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Sunday, January 25, 2009

Battelle's world: Columbus-based research giant extends its global reach

Former LLNL Deputy Director Jeff Wadsworth appears to be flying high. Looks like getting passed over for the LLNL Director job has worked out quite well for him - I bet both career and financially compensation wise.

Battelle's world: Columbus-based research giant extends its global reach
Sunday, January 25, 2009 3:54 AM
By Kevin Mayhood

We drive by its headquarters near Ohio State University, attend events in the hall named for it in the Columbus Convention Center and go to the park that bears its name, but few of us know what Battelle really does.

The research institute's stock in trade has always been smarts. The company that opened in Columbus in 1929 as Battelle Memorial Institute brought the world Xerox copiers, compact discs and the coating for M&M's.

But it's what we don't hear about -- the hundreds of contracts for national security, energy and health research -- that drives its revenue to new heights.

Battelle grew its annual revenue from $921 million in 1998 to $4.6 billion last year by winning contracts to manage seven national laboratories, boosting its national-security work and focusing a lot of research power on energy and health science.

Add those together, and "That's the world," said new CEO Jeffrey Wadsworth.

One sign of how well Battelle is doing is the announcement it made this month that it will invest $200 million to update, expand and build labs and add 200 jobs in central Ohio.

That investment in its labs is aimed at giving Battelle a leg up on competitors when the economy rebounds.

To be a major player in these fields, Battelle has tapped some of the top scientists in some of the largest and most advanced laboratories in the country.

Battelle manages six Department of Energy National Labs and one Department of Homeland Security lab.

The labs are so sophisticated that only a powerful government can afford them. For example, Battelle is overseeing cutting-edge research in nuclear and renewable energies, subatomic physics and medical isotopes.

"Big science today is on the billion-dollar scale, and it takes collaboration. It's hard enough for governments; a huge corporation can't do it alone," said Bill Madia, a former Battelle executive who now consults for the business.

"To have the international impact Battelle wants to have, we have to play at that scale."

The national-lab employees are considered Battelle employees, bringing the total worldwide to more than 21,000. On any given day, Battelle employees are working on 5,000 projects for 1,000 customers. This year, Battelle is working under nearly 2,200 contracts funded by government and 669 funded by for-profit companies, from Eli Lilly to NASCAR.

During the past 10 years, Battelle has more than doubled its own facilities to 161 labs and offices worldwide. It has a growing presence in China; subsidiaries in Korea, Japan and India; and a deal to help run Malaysia's national renewable-energy lab, which focuses on tropical bio-energy sources.

"They're very straightforward; they don't really look at opinions," said Tim Studt, former editor of R&D Magazine and current editor in chief of its sister publication, Laboratory Equipment magazine.

"They work at issues logically and give the facts."

A few other companies are like Battelle, an independent research and development organization, Studt said.

"But they're nowhere near the size."

The effort to expand into national-lab management began in 1992 under then-CEO Douglas Olesen. Battelle had managed the Pacific Northwest National Lab since 1964 and added three more during Olesen's tenure.

When Olesen retired in 2001, Battelle's board of directors tapped Carl Kohrt, the first outsider to run the company.

On his first day, Kohrt, who came from Kodak, gave the board of trustees and the entire company a set of principles and "a strategy to grow the organization so we can have impact."

Madia summed up the change: "Carl Kohrt's vision for Battelle is to be a dominant world player in relevant areas of science and technology."

At the same time, Battelle is growing a network of scientists whose expertise and experience build and make the nonprofit company even more valuable.

In other words, while the government and commercial customers get the product or answer they seek, "Battelle gets a tremendous amount of know-how," said Barbara Kunz, president of Health and Life Sciences, a Battelle division.

Under Kohrt, who retired last year, Battelle focused its efforts on national security, energy and health to gain depth that others lack, said John B. McCoy, chairman of the Battelle board of directors.

As it has grown, Battelle has worked to stay true to the institute's founding principles, a lesson learned the hard way.

Battelle Memorial Institute was created by Gordon Battelle's will in 1923.

Battelle, the son of an industrialist, said the nonprofit institute would be run by a local, independent board of directors; focus on research and development in metallurgy and education; and take discoveries to market.

His will also said that a portion of revenue must go to charitable enterprises.

Battelle opened for business in 1929 and, for 40 years, built labs, hired scientists and made discoveries.

But in 1969, then-Franklin County Probate Judge Richard Metcalf questioned whether Battelle was neglecting its philanthropic promises. Eventually, state Attorney General Paul W. Brown sued.

In a 1975 settlement, Battelle paid $80 million to more than 125 groups and organizations. Over time, money was used to build Battelle Memorial Hall at the Columbus Convention Center, refurbish the Ohio Theatre and create Battelle-Darby Creek Metro Park.

A 158-page agreement with the attorney general's office detailing what Battelle could and couldn't do was filed with the court.

Then the IRS stepped in and questioned whether Battelle should keep its tax-exempt status.

Concerned that the IRS interpretations would stymie growth, Battelle gave up its tax-exempt status, said Russell P. Austin, general counsel and secretary of Battelle.

The nonprofit then paid tens of millions of dollars in back taxes.

Battelle continued to work under the state agreement, but after it began to grow, its leaders felt somewhat constrained.

The institute went to court in 1997 to update the agreement with Attorney General Betty Montgomery. The settlement was replaced with an agreement that opened the door for Battelle to pursue any science endeavor and use almost any avenue to further the directives of the will.

The agreement says that Battelle must keep 62 percent of its charitable spending in central Ohio, as well as its top executives, and it limits the jobs that can be transferred out of Columbus.

It also states that the organization must give at least $1 million to charity every year. The previous agreement stated a minimum of $100,000.

Battelle's board of trustees eventually increased the minimum charitable contribution to $3 million annually and has lately given more, including nearly $11 million last year, primarily to boost science education.

Battelle regained its tax-exempt status in 2001.

"There's not a day that goes by that we don't think about how to protect the tax-exempt status," Austin said.

Battelle patents inventions, licenses technologies, manufactures products and creates spinoff companies that make and build on innovations discovered in its national labs.

For example, Battelle sold Velocys, a for-profit manufacturing spinoff in Plain City, in November for $35 million. Velocys makes microchannel processing systems that can reduce pollution by power plants.

The products, based on technology from the Pacific Northwest National Lab, which Battelle manages, are far smaller than conventional smokestack structures.

Battelle has committed about $400 million in recent years to a variety of capital ventures, said Alex Fischer, senior vice president for business and economic development.

An independent venture-capital fund called Battelle Ventures has put money into 20 spinoffs and startups that improve on technology that came from research at national laboratories.

The technologies include a migraine-treatment patch, protein therapeutics to rebuild heart muscle, high-tech scanners that could replace metal detectors and X-ray machines at airports, and electronic tags that can alert the owner of a package that someone has tampered with it.

The goal is to sell the ventures at a large profit.

"We're just opening our eyes to what we can do with public policy," said Fischer, former deputy governor of Tennessee and former commissioner of the Tennessee Department of Economic and Community Development.

Fischer oversees the Battelle Technology Partnership Practice, an economic-development research group based in Cleveland. The 25 Battelle employees there push technology-based economic development in cities and states across the country.

Despite its worldwide growth, Battelle sees itself as a local company, and local officials see it as a corporate magnet.

"I think Battelle is one of the most important assets to Columbus," said Mayor Michael B. Coleman.

Battelle has opened manufacturing plants in Dublin and Hilliard, added to its work force in Columbus and West Jefferson, and brought companies such as Velocys to central Ohio.

Companies such as NetJets moved to Columbus and have stayed partly because of Battelle, Coleman said.

He and Ty Marsh, president of the Greater Columbus Chamber of Commerce, said they use Battelle as a selling point when lobbying companies to move here.

And they laud Battelle's commitment to investing in local initiatives, including the Metro High School and the COSI Columbus science museum.

Wadsworth, who joined Battelle in 2002, used to work at Stanford University, Lockheed and the Lawrence Livermore National Laboratory.

He was director of Oak Ridge National Lab from 2003 to 2007 and then oversaw Battelle's global lab operations before becoming president.

Wadsworth, who was born in England, admires the Manchester United soccer club, a powerhouse that unabashedly pursues the world's best players.

"We want to be a dynasty," he said. "That ensures the success of Battelle Memorial Institute."

1 comment:

Anonymous said...

Both LLNL and LANL would have been much better off by now if they had been handed off to a non-profit like Battelle Institute. The employees would also have been much happier.

Why, oh why, did NNSA choose the likes of for-profits Bechtel and BWXT to run these labs? Oh, now I remember why. The choice was decided by a single man at NNSA.. Tom D'Agostino. I expect he'll be well rewarded by his friends in the corporate world when he is replaced by Obama sometime in the next few months.


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