The Internet has changed many things, of course, but one of its more far-reaching effects has been to transform the economics of innovation.
Big corporate research and development laboratories — at IBM, General Electric (GE), Hewlett-Packard and a handful of other companies — have their roots and rationale in the industrial era, when communication was costly, information traveled slowly and social networks were fostered at conferences and lunchrooms instead of over the Web.
Crowdsourcing and other new, more open models of innovation are really byproducts of the low-cost communication and new networks of collaboration made possible by the Internet.
So, in the Internet era, what is the continuing role and comparative advantage of the corporate research and development (R&D) lab?
Its role will be smaller and its advantage diminished, said Michael Schrage, a research fellow at the Center for Digital Business at the Sloan School of Management at the Massachusetts Institute of Technology (MIT). The idea-production process, Schrage said, will continue to shift away from the centralized model epitomized by large corporate labs, going from “proprietary innovation to populist innovation.”
Much of traditional corporate R&D spending, he said, has been subsidized by profits that are increasingly under Internet-era pressures.
“The economic case for a lot of in-house R&D no longer makes sense,” Schrage said.
The best bet for corporate R&D labs, he said, is to adopt a “federated” model that leverages all the innovative work by outsiders in universities, start-ups, business partners and government labs. The corporate lab’s role, then, is to be more of a coordinator and integrator of innovation, from both outside and inside the company walls.
Though hardly alone, Hewlett-Packard has aggressively adopted that approach in the last two years, after Prith Banerjee became the senior vice president for research. Under Banerjee, former dean of engineering at the University of Illinois at Chicago, HP Labs has not only narrowed its focus, placing larger bets on fewer projects, but has also systematically sought outside ideas.
HP now runs a yearly online contest, soliciting grant proposals from universities worldwide. The company lists eight fields in which it is seeking advanced research, and scientists suggest research projects in those fields.
The HP grants are typically about US$75,000 a year, and many of the collaborative projects are intended to last three years. In June, the company announced the 61 winners from 46 universities and 12 countries, including 31 projects receiving a second year of funding.
“We are tapping the collective intelligence, selectively, of leading academics around the world,” Banerjee said.
Alan Willner, an electrical engineer at the University of Southern California, is one of those academics. He is an expert in photonics, using light photons instead of electrons to transmit information. The goal of the project with HP is to cut power consumption and increase data-transmission speeds between computers in data centers, and eventually even inside of chips.
The HP project, he said, supports a research student, provides insights from HP scientists and has helped double the productivity of his research team, whose members have co-authored 21 conference and journal papers related to the project in the last year.
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