How innovation works – lesson of Bell Labs

I’ve just finished The idea factory: Bell Labs and the Great Age of American Innovation by Jon Gertner (see also his YouTube interview) which contains a great description of the role of interaction and serendipity:

Luck seems to matter, and so does timing, for it tends to be the case that the right answers, the right people, the right place — perhaps all three–require a serendipitous encounter with the right problem.

He points out that Bell Labs greatest invention might have been the process of invention that focused on that interaction. Physically, Bell Labs was designed to foster that interaction:

By intention, everyone would be in one another’s way. Members of the technical staff would often have both laboratories and small offices–but these might be in different corridors, therefore making in necessary to walk between the two, and all but assuring a chance encounter to two with colleague during the commute.

The system was not the classic linear model — although it might be described by some as that. Rather it was a critical mass of scientists, engineers technicians etc — interaction between fundamental and applied science — and between disciplines. While the official description was a flow from research (science) to development (engineering) to manufacturing, the system was deliberately more organic and interactive. Interestingly, in his YouTube video, he talks about the important link between innovation and manufacturing. He also made the distinction between innovation in the platform (which was Bell Labs end goal) and innovation in end-use products.
He notes the difference between Bell Labs which could (and had to) share its findings and the current tech companies like Google and Apple:

Such companies don’t exist as part of a highly regulated public trust. They exist as part of our international capital markets.

He notes in the interview that 1-1.5% of telephone users bill went to subsidize R&D.
The pressures on Bell Labs were very different from what exists today. Research was focused on the specific needs of refining and expanding the telecommunications system. Contrary to the perception of many, the overriding objective of Bell Labs was the practical improvement of the Bell System – not “blue-sky” invention. The goal was “Better, cheaper or both.” Blue-sky was a part of getting to that outcome and only occupied a fifth of the workforce.
Bell Labs practices a form of open innovation from the beginning. For example, Bell Labs sought to further develop the transistor by licensing to others. They realized that they would benefit from improvements made by others, both for their own use in the Bell System and from increased licensing revenue as the technology become better and therefore more widely used in more applications. This open innovation system was formalized in the 1956 consent decree where AT&T agreed to license all patents.
When the breakup of AT&T happened, it was thought to be good for the Labs. The idea was that the breakup would free Bell Labs from the consent decree and allow them to commercialize its own discoveries – rather than share them. It didn’t work that way. Rather it became a standard –industrial lab.
This is not to say that we can return to the Bell Labs model of a monopolistic industry subsidizing research. Bell Labs might be more of an anomaly. But the model of multiple levels of interaction–across disciplines and across the development process–is one to be emulated. Silicon Valley is often seen another version of that model. But this model may not be able to attack the big problems of energy, for example. Thus, there may be many paths to this goal. The key in all cases, however, is organic and interactive.

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