The Death of the Corporate Research Lab Means the Rebirth of Innovation
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The Death of the Corporate Research Lab Means the Rebirth of Innovation

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Editor’s Note: This is part one of a two part series exploring the death, rebirth, and total transformation of business innovation. You can read part two here.

Today, more than ever, we need innovation. A global recession has highlighted the demand for jobs, new markets, and fresh technologies. As cash flow slows to a trickle in many industries, research is often the first budget to be slashed. But that has not always been businesses’ first response. Decades ago, an aggressive research agenda ignited scientific discovery and created new industries, pulling America out of its wartime slump and into an era of technological development and economic expansion.

The Rise of the Corporate Research Lab

A streak of innovation ran through the mid-twentieth century, pioneered, in many ways, by corporation-affiliated research labs. Arguably the most remarkable and prolific among them was Bell Labs, formalized in 1925 as an outgrowth of AT&T and Western Electric, with the mandate of developing telephone-related technology. But the research group quickly deviated from its parent companies and its original focus, becoming a hotbed of new ideas at the intersection of many fields. Bell Labs attracted and nurtured some of the brightest minds of the time—including engineers, materials scientists, designers, and mathematicians—who formed interdisciplinary teams and unconventional partnerships. Eight Nobel Prizes have been awarded to its researchers, and Bell Labs is credited with developing fiber optics, photovoltaics, the laser, Unix operating system, communications satellites, and, perhaps most importantly, the transistor.

Invented in 1947, the transistor quickly replaced fragile, inefficient vacuum tubes and would go on to become an essential component of almost all modern electronics—and one of the most important inventions of the century. Without the transistor, you wouldn’t be reading this article.

But AT&T didn’t directly and immediately benefit from its research lab’s groundbreaking discovery. The technology sparked a tide of entrepreneurial initiative and novel thinking outside of telephony, such as small personal electronics. At a time when there was only a market for large tabletop radios, Pat Haggerty used transistors to make a small (pocket-size), inexpensive ($49.99), and attractively designed radio named the Regency TR-1, which debuted in 1954. The device was extraordinarily popular, selling over 100,000 within a year and foreshadowing the booming consumer electronics industry that now brings us an annual iPhone.

Newspaper ad for the Regency TR-1In a similar way, several corporate-affiliated labs created the research backbone for a burgeoning technology industry and, in doing so, kick-started America’s economic growth. For example, Xerox PARC, the research arm of the giant copier company, arguably invented the personal computer with the Alto. However, the parent company was oriented toward the photocopier market and unwilling to start a new product line for computers. A corporate manager explained to PARC researchers that “the computer will never be as important to society as the copier.” Xerox PARC went on to pioneer many technologies, including graphical user interfaces, which a young and eager Steve Jobs was excited to see during his 1979 tour of the facility. It was this very technology that would skyrocket his small company Apple to the front of the computing race.

Research Without Development

Almost universally, research groups have failed to turn groundbreaking developments into real products and bring them to consumers. “As great as these institutions were as platforms for invention, they suffered from an inability to get ideals into the marketplace,” noted Justin Rattner, CTO and VP of Intel Labs. Research labs were trapped in a catch-22; distance from parent corporations, both conceptually and physically, may have been a key factor of their success—as well as their irrelevance. Researchers, left to their own devices, had the intellectual freedom to innovate, but the work they produced was unpredictable and potentially far from the initial intent or from a marketable product.

Corporate research labs thrived in an era when parent companies enjoyed a lion’s share of the market and were flush with cash, ready to divert a steady stream of funding to basic science and tangential research. In today’s world, innovation without realization just isn’t viable. But the dot-com bubble did prove that plenty of money can go into realization without innovation, so long as the pace is quick. Start-ups, competition, lightning-fast advances, and venture capital have changed the landscape of technological development.

A New Era of Innovation

This may mean the death of the corporate research lab. “With the increasing focus on shareholder value that began in the 1990s as global competition heated up, Fortune 500 companies could no longer justify open-ended research that might not directly impact their bottom line. Today, corporate research is almost exclusively engineering R&D, tending more toward applied research with a three-to-five year time horizon (or shorter),” according to BusinessWeek. Short-term, targeted research is measurable, marketable, and has a much higher rate of incremental success, but it is also less innovative. Pre-scripting outcomes negates the potential for a truly groundbreaking discovery.

Innovation may no longer be in corporate-affiliated research parks, but it is cropping up in unexpected places—places where flexibility and open-ended work encourage the kind of lateral thinking that once happened at Bell Labs and Xerox PARC. This goes hand in hand with rapid shifts and expansions in the information landscape. Tools, knowledge, and resources for innovation are now readily accessible, and communication with the brightest minds can happen instantaneously around the world, rather than being sequestered in research campuses. Innovation, in short, can now be sourced from the general population if it is nurtured by the right conditions. Acknowledging and deliberately fostering an environment for novel thinking may yet ignite a new era of discovery.

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