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It’s heartening to be reminded that old-fashioned engineering still matters even in this age of dot-com madness, when any wacky business model garners a multibillion-dollar valuation. Scientific discovery and research are still the source of innovation, and wealth, for many large corporations. Such is the message of Robert Buderi’s new book, Engines of Tomorrow: How the World’s Best Companies Are Using Their Research Labs to Win the Future. In an engaging style, the author accomplishes several things at once: He presents a wealth of historical detail about the emergence of corporate research. He provides a thorough survey of today’s most prominent laboratories. He offers insightful analysis of how companies get the best out of their research labs. The beginnings of corporate research go back to the mid-1800s. Before then, much of the industrial process was seat-of-the-pants. Whatever scientific technique existed to manufacture products was often the exclusive domain of master craftsmen or guilds. As a result, innovation occurred slowly, if at all. Buderi gives an amusing example of what had to happen to spur innovation. "At Bayer [the German chemical giant] a recipe for aniline blue [dye] required 48 egg whites in each batch," he writes. "Workers made pancakes from the leftovers, but when management contracted to sell the yolks to a local baker a sudden process improvement vanquished the need for eggs." It was in that same textile dye industry, principally among German firms such as BASF, Hoechst, and Bayer, that the first corporate research began. Buderi gives credit to Bayer for creating in 1891 the first true corporate research lab, one that operated independently from production and sales. Others may claim that honor for Thomas Edison, whose lab was going strong at the same time, but the time period is certainly correct. Soon, many large firms followed. By the early 1900s, corporate research labs were becoming commonplace. Some—such as Bell Labs, Siemens, and General Electric—stood out. Buderi devotes several chapters to recounting the history of these labs. By the 1980s, most of those same labs were in crisis. Many of the companies that fielded the best labs—such as IBM and AT&T, which produced a bevy of Nobel Prize winners—could no longer afford the luxury of pure research. Pressure mounted to change R&D budgets so there was less R and more D. As a result, there is certainly less basic research under way in today’s corporate labs, but fears that it would go away entirely have proved to be unfounded. "Basic research, proclaimed to be dead in corporate labs a decade earlier—[is] alive and increasingly vigorous," Buderi writes. Today, "central research as a whole [is] healthier than at any time in the last 50 years." The labs were saved by leaders like Nobel laureate Arno Penzias, the director of Bell Labs in the late 1980s and early 1990s. He realigned the labs’ research efforts to be more in synch with the business needs of AT&T. The change wasn’t easy. "To some scientists, Penzias was almost a traitor, forsaking Bell Labs’s greatness," Buderi writes. Penzias justifies his actions by saying "What I have done is for the good of research." And he’s probably right. As interesting as the book is, I do have a few quibbles with the author. Buderi does a terrific job of surveying the varied sorts of corporate research laboratories, but he says little about the role that government and university laboratories play in furthering corporate goals. Granted, the book is focused on corporate labs, but it’s impossible to ignore the increasingly important role the nonprofit sector is playing in the game. The Internet and biotechnology, the basis for two of today’s most important industries, were both the product of university and government research, not corporate research. Also, the subtitle for the book should have been "How the World’s Best Computer Companies Are Using Their Research Labs to Win the Future," because the book focuses on the computer, electronics, telecommunications, and software industries. Considering the innovation going on in areas such as biotechnology and chemicals, it’s a shame. Despite these shortcomings, Engines of Tomorrow is an interesting and important book. Companies whose research laboratories are not only productive, but smoothly transfer results to product developers, have a huge competitive advantage. This book goes a long way toward helping us understand how the best companies do that. It also reminds us, once again, of all we owe to those mostly obscure men and women in white coats.
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