data; Veridicom, Inc., which markets Bell Labs' patented fingerprint-authentication technology; Lucent Digital Radio, which is developing technology to convert analog FM radio signals to high-quality digital sound for broadcasters and greatly improve the quality of AM radio; and Persystant Technologies, which offers a software server that creates virtual environments linking networked users—whether on wired or wireless phones, laptops, or multimedia personal computers—over the public Internet or corporate intranets. Some of these ventures have moved their research results to the marketplace in just 8 months.

AT&T also remains committed to funding research, but at a level not to exceed 0.3 percent of total revenues. Actual expenditures for research at AT&T have been closer to 0.2 percent of revenues since the two companies split, because the size of the staff grew more slowly than had originally been anticipated. AT&T also has allied research programs with newly defined strategic initiatives of its business units, especially those focusing on Internet-related technologies. For example, AT&T formed a subsidiary, a2b music, in November 1997 to provide secure downloading of music over the Internet. The company uses AT&T's encryption technology to protect the digital content rights of music labels and artists.

Xerox Corporation

Most of Xerox Corporation's computing- and communications-related research is conducted at its Palo Alto Research Center (PARC), which views itself as providing the equivalent of genetic diversity for Xerox. PARC's goals are to create surprising technological opportunities and ensure resilience against dramatic changes in the information technology industry. The center maintains small research programs in several topical areas that are expanded or contracted as technology trajectories and each program's relative importance to the company become clearer. Over time, PARC's research agenda has shifted to emphasize computing over areas such as mathematics and physics, and the center's overall level of effort has increased slightly, reflecting Xerox's commitment to research.

To avoid repeating past mistakes, Xerox PARC has established mechanisms to improve its ability to capture the value of its research. Researchers are encouraged to work more closely with Xerox business units, and PARC routinely uses “spin-ins” (cases in which Xerox forms a corporation to develop a technology, takes a majority ownership position, and offers participants stock) and “spin-outs” (in which separately operating companies are formed that license the technology from Xerox) to encourage the commercialization of research results. Research problems still are chosen in a highly decentralized fashion, with researchers proposing new projects, but PARC has emphasized a problem-oriented approach to project selection. The idea is to focus on projects that are important to the company, such as how to make a totally silent copier. A challenge like this allows a range of responses, from incorporating sound-deadening devices in the copiers to facilitating the use of computer displays instead of paper copies. Such problem-oriented research often results in multidisciplinary work teams. Work on “smart matter” (the creation of materials with embedded computing capabilities), for example, involves both solid-state physicists and computer scientists.

SOURCES: Buderi (1999); Carey (1999); Neil Marx, Internet DivisionFinance, IBM Software Group, personal communication, November 20,1997.

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