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Ringing Endorsement

Lucent technologies, people here like to proclaim, is the best thing that’s happened to Bell Labs in recent memory. It may seem less than earthshaking to outsiders, but chairman Henry B. Schacht’s decision to place his headquarters inside the lab and feature the R&D arm in the company slogan provided a ringing endorsement unheard of in the old AT&T days. Chatting in his expansive office, current executive vice president of research Arun Netravali reflects that pride by wearing a polo shirt emblazoned with the message: “Lucent Technologies. Bell Labs Innovations.”

Netravali heads the resurgent team. As the hand-picked successor to the lab’s former leader, Nobelist Arno Penzias, Netravali assumed daily control of research with Lucent’s 1996 formation-well before Penzias retired this spring from the senior scientist’s position. But the native of India has been at the lab since 1972. As a Bell Labs engineer and computer scientist, he pioneered digital image and video compression technology-work which last year earned him the prestigious Computers & Communications prize awarded by NEC Corp.

The almost palpable optimism coursing through Lucent is a far cry from the situation only a few years ago, when the lab was thrown for a loop by fast-shifting global competition. Netravali now sees incredible opportunity in the mayhem. Smaller companies and start-ups may move faster and excel in narrow areas, he notes. But Bell Labs’ strength lies in the ability to make sense of and shape the bigger picture-by assimilating technologies from inside and outside its confines, and fitting them into systems.

To fulfill this promise, Netravali maintains, the need for speed is paramount-in evaluating projects, pursuing research advances, creating novel products and adopting outside technologies. Another critical focus is “cannibalization”-the drive to make Lucent’s own products obsolete. For instance, because of the Internet, tomorrow’s data and voice communications will be very different from today’s, a potential mega-disruption to traditional business lines. Research has to be ready with solutions. “The key is how can you become an attacker of yourself-almost like another company might do to you,” explains Netravali. “Let us become better at doing this than some outside company because it’s going to happen anyway.”

These goals could not be adequately met under the old research model-a model that was itself poorly understood. Contrary to popular perception, research has always been a small part of Bell Labs: Of a total workforce of approximately 24,000, only about 1,300 labor on the R’ side of research and development. However, this relatively tiny endeavor has long served as a fountainhead of science and technology. And for decades following World War II, the emphasis fell on being the first or best: publishing papers, setting transmission records, building the most powerful laser diode.

Bell Labs could afford this Ivory Tower modus operandi largely because AT&T was a regulated monopoly allowed to fold a “research tax” into every phone call and sale. But the Bell System’s 1984 court-ordered breakup into seven regional operating companies, AT&T’s dramatic decentralization five years later into a series of business units, and then trivestiture, which saw roughly one-fourth of its researchers assigned to the new AT&T, forced a dramatic change in that outlook.

Starting with Penzias and continuing under Netravali, research has moved to reflect the company’s new place in a fiercely competitive world. Software studies in object-oriented programming, speech recognition, networking and other fields have been beefed up at the expense of robotics and hard-core physics pursuits such as superconductivity that seem unlikely to have an effect on business. Today the labs are divided roughly 50-50 between the physical sciences and software and networking, a more realistic division than the previous 80-20 split. Meanwhile, in addition to maintaining high standards of excellence, managers have been handed responsibility for meeting the company’s technological needs in their particular areas.

Market awareness is central to the new Bell Labs. Scientists and business colleagues interact more regularly with customers and know a lot more about how clients operate than they used to. Since the early 1990s, about half the lab’s researchers have worked with business unit colleagues on specific “joint projects.” Either side can propose such an endeavor-for creating a new switch, a networking technology, or whatever-that is jointly staffed and developed by research and the particular unit. Up to 50 workers staff each project, though most are much smaller. Specific milestones and timetables are created, and researchers sometimes transfer temporarily to the business unit to help launch the products. There’s even a special “breakthrough” category for innovations with strong potential to dramatically reduce costs, improve functionality or create new markets. Typical breakthrough projects get three times a joint project’s staffing and seek to slash in half the normal three-year time to market. Such targeted research strategies have produced a slew of lucrative products. Standout innovations run from numerous fiber optics advances to a low-power digital signal processor (DSP) chip to various internet protocol switches designed to route data with unprecedented speed and quality.

Since its inception Lucent has also operated a New Ventures group that helps spin off inventions outside its core areas of focus. “If we do our research work right we’re going to create lots of pleasant surprises that are technologically exciting and that make more business sense to commercialize outside of our normal business interests,” explains Mel Cohen, vice president for research effectiveness. Under its old style, such products might well have withered on a lab bench. But as of mid-1998, the group had funded nine start-ups based on Bell Labs innovations.

Despite Lucent’s soaring success-its stock has risen 430 percent since the initial public offering in April 1996-research managers profess wariness about going too far to the applied side. The great challenge, notes Bill Brinkman, vice president of physical sciences and engineering research, lies in becoming better attuned to corporate needs but not to “overdo it so badly that you have no science.”

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