Corporate labs no longer fill the niche they did in the early-mid twentieth century

It’s fairly uncontroversial that In the past, corporate labs filled a particular niche in the innovation ecosystem. There’s a strong sense that as of 2020, they no long fill that niche. However, corporate labs (including Xerox PARC and Bell Labs) still exist, so we need to create a strong argument that they no longer fill an important niche.

I’ll proceed by both looking at outputs and inputs. Outputs are just the labs’ real-world outcomes and note that corporate labs are no longer producing the sorts of outputs they once did. However, that argument has a causality problem - it could be that labs are actually filling the same niche and a confounder is causing decreased output. This confounder could be the same thing driving the Low Hanging fruit theory of stagnation. So we also need to outline the conditions/inputs that were arguably necessary for the labs to fill their niche in the past and illustrate how those conditions no longer exist. Neither approach is bulletproof but hopefully a combination of the two is convincing.

A couple of caveats: there are many exceptions. AI research is an exception to the decline of corporate R+D and there are many potentially amazing projects happening at corporate labs around the world. One might argue that the exceptions are the rule - that there are just fewer technologies that would benefit from healthy corporate labs (remember, the Low Hanging fruit confounder.) It’s impossible to prove definitively, but evidence suggests that The niche corporate labs once occupied still needs to be filled.

Going through the characteristics of the niche:

  • Most corporate labs no longer work on general-purpose technology. The trend, as embodied by the Microsoft Research Founding Memo is towards focusing on product development. This trend is also seen at Google X where they pride themselves on killing ideas quickly and then focusing on a specific product. The trend towards product development pushes corporate labs more towards the same niche filled by startups.
  • Corporate labs no longer enable smooth transitions between Technology readiness level - TRLs. Either they are incredibly separate from the main org that they have no advantage over a startup or are so tightly integrated that anything new is quashed. In the first case, there is no systematic way for projects to move from the lab to the company, instead needing to go through the same ‘finding a champion’ and bespoke uphill battle rigamarole that any product going to market faces. have similar barriers to integrating into the main company as a startup. These barriers create the same The (idea) valley of death that the academia -> startup path faces. Manage the Transfer not the Technology In the second case, labs are so joined at the hip to the main org that they can’t work on anything besides incremental improvements. Separate soldiers and scientists.
  • Echoing the previous point, corporate labs often no longer work on potentially game-changing technologies with tight feedback loops. It feels like they’re either doing “show-off” work that leads to nifty demos and papers or grungy incremental work. To posit a reason why - technology improvement is no longer an existential imperative for most companies. They both have the option to acquire new technology through M&A and Companies want R+D to be off of their balance sheets and they face very different pressures from AT&T. AT+T benefitted significantly from creating better technology. Killing the Golden Goose? The changing nature of corporate research, 1980-2007 digs into this trend more.
  • Corporate labs no longer provide a first-class alternative to academia. With the exception of the big AI labs and maybe IBM research on superconductors, there are few areas where working at a corporate lab is as academically prestigious as being a professor. The reason is tied into how cutting-edge science and technology are no longer an existential concern for companies, which gives them little reason to hire and keep the best and most ambitious researchers, creating a downward spiral where there are no A players and the labs become susceptible to the fact that A players hire A players and B players hire C players. Additionally, the incentive shift to focus more on product development creates a cultural shift away from participating in the scientific enterprise. See The decline of science in corporate R&D.
  • Corporate labs no longer enable continuous work on 5+ year timescales. There are many commentaries on corporate short-termism that I won’t dig into. In short, a combination of focusing on quarterly earnings, competition and shareholders pushing companies to stick to their knitting, and the availability of M&A opportunities is not conducive to 5-10 year speculative projects. And not just just in the obvious sense that they might get cancelled. The more nefarious condition is that there’s no level of planning for how that project eventually becomes part of the core company so even if it’s not cancelled it can putter along forever.
  • In most cases, corporate labs no longer probe deeply into natural phenomena and try to exploit them. As noted earlier, corporate labs just don’t do as much science. This isn’t to say that corporate labs ever did science for its own sake - but in the past they perceived a direct line between scientific discoveries and the health of the company. I suspect that this perception is accurate in most cases. The move away from Pasteur’s quadrant could simply be because we’ve exhausted exploitable phenomena and everything left is either too big, too small, or too obscure to make a difference at human time-and-size scales. Alternately, the move could be chalked up to a change in the nature of the companies and their products to be more specialized and less dependent on exploiting new phenomena.


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