.15 0.015

unknown 3 0.30 0.27 0.15 0.03 0.06 0.09 0.009

unknown 2 0.20 0.18 0.25 0.02 0.04 0.06 0.006

unknown 1 0.10 0.09 0.05 0.01 0.02 0.03 0.003

(Known x Known) rule is a good way to recognize complexity of technology development which requires multiple new/novel concepts put

together in new ways. Requires deliberate strategy to manage risk !Early prototyping and model building, commercial test of components of

system, risk assessment are some of the ways to manage risk

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Framing the right problem is critical• “It's not that the right answer can't be found, it's that the right

question isn't being asked.”

• Successful technical creativity is more about finding the critical points-of-attack than ”wild” thinking.

• Working to solve the wrong problem is worse than not working any problem at all

• Complex, multifaceted problems require complex, multifaceted understanding.

• Every problem has simple, easy to understand wrong answers.

A core philosophy is to take the time to define the actual problem, i.e., the root issues associated with a perceived

inadequacy

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Drilling Deep Without Doing Root-canal

Approach• Focus on identifying root issues – "creativity" will largely take care of itself.

• Deconstruct complex problems in sub-units which can be readily understood and innovated on

• But, don't overly deconstruct into so many sub-units that one is "lost in the forest"

• Identify and high-grade a wide range of possibilities prior to focused innovation on any one of them

• Structured layout of issues, elements, and solutions

• Succinct documentation

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Idea Grading• Evaluated ideas based on:

– Order-of-magnitude economic benefit if successful– Feasibility

Observations

• No ideas identified that were both readily doable and would have a huge (i.e. Breakthrough) impact

• Many ideas generated had serious issues with basic physics, chemistry, or engineering

• Idea generation focused on novel and unconventional approaches rather than tweaks to existing methods

Economic Benefit(None) (Low) (High)

(Huge)

Feas

ibili

ty(E

asy)

(1 m

iracl

e)(2

mira

cles

)(3

+ m

iracl

es)

Idea Ranking - January 23, 2003

89

8887

86 85

84

83

82

81

80

79

78 77

76

75

74

73

72

71

70 6968

67

66

65

64

6362

61

60

59

58

57

56

55

54

53

52

51

50

49

48

47

4645

4442 41

40

3938

3736

35

34

33

32

3130

2928

26

25

242322

21

20

19

18

1716

15

14

1312

11

10

9

8

7

6

5

4

3

1

2

43

0

1

2

3

0 1 2 3

y

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Tornado Diagram to Highlight Value Propositions

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.016-Year A.T. NPV (M$)

Energy+Margin

Approach to Process

Durability

Technical Performance

Breadth Appl

Capex

Roll-Out+2 yr Re-process

Processing Cost

R&D $ to Comm

10% Feedstock5% Feedstock +25% Feedstock

4.1 $/MBtu2.5 $/MBtu

7.3 $/MBtu

65%50% 85% (2yr avg)

100% Cycle50% Cycle 200% (50% Process Cost)

5 yrs10 yrs 3 yrs

150% 50%

11 M$15 M$ 9 M$

8 $/ft12 $/ft 2 $/ft

43%

29% 71%

ExxonMobil Research and EngineeringExxonMobil Research and Engineering“Right-to-Left” Need-driven Science and

Technology Platforms are Enabling Breakthrough

• Mapped Platforms Against Game Changing Business Drivers• Platforms Have to Have Substance for Rapid Delivery of Breakthroughs• Acquire Platforms from Multiple Sources• Dig into Fundamentals of Business Drivers and Technology Needs

A

A

A

$

$

$

$

Business Needs & Opportunities

Technology Platforms Needed

A

1

54

23

Science Platforms Needed

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Example: Energy Reduction Program

New Reaction Pathways

0

20

40

60

80

100

Exergy Process

Limit

Current

BT Prgrm

State of

the Art

Actual

Energy

% C

urre

nt E

nerg

y C

onsu

mpt

ion

Current Best practice Theoretical

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Example A: Opportunity Identification Process Charter: In order to do low pressure deep distillate HDS catalysis we will

identify what specific chemistry steps we want the catalyst to do and what we don’t want it to do. The purpose is to identify the science input weshould seek to help design high throughput experiments

Why low P distillate HDS catalysts have low activity?• Map out chemistry that is known to occur on different catalytic materials

(volcano diagram – generic process steps)– Why-why?

• What are the promoters and inhibitors of the key reactions?– Why-why?

• What specific chemistry do we want to promote with catalytic sites? (Targets for improvement , metrics)

– Why-why? Why-how

• What are analogues to these catalytic sites? (Direct and Functional)

• What science and/or technology approaches could be used to achieve these analogues? Priority?

• What specific solutions should be included in effort? Priority?

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Compositional Modeling Combines Advances InComputing and Analytical Chemistry

• Detailed Molecular Characterization of Refinery Streams CombinedWith Reaction Kinetics

• Process Models Based on 5000+ Molecular Species and MolecularConversion Reactions

• Predicts Detailed Product Compositions, Yields, and Properties

Advanced Analytical Technology

Hydrocarbon Chemistry2H2

2H2

2H2

2H2

2H2

2H2

2H2

2H2

3H2

2H2

2H2

2H2

Modern Delivery Systems

APPLICATIONS:• Crude Selection• Refinery Yield Opt.• B/S Harmonization• Lube Performance• Toxicological Char.• Chemicals Mfr.• Research Guidance

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Generate Molecular Models for Research Guidance • Propose Chemistries and Separation Schemes to Achieve

Desired Products

• Enables research target setting even if means of achieving target are unknown

• Facilitates testing of observed data against proposed mechanisms

7

8

9

10

11

12

300 500 700 900 1100 1300 1500

BP (F)

Solu

bilit

y Pa

ram

eter

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Assessment Process

GATE I

Source/carrierpair analysis.

Identifysource/carrier

pairs withsignificantpotential.

Identify, assessenabling

technologiesand pathwaysof potential

interest

Selectsource/carrier

pairs

Selectspecific

pathways

Pick new source/carrier pair...uselearnings to adjust process

source

CoalSolar

NuclearGas Hydrates

BiomassGeothermal

carrier

Refined LiquidsGas

HydrogenElectricity

EXTERNALPROGRAMS

INTERNALPROGRAMS

CapabilityBuild

LeveragedTechnologyAcquisition

Monitor forBreakthrough

P O S

I T

I O

N I

N G

InternalTechnology

Development

Evaluateenabling

technologies fordevelopment andcommercialization

potential.

Developrecommendations

fordevelopment of

enablingtechnologies

GATE II

PHASE I PHASE II

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Lead Inventory of LG Teams

0

2

4

6

8

10

12

14

16

# of

Lea

ds

Low QualityMedium QualityHigh Quality

Lead Generation Programs Breakthrough Programs

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Fuzzy Front End Model

ENGINE

OpportunityIdentification

OpportunityAnalysis

Idea Generation and

Enrichment Idea

Selection

Concept Definiti

onTo Stage Gate

Engine“Controllable”

Core Front End “Activity”Elements

InfluencingFactors

“Uncontrollable”

ExxonMobil Research and EngineeringExxonMobil Research and EngineeringClosing Comments

• The key element of breakthrough research is a thorough understanding of targets or goals that constitute the breakthrough(s) and the ability to identify the science which has the potential to enable it

• Having a systemic process to evaluate ideas and concepts critical to sharpen and better define targets

• Most breakthroughs come about from a new and different way of posing the questions that guide the research, framing the problem a new, creative way

• Basic research in the absence of a “breakthrough process” has lower probability to find discoveries that lead to major impact, or it may take longer to find appropriate application

• Breakthrough research requires a different approach and management than basic academic or applied industrial research

• Overly focusing the research reduces the probability of success

• Constraining the approaches to achieving the target is counterproductive

• Revisiting the targets on the basis of new knowledge and understanding is critical

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Back-up

ExxonMobil Research and EngineeringExxonMobil Research and Engineering

Recurring Themes on Breakthrough Hurdles• Extensive Experimentation and Modeling Required

– A technical idea is seldom recognizable as “the solution” until extensive scoping work is performed– Any idea with a low acceptance-barrier would almost certainly already been implemented– Thinking exercises inherently limited to identifying promising pathways rather than solutions

– “Genius is 1% inspiration and 99% perspiration” – Thomas Edison

• Risk Aversion– Individual: Why work on high-visibility projects with low chance of success, when important lower

risk projects are options? – Corporate: Why fund high-risk projects with poor tracking metrics, when there are more than

enough incremental efforts to do?

• Disruption– Competes with incremental research programs– Takes resources (e.g. funds and staffing) from established programs– Typically requires some support from naysayers (vocal and private)

• Episodic– Discoveries unevenly distributed in time

• The higher the bar for "Breakthrough", the more unevenly distributed in time the discoveries– "Nonlinear" project progress

• Not Fitting The Mold– Much higher uncertainty than traditional projects

• Timetables and costs cannot be estimated at the outset as accurately as incremental projects• Approval required without endless justification exercises

– Projects often cross business divisions• Cross-disciplinary research by its nature is much well-tread than research focused on single

disciplines– May require new business models to profit from the Breakthrough technology– “Success” of the project and team cannot be measured solely by the project’s ultimate profitability

ExxonMobil Research and EngineeringExxonMobil Research and EngineeringRecurring Themes in Successful Innovation• Clear Articulation by Top Management of Innovation Priorities and Expectations

– Critical audience is all who encourage (or can discourage) research directions– If priorities and expectations are not strongly championed, innovation efforts

readily degrade into repackaging incremental efforts or are dropped in favor of short-term goals

• Fail Fast, Fail Often– Fast

• Streamlined approval process– Don’t require highly detailed economics

• Initial effort is a rapid proof-of-concept• Have gate-system for project continuation

– Often• Best way to get a few great ideas, is to sift through many ideas• Allow “failure” so researchers suggest the novel and difficult rather than the

obvious and straightforward• Project Champions

– Strongly motivated and empowered team leader– Leader with a very strong belief and stake in the project– Commercialization champion likely different than the research champion

• The Right Team– Get the experts

• Cross functional and organizational boundaries as needed– Have only excited team players