How to manage and innovate like Google and Bell Labs

In searching for the management techniques of tomorrow, it pays to look carefully at what has succeeded in the past. For sixty years of the 20th century, a single company was widely known as the most innovative in the world. That company was AT&T, and a large part of their success can be attributed to their R&D wing, Bell Labs.

Bell Labs created a staggering proportion of the technological innovations that made the information age possible. They created the transistor, the laser, the silicon solar cell, and the mother of modern computer languages, UNIX. They pioneered fiber-optic systems, invented the cellphone, and created the first communications satellites. A small group of scientists and engineers, housed in a single facility was able to do all of this on their own. The question arises: was this just luck? Did the geniuses of the modern world all independently decide to go work for AT&T and create from whole cloth the building blocks of the modern information economy? I seriously doubt it. The key to Bell Labs’ brilliant success was the visionary leadership Mervin Kelly. His insight into the nature of creativity and organizational dynamics provides a window into how we can improve the current state of management.

The key tenets of Kelly’s leadership were simple:

• Encourage the free exchange of ideas across all hierarchical and departmental levels

• Allow employees to follow their own creative inspiration; their ideas will often lead the company in unexpected and profitable directions

• Facilitate frequent random interactions. Bell Labs’ very architecture was designed to make it difficult to get from one place to another without passing through several departments.

Does this all sound a bit familiar? A certain company whose name starts with a G springs to mind. Sergei Brin knows something about the history of innovation, and has undoubtedly learned from Mr. Kelly’s example. Google’s practices of allowing employees time to work on personal projects and of including daycare services and recreational facilities on campus to keep employees interacting for more hours of the day certainly bear Kelly’s Watermark, as does the sheer “cool” factor associated with being a Google employee.

I know what you’re thinking: Bell Labs had a massive flow of funding from AT&T, and Google has more revenue than it knows what to do with. How can a manager with a tight budget and deadlines to adhere to possibly follow this example?

The short answer is that you can’t, not completely. But you can certainly apply some of this philosophy in smaller and more practical ways to start increasing innovation and productivity.

In many ways, the problem with the current organizational structure is not a lack of ideas, but a lack of incentive for employees to apply these ideas. Lets look at the current standard setup for an organization:

• At the top of the hierarchy, the management determines strategy and allocates various objectives

• These strategies and objectives are then funneled through to the various lines of business, where the managers interpret them and define goals for their team.

• The team sets to work on achieving this version of the goal, unaware of the larger objectives sought by the top management.

The problems with this approach are manifold:

• For one thing, the employee has no sense of the overarching goal and is only responsive to what he has been told he needs to do.

• This robs the employee of a feeling of full partnership in the organization as he gets the sense that he’s working on a “need to know” basis. In effect, this is a disincentive for innovation.

• When you add in the awarding of bonuses based on quantitative KPIs, a culture of lone wolves becomes the norm, undermining the team-based nature of the business.

• In addition, any inaccuracy resulting from the possible misinterpretation of the goal after it’s been handed down from top to middle management is opaque to the employee attempting to execute it. This robs the organization of a potentially beneficial feedback circuit.

From a budgeting standpoint, this is also rather inefficient:

• Because each manager has separate goals, each line of business fights for a larger piece of the pie, requesting outsized budgets lest they be allocated somewhere else.

• Business costs rise as the various lines of business constantly request increased funding, negating the benefits of increased efficiency.

• The ability to allocate funds for innovation is curtailed due to this constant pressure for more funding.

The problems with this approach are in fact too numerous to list here, but I think you can extrapolate how this kind of regimentation will stultify innovation. While it may not be possible for you to completely revamp your business along the lines of Bell Labs or Google, here are a few tips to mitigate these problems:

• Employees from all lines of business should be involved in the overarching administrative strategy. This can take the form of a daily discussion between upper management and employees

• Employees should be free to discuss issues they face on the frontline, and should work with upper management to define areas in which innovation is necessary.

• Once innovation goals are defined, employees should be left to implement them. They should be given a large amount of freedom in how they work to achieve these goals.

• How well these strategies are implemented should be factored heavily into KPIs, and bonuses and incentives should be accorded for innovation.

In this way you close the circuit between management and employees, undermining the barriers between the various lines of business. In order to curtail increasing budgets, try the following:

• Have built-in yearly budget decreases based on the theory that increased innovation should reduce costs

• Use the savings to sponsor workshops, retreats or other forums for innovation to help encourage team cohesion and a culture of collegiality.

• Award bonuses to teams instead of to individuals. Or rather, reward individuals for team behavior

Implementation of these changes is easier said than done, and the changing of the budget structure is an extremely complicated proposition that deserves more than a bullet point. However, if you begin by changing the culture, and facilitating team behavior and innovation, the seed of what made Bell Labs the 20th century’s “idea factory” can begin to take root in your organization in the 21st.

Can Akdeniz

Can Akdeniz is the author of seven books and founder of Business Hacker, a popular business blog. His books such as Go Nuts, Cool Boss, Happy Company and MBA 2.0 have changed how people think about business, productivity and work.

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