Thursday, February 21, 2013

Innovation in the Local Economy: A How-to Guide

By Evan D. Robertson, Project Associate. 

It’s around 6:49 p.m. on a Monday in Midtown Atlanta. Stephen Fleming of Georgia Tech’s Enterprise Innovation Institute is on stage interviewing Jermaine Dupri, founder and CEO of So So Def Records. It’s an odd combination, but since its Atlanta’s Start-Up Rally 2013, I go with it. For the last hour and a half, entrepreneurs in Atlanta’s startup scene have been getting on stage answering one simple question: why Atlanta? 

Dupri is asked the same, his response is classic, “I didn’t know any better.” He then goes on to discuss the finer intricacies of starting a Hip-Hop record label somewhere other than Los Angeles. Even with a number one album, Dupri had trouble breaking into Hip-Hop’s musical hierarchy. His records just weren’t getting promoted. He then hit the nail on the head regarding Atlanta’s startup culture. 

Dupri was deejaying for Delta’s Pre-Grammy Party in Los Angeles where he met the airline’s C-level executives. For the nearly 20 years that So So Def has been in Atlanta, this was the first time that Dupri was asked to host a Delta event – a firm headquartered out of Atlanta – let alone meet any of its executives. Not a single private event or corporate party. As Dupri pointed out, it took an event in another city to bring them together. While Atlanta has many large corporate headquarters, they usually either aren’t interested in small startups or have to rely on decisions from their corporate offices based outside of Atlanta, precluding them from easily interacting with nascent firms. The lack of autonomy degrades the ability of startups and their established brethren to quickly form relationships. 

Conditions in Atlanta are, however, improving. Over the last hour and a half the theme has been that Atlanta is embracing a collaborative approach to fostering startups. Hypepotamus, a startup itself dedicated to connecting other startups and young entrepreneurs, the Atlanta Tech Village, a co-working space, and the Advanced Technology Development Center, a technology incubator, enhance the capacity of corporate sponsors and smaller, less established startup businesses to communicate and collaborate. As each entrepreneur gets on stage, a theme becomes clear. You don’t need to be in Silicon Valley to start a business. Atlanta has the collaborative community. Venture capital will come to you. Implicit in this argument is that Atlanta has been able to replicate the Silicon Valley model. This, however, rubs me the wrong way. 

If you follow the history of information technology it is easy to stop at Silicon Valley and call it quits. Yes, the Valley has been a host to many innovations in information technology. But, if you want the full picture and greater appreciation for the information technology revolution, you have to end your search in New Jersey. Murray Hill, New Jersey, or more specifically Bell Laboratories. Bell Labs was the most prolific innovation center in America and will likely hold this title for the foreseeable future. Yes, technology firms now-a-days may produce more patents than Bell Labs in its heyday, but the quality of the innovations at Bell Labs were worthy of a Nobel Prize ¬– seven to be precise. The innovations they produced through the 1930s and late 1980s would birth the information technology revolution of the 1990s and 2000s. 

Jon Gertner’s book The Idea Factory: Bell Labs and the Great Age of American Innovation details the complete genesis of information technology innovation throughout the Labs’ storied history. Gertner follows the Lab’s most innovative scientists, and tells how the major inventions at the Lab took place. Most happened through the combination of luck, happenstance, epiphany, meticulous calculation, raw creative thinking power, and a cadre of engineers and technologists who were dedicated to translating ideas and scientific discoveries into useable technologies, bringing these inventions into our homes. Bell Labs produced disruptive innovation on a massive scale. What did the Labs produce? Quite simply, every technology Silicon Valley is predicated on: 

• Transistor (1947) 
• Satellite Communications (1956-1959) 
• Cellular Communications (1947-1978) 
• Advances in Fiber Optics* (1976) 
• Solar Cells (1954) 
• Laser (1958) 
• Digital Transmission and Switching (1962) 
• Unix Operating System (1969-72) 
• C Programming Language (1969-72) 
• Information Theory (1948) 

Bell Lab’s scientists were beyond innovators, they were prescient. They knew exactly where the information technology revolution was headed. Bell Lab’s scientist Claude Shannon, who won the first Kyoto Prize in 1985 in basic sciences (an equivalent to the Nobel Prize which doesn’t grant an award in mathematics), was talking about the “internet of things” in 1947. During the rest of his career and in later life, Shannon envisioned a world of computer AI, computers talking to computers, and technology supplanting human labor. The concepts young entrepreneurs are commercializing today are an extension of the insight that stemmed from Bell Labs. 

So, why isn’t this story told? And, more importantly, what can as economic developers learn from Bell Labs? 

For the former, Bell Labs isn’t a great story because it lacks sex appeal. Bell Labs was a subsidiary of AT&T which during that time had a monopoly on telecommunications. This was an important factor in the Lab’s success. Scientists and researchers didn’t have to worry about funding because AT&T had a steady stream of predictable revenue to fund the Lab. More importantly, Bell Labs’ scientists had a dedicated problem to solve: improve the quality and reliability of AT&T’s network. As Mervin Kelly, the Labs’ Research Director, stated “It must do the job better, or cheaper, or both.”** Without the worry of competition, a real problem to solve, and America’s most innovative scientists, Bell Labs were able to take a very long view on technology, to discover the innovations that weren’t the most obvious, whose solutions took decades to discern. 

What can economic development stakeholders learn from Bell Labs? 

Spontaneity, we must first and foremost design our communities to enhance spontaneous interactions. Many of Bell Labs’ systemic ideas were produced by happenstance, random interaction between scientists that led to insight and new ways of looking at a problem. 

Secondly, spontaneity is useless unless the interaction is interdisciplinary. No preaching to the choir. While a team of people invented the transistor (really two people, and a jealous manager), the transistor was dependent upon technologies that came from other disciplines. Chemists and metallurgists were needed to produce elements so pure that that they were able to control the amount and position of any impurity. By impurity, I mean a single atom. The transistor was the culmination of many other innovations developed at the Lab. 

Thirdly, both talent and place matter. Bell Labs’ Murray Hill location was designed for both flexibility and increased interaction. Need more lab space? Knock out a wall. Can’t solve a problem? Walk down the long hallway corridors to lunch, overhear conversations of other scientists and engineers. The building itself was designed with knowledge transfer in mind. It also helps to have the best scientists in the world to develop and exchange this information. 

Lastly, and the most difficult of all, innovation systems need time. Time to think, time to ponder, and, most importantly, time to fail. It is not so easy to see how we can create this environment in modern America, an economy where business success relies on a steady stream of innovation to drive quarterly results. AT&T, as a regulated monopoly, was able to finance failure. It was able to bear the brunt of costly mistakes and missteps, in many respects it functioned as a national laboratory. Given our bias towards quarterly results and young startups that require early results in order to proceed, it is unclear to me how our entrepreneurial and startup culture will produce disruptive innovation on the magnitude and scale of Bell Labs. 

The story of Bell Labs is the story of our modern information technology infrastructure. Everything the computer touches, every online interaction, and even the computer itself was founded upon the Labs ideas produced at Bell Labs. The Googles, the Intels, the Apples, and the Amazons of today’s technology world are based upon technologies developed at Bell Labs. In a harsh economic reality in which our leaders openly declare innovation as the way out of our Great Recession, we would do well to look at the success of Bell Labs which produced the infrastructure that drives our economy today. What we need is a game changer, Bell Labs produced not one, but many. 

*The actual optical fiber was discovered at Corning Incorporated, a specialty glass manufacturer. Bell Laboratories expanded upon their invention. Other facilities outside of Murray Hill were also highly responsible for fiber optic development, Bell Lab facilities in Norcross, Georgia is a notable example. 

**Gertner, Jon. The Idea Factory: Bell Labs and the Great Age of American Innovation. New York: Penguin, 2012. Print.