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Can a firm have too much innovation to handle?

It happens. And that problem was the dominant issue for a small group of executives from Microsoft’s Beijing research lab when they held a retreat in November 2002 at a spa in Zhuhai, not far from China’s border with Macao. Relaxing in the outdoor hot springs, the group brainstormed a promising solution to a fundamental problem facing Microsoft and many other high-tech companies: how to move more innovations more swiftly and effectively from research to development to market. Their idea: a new type of organization designed to bridge the gap between “R” and “D” and in the process overcome many of the product development bottlenecks and geographic and cultural differences that impede today’s global corporations.

Microsoft’s Advanced Technology Center (ATC) opened in November 2003 with 20 employees and a couple of projects. By late last year, after receiving more than 30,000 résumés from around China and sparking keen demand among Microsoft’s business divisions, it had around 100 employees, with some 17 major projects and scores of minor ones on its books; this year, the ATC is set to double in size. In the next few years, the center expects to be the key technology transfer point for a host of new products, from Web-search technologies to mobile applications and home entertainment systems. On the strength of these innovations, Hongjiang Zhang, the center’s charter director, hopes to provide a powerful alternative to Microsoft’s traditional strategy of creating products in the U.S., spiraling into Europe, and then adapting them for the Chinese market. “China is still emerging, but China is no longer just a follower,” he says. “They are starting to lead.”

So why not complement the current strategy by growing and testing new products in China and then introducing them in the United States?

Necessity: Mother of Development
ATC takes up half of one floor of a six-floor office building in the Haidian district of northwest Beijing—the same edifice occupied by Microsoft Research Asia, one of six research labs worldwide that Microsoft operates. Enhancing the transfer of technology between the 170-strong research facility and product development groups at Microsoft’s headquarters in Redmond, WA, is the whole reason the center exists, and the close proximity to the lab makes handoffs easier.

Zhang, who worked on technology transfer at Hewlett-Packard Labs before being recruited as a charter researcher at the Beijing lab, says the issues spurring the ATC’s creation are common to all research and development–driven organizations. After researchers hand off an invention or a new piece of code to product developers, a lot of refinement and testing is needed to get it ready for commercial release, and the product developers aren’t always able to do it. They often have their hands full with more pressing jobs—say, upgrading conventional features or improving security. And even a great invention might arrive at the wrong point in the product development cycle, where it’s difficult to fit into the next release. “Which means that for the product group to form a team and take that risk [of developing the invention] may be too big a risk and too big a distraction,” says Zhang.

His sentiment is echoed by Dennis Adler, general manager of business development for ATC. Based in Redmond, he is the liaison between the center and Microsoft’s product groups, helping the business divisions understand what advances are emerging from Beijing and the ATC members understand development schedules and constraints. Many times, he says, product groups would have loved to incorporate some cool feature or technology created in one of Microsoft’s research labs but just didn’t have the staff to devote to it. “There are tech transfers that haven’t happened because of it,” he says. “So ATC was set up as a way to help close that gap. It’s all about lowering the impedance.”

Microsoft officials say they know of nothing else like the Advanced Tech­nology Center either inside their company or outside it. “We just invented it,” says Adler. At least in Beijing, an organization like the center wasn’t even thinkable until a few years ago, and its creation shows the benefits of constantly adapting operations as conditions change.

Given that it typically takes several years for research projects to yield anything that can be commercialized, moving innovations to development was hardly a top priority when the Beijing lab was formed in 1998. Early on, though, a group was set up to help researchers build demos for showing concept technologies to their Redmond research colleagues and to the business divisions—with two engineers or programmers assigned to each of about a dozen projects. But as the lab grew, and its projects became serious contenders for product development, it became clear that while one project might require only two engineers or programmers, another might need five or more to handle the intensive testing and predevelopment refinement needed to verify that a one-of-a-kind research prototype could be mass produced.

The initial solution, in late 2001, was to form a centralized, more flexible organization dedicated to technology transfer. Rather than being assigned to specific lab projects, engineers in the new Tech­nology Transfer Group (TTG) went where they were needed—in the numbers needed. The new group marked a big step forward, says Zhang. But as the lab matured, more of its research teams produced more promising technology. “Now the scale is bigger,” Zhang says. So something bigger than the TTG was needed.

In addition to Hongjiang Zhang, the group that assembled at the hot-springs retreat in late 2002 included Ya-Qin Zhang (no relation), who headed the Beijing research lab from mid-2000 until early 2004, before becoming vice president of Microsoft’s Mobile and Embedded Devices division. They were joined by Harry Shum, then number two at the lab and now its director, and a handful of other key personnel.

Central to their thinking was China’s status as more than just an emerging market. Thanks to places like the Beijing lab, the country was making its mark in the creation of information technology, and the spa-soakers figured that a different type of organization, larger and more systematically woven into Microsoft’s product-development cycles than the Technology Transfer Group, might help the company take advantage of that creativity far more effectively. “That’s how the ATC concept started,” says Ya-Qin Zhang, who came up with the initial idea. “It’s an incubation center for new technology”—technology made in China.

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