ADL's Golden Egg

And then there is the other technology — real, hardcore technology. The focus here is on hard science: chemistry, physics, biology. The consulting firms that focus on this technology build tangible things out of actual atoms and molecules. This is a far cry from information technology. These technology consulting companies also try to leverage their R&D prowess into higher-level management engagements.
As a technology consulting firm, ADL focuses on hardcore technology R&D. The consulting firm has proven it can consistently deliver breakthrough advanced technology and turn seemingly obscure R&D into commercial products in areas as diverse as healthcare, energy, defense, communications, packaging, and more. Yet, although ADL considers itself one of the world's premier consulting firms, the question arises as to whether it can survive as a management consulting firm or whether, in the end, it is better off as a technology R&D shop.

ADL managers like to emphasize its management consulting, but its successes and noteworthy achievements tend to come through its technology R&D. "Successful returns start with technology-based consulting, which is how we understand the market and the opportunities," explains John Collins, senior vice president, who directs the ADL technology and innovation group.
Nobody quibbles with ADL's technology prowess. It is its management consulting capabilities that seem to be lacking. "If you want to talk technology, ADL is the one; when it comes to management consulting, it has nothing to differentiate itself," explains one consultant and pundit, who prefers anonymity but is well acquainted with the management of most top consulting firms — including ADL's.

Consulting's Granddaddy

The company, founded in 1886, maintains offices and laboratories in more than 30 countries around the world. Its strategy is to use technology innovation to achieve breakthrough results that fuel rapid growth for itself and its clients. While it continues to ring up technology successes — the ADL technology and innovation group increased revenues over 30 percent last year and expects to continue at that pace this year, according to Collins — the management consulting business has proven a drag. "Management consulting is ADL's problem. All its current difficulties stem from its management consulting," says the consultant, who marvels at the sizable lapse in ADL's client services offerings.

The firm's current difficulties seem to beg the question: What does the future hold for ADL? Last spring, the firm announced plans to cut 200 jobs — small by the standards of the consulting firms that are cutting back in the face of the dot-com crash, but there is no dot-com problem here. The cutbacks come as ADL reportedly struggles with millions in debt and is experiencing difficulty paying bills. The chief executive has been relieved of all duties. "This has been building for 2 to 3 years. The stock is employee-owned and has fallen greatly in value, which is ticking off employees. Everybody is pointing their finger at each other," says one ADL consultant. In published reports, top ADL executives finger the company's management consulting group as the prime culprit.

It wasn't supposed to be this way. For example, pure technology R&D accounted for 20 percent of the business at the firm's technology and innovation group. Product and process development accounted for another 40 percent, while technology-based consulting makes up the rest, reports Collins.

ADL's Golden Egg

The technology business has proven to be golden. "We work with clients to come up with a solution," Collins explains. The effort usually starts as a fee-for-service technology consulting engagement, where the client underwrites the R&D. Once the solution appears viable, ADL will either partner with the client or even take on the risk to continue development of a marketable solution. This model has worked repeatedly, as when ADL helped a client to develop pump technology for use in auto air conditioning and subsequently re-engineered the core technology to serve an entirely new market, surgical pumps.

The technology business, in fact, has proven so good that Collins almost thinks of it as recession-proof. "Technology can give you an uptick when the economy tightens. It is a way to break out and grow the business," he says. And the technology-driven formula has worked consistently for ADL's technology and innovation group; in 12 years with the group, Collins can't recall a loser. The company has built a deep portfolio of intellectual property assets — assets that can produce real money.

Its latest hit appears to be Nuvera Fuel Cells, a joint venture formed in 2000 after the merger of ADL's Epyx fuel-cell business and DeNora Fuel Cells of Milan, Italy. Nuvera uses technology created by ADL, with support from the U.S. Department of Energy, to convert gasoline and other fossil fuels into hydrogen for use in fuel-cell applications. The result is an efficient, inexpensive, environmentally clean power source suitable for use in small-scale remote electric generators, as stationary power sources for residential and commercial sites, and to power cars and buses.
With the price of oil at near-peak levels, the economic outlook for fuel cells should be bright, especially after ADL figured out how to make fuel-cell technology commercially viable. Now ADL is awaiting the initial public offering (IPO) of Nuvera, when it expects to reap a big payoff, depending on the state of the IPO market, of course.

But R&D success isn't supposed to stop with the technology group or even with an IPO. Rather, ADL is supposed to link its management consulting to its various technology consulting services. "The management consulting allows us to put the technology in a strategic context," says Collins. The ADL technology and innovation group did its part — it delivered the goodies — but somewhere along the line, the management consulting group dropped the ball. It seems unable to capitalize on the technology engagements. "The technology work just never transferred to the management consulting group," says the observer.

ADL has another technology consulting operation in Cambridge, England. The Cambridge group, called Cambridge Consultants Ltd., follows a model similar to that of the technology and innovation group. It usually starts with a client-initiated fee for a service engagement that leads to a technology breakthrough and produces intellectual property assets the company can repeatedly leverage.
For example, the Cambridge group today is still leveraging work it did with inkjet printing going back 20 years to create technology that can print sell-by dates on food packages of all shapes and surfaces. "We spotted a change in legislation [to require sell-by dating on packages] and we built a business around it," says Howard Biddle, managing director. The resulting business, Domino Printing Sciences PLC, is the leader in its industry.

A Wireless Future

Today, the Cambridge group has identified wireless technology and the Bluetooth standard as a hot growth area. "We spotted the Bluetooth opportunity as the standard was just emerging. We had been working on a mixed-mode ASIC [application-specific integrated circuit] for healthcare and a wide area pager," Biddle explains.
The company realized that its work could be applied to Bluetooth. The result turned into two companies, Cambridge Silicon Radio (CSR), which provides a single-chip Bluetooth radio, and Mezoe, which offers Bluetooth protocol software. The Cambridge group spun off CSR as a separate company. CSR now has 120 employees, a valuation of several hundred million dollars, and has already shipped over one quarter of a million chips, Biddle adds.
As a technology R&D company, ADL has no peer. Its primary competition is the internal R&D teams of its clients. "It's really the client's internal business decision" whether it opts for ADL or tackles the job in-house, notes Collins. After that, ADL finds itself competing with small start-up companies similar to the kinds of companies it spins off, companies that are introducing an advanced technology.

To that end, ADL has even started its own incubator, SciRox, to nurture start-up companies involved in hard science that leverage ADL's capabilities. Although ADL occasionally works with information technology, it rarely crosses paths with conventional information technology–oriented consulting firms.

ADL today is at a crossroads. It has a robust technology consulting business and a proven record of converting technology R&D into marketable products, but a crippled management consulting practice. In theory, its technology consulting should lead to lucrative management consulting engagements, but that hasn't materialized. What happens next — breakup, takeover, something else — is anybody's guess.