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Mad Scientist

Can legendary Bell Labs—and its struggling parent, Alcatel-Lucent—be saved by a "crazy risk taker" who's betting that innovation can be captured in a mathematical formula?

One afternoon this past summer, Jeong Kim took a seat at a quiet back table of a suburban New Jersey restaurant and removed a pen from his jacket pocket. Without speaking, Kim cleared away the salt and pepper shakers and brushed away some crumbs. Then he leaned forward and drew a square on the paper tablecloth. He paused. Then he drew another square behind the first and carefully transformed the diagram into a cube.

Our topic was innovation. A few months before, Kim said, he'd been invited to give a speech on the subject in China. But he wasn't precisely sure what to say. Half of the problem was linguistic. China's engineers might consider a technology "new" or "improved," but "innovative" defied exact translation. The other half of the problem was philosophical. "Everyone talks about innovation; everyone wants it," Kim remarked, but do we really understand what it means or what it takes?

Now 46, Kim has spent much of his professional life as an entrepreneur. In the late 1990s, he sold his second startup, Yurie Systems, to Lucent Technologies for around $1 billion; his personal share worked out to more than $500 million. The man clearly knows how to innovate. And yet that didn't make preparing for his speech any easier. So Kim laced up his running shoes. Maybe it was at the 10-mile mark, maybe the 12-mile mark. But at some point, he began to think of innovation as the options and contingencies a would-be innovator confronts every day. He envisioned a cube. One dimension, or one axis, could represent the impact of a particular innovative effort: Would it be incremental or revolutionary? Another axis could represent the process of innovation: Would it be achieved through painstaking analytic work or through artistic inspiration? The third axis was time itself: Was the innovation driven by the market today or in the distant future? None of this would tell his audience what or when to innovate—small inventions could be as lucrative as big ones and ideas for next year as disruptive as products for five years hence. Nor would this offer a foolproof strategy for how to innovate, since hiring an eccentric genius could prove as valuable as an overcaffeinated entrepreneur. But it did suggest to Kim that, for any company, innovation required visualizing the whole future, perhaps within something like this cube, a 3-D box where every idea in your portfolio was judged and plotted in relation to its potential impact, time to market, and creative process.

On the restaurant tablecloth, Kim kept drawing, explaining, labeling the corners and faces of the cube as he went along. What had begun as a PowerPoint slide for the Chinese ministers 7,000 miles away, he said, had since come to define his work as president of Bell Labs. For most of its history, Bell Labs served as the research division of AT&T. It was a fabled conglomeration of about 3,000 scientists that could lay claim to being the greatest innovation factory of modern times. In recent years, though, it has foundered as it became the research division of Lucent, now Alcatel-Lucent. The huge telecom-equipment manufacturer has stumbled and downsized in an unrelentingly difficult business climate, leaving the Labs with about 1,200 scientists and an ill-defined future.

Against this backdrop, Kim has said he's trying to "innovate innovation." It seems like the catchphrase of a marketer rather than an engineer, but there probably isn't any other way to describe his intentions. In the restaurant, Kim put down his pen. His drawing was finished. He had marked a wedge in the cube that showed the future of the Labs' innovations, all facing the side he called the "high-impact plane." To succeed, he explained, the Labs' research efforts would need to be concentrated in this sweet spot—an area that incorporated big and small ideas, balanced the revolutionary with the very useful, and involved quick turnarounds and far-off delivery dates. The mix and execution would have to be nearly flawless. Kim doesn't have any money to waste. And with the telecom-equipment business in rough waters—and the future of Alcatel-Lucent riding in part on the work of his people—he doesn't have much time, either. The odds of "saving" the Labs, as some people there describe his mission, seem to be against him. Then again, the odds have been against him his entire life.

Some of us feel compelled to invent new technologies; some of us feel compelled to invent ourselves. A rare few do both. Kim seldom talks in any great depth about his personal history. He came to the United States from South Korea at the age of 14. He knew no English; he had no money. He lived in Maryland, in subsidized housing, wearing clothes from thrift shops. Sometimes he went without food for days. By his own account, his home environment was tense, unbearable. His nose would bleed from the stress. In an interview several years ago for the Academy of American Achievement, a Washington, D.C., nonprofit, Kim acknowledged that at one point as a teenager his misery was so profound that he concluded he had two choices: He could either take his own life or make something of himself. "I'm at rock bottom," he realized. "It's going to have to get better than this."

It didn't—at least, not right away. His father kicked him out of the house at 16, and he went to live with a sympathetic high-school teacher and his wife. He was a good student, with an aptitude for math and science, but he lived in a haze of sleep deprivation. He would go to classes, study for a few hours after school, catch a couple hours of sleep, and then go to work at the local 7-11 from 11 p.m. until dawn. When his shift was over, he would head back to school again.

His grades got him into Johns Hopkins. By then, the personal computer had caught Kim's attention. "I guess I was different," he says. Most college students interested in computers at that time wanted to buy one—he wanted to build one. While still an undergraduate, he joined a PC startup company formed by some people at Hopkins. (It initially did well but later collapsed.) He also joined the U.S. Navy, which, after graduation, led to an officer's commission on a nuclear submarine.

The subsequent pieces of his life fit together with an almost predetermined logic. He married, had two children, earned a PhD in engineering at the University of Maryland. He then started a technology consulting business, which led to a startup company that created a communications device—the Yurie box, named after one of his daughters—that aided in the complex transmissions of voice, digital, and video signals. While working on Yurie in the mid-1990s, Kim—who has described himself as a "crazy risk taker"—went $400,000 in debt by mortgaging his house and maxing out his credit cards. Paying those back after he sold the business to Lucent in 1998 wasn't a problem.

His path to the top of Bell Labs had a detour. In 2000, while he was working at Lucent, he was offered the presidency of the Labs. He turned it down; he thought he didn't have the proper research experience. Instead, he became a professor at the University of Maryland. Four years later, Patricia Russo, Lucent's CEO, asked him again to run the Labs. And this time, he accepted.

One morning in October, in a conference room that abuts his Bell Labs office, Kim is battling a fever and a chest-rattling cough while laying out his research plan for the next few years. He really should be home in bed, he admits, but there's too much to do. Projects involving the incorporation of Alcatel's European research group into Bell Labs, for instance, need his input or affirmation. Wealthy beyond anything he imagined during his graveyard shifts at the 7-11, he dismisses the notion that money is what motivates him. "There are people in the hedge-fund and financial sectors who have made so much money," he says. "But what have they created? What value?" The goal of the innovator, as he sees it, is to have a positive impact on your company, your country, and yourself. He approaches the task with a deep social responsibility, even a sort of patriotism. "How are we going to compete with China? How are we going to compete in the world?" Kim asks me. "We can't possibly compete with their low-cost labor. We have to compete in innovations."

"People in the financial sector have so much money," says Kim. "But what have they created? What value?"

Kim is not especially dismayed by the challenges Bell Labs faces both in the United States and abroad. It's not swagger so much as a belief in steadfast forward movement. "I'm very comfortable in chaotic environments," he explains. "It's no more chaotic than when I first emigrated to the United States. I didn't understand the culture. I didn't understand the language. I didn't know the people. Everything was confusing, even the food." You can get the sense that for him, the professional and personal are not unconnected. Innovation, like growing up, sometimes needs to get done in the midst of adversity.

Over the past few decades, as this country's entrepreneurs have been rewarded with torrents of venture-capital money and the fruits of public offerings, monolithic research shops like Bell Labs have begun to recede from view. Small is now beautiful. And big is perhaps no longer necessary. For better or worse, corporate innovation has increasingly become an exercise in speed and scrappiness and practicality, rather than a diligent pursuit of pure knowledge.

When Kim took over the Labs in 2005, his overarching concern was not how to produce more ideas but how to capitalize on them. He decided that if Bell Labs was to survive, it had to be more aggressive and market driven. To that end, he set up two new groups. The first was what he termed Technology Integration—in effect, work for the parent company's business units. Some of these projects involve routine improvements on wireless or wireline equipment, but some are grand in their goals. For years, researchers have been considering the obstacles that stand in the way of a totally wireless nation. One is poor reception inside our homes or offices. Building more big telecom antennas isn't practical; they're expensive and already densely deployed. But extending the wireless network into homes and small businesses—by selling small, auto-configuring antennas—might solve the reception problem, especially if such antennas could route calls and data over existing Internet connections. With Kim's endorsement, what's currently known as a "femtocell" is being tested and should be on the market within a year or so.

Meanwhile, Kim has grouped the Labs' more audacious research efforts under what's now called Alcatel-Lucent Ventures, or ALV. By his estimation, Bell Labs' value is in its critical mass—a lot of researchers in close proximity, sharing insights and expertise. But he also points to two earlier Bell Labs inventions: "Remember, the transistor was invented by three people, not 30,000. The laser was invented by two."

ALV is essentially a venture-capital fund for scientists within the Labs—"intrapreneurs," as business theorists sometimes call them—whose ideas might have previously ended up as stranded assets because they were too far ahead of the curve or not relevant to Alcatel-Lucent's current customers. So far, Kim says he has considered about 150 proposals, routed to him through a semi-annual companywide "call for ideas." He has green-lighted fewer than 10. Each one, in his view, has the potential to recoup six times its initial investment and expand Alcatel-Lucent's reach into entirely new businesses. Once a proposal is accepted by Kim and Wim Sweldens, who runs the day-to-day venture business, a team—usually 15 to 50 people—gets a book-on-tape copy of Good to Great (Swelden is a fan of business guru Jim Collins) and is whisked into sequestered space.

These projects have been named, at Kim's direction, after the rivers of the world, since he believes innovative ideas start small, "like a stream." The first, originally named Evros (after the river in Greece), emerged from development this past fall. A small, battery-powered wireless card that's always on and has its own operating system and wireless capabilities, Evros plugs into any laptop. It is being marketed to corporations as a security tool. "I'll tell you what this device is, contrary to what our marketing people say this device is," Kim tells me. "The laptop is really a revolutionary idea, because it allows you to move around, and you're not tied to a desktop. But you have to pay a price. It gives you mobility, but it only allows for an architecture where you reach into the network. There's no way for the network to reach out to you." Evros enables companies to reach their workers (actually, their workers' laptops) at any time. If a laptop in the field is stolen or lost, a CIO thousands of miles away can lock it down and protect its data. This is what Alcatel-Lucent marketers perceive as its main selling point. Kim sees larger possibilities. If a CIO wants to install a software patch overnight, for instance, he or she can do that, too. And software developers could write applications for Evros that would allow laptops to download email faster from company networks, or automatically seek out content. Kim thinks the product is a worthwhile gamble. "It took Apple two years to sell 1 million iPods," he says, "and then it took off and became a platform. Can you sell 1 million Evros? Yeah, I think so."

If indoor cellular receivers and Evros catch on, would the Labs rejoin the innovation vanguard? Competition among telecom companies selling femtocells will likely be fierce. And as for Evros—which has been rechristened the "OmniAccess Nonstop Laptop Guardian"—nothing is more difficult than creating from scratch a market for new business products. "I have another project called Yangtze," Kim says, referring to a whispered-about telecom-equipment venture that is due out next year; he thinks it has the potential to fundamentally alter the way wireless and wireline carriers deliver information and communication services (though he declines to offer specifics). But even with a promising pipeline, Bell Labs confronts long-term issues. Its population of scientists is aging, and its main location—Murray Hill, New Jersey, just outside New York—makes it difficult to lure the talent that's now drawn to Silicon Valley and Route 128.

"I'm cautiously optimistic, but I've always been cautiously optimistic," Kim says of the Labs. "I will acknowledge the challenges we're facing. They're not small." Most Wall Street observers second this notion, pointing to a dim short-term outlook for Alcatel-Lucent. Analyst Per Lindberg of Dresdner Kleinwort has even begun to call for the spin-off of Bell Labs. I ask Kim if he thinks the era of the big research lab is over. "If I believed that," he says flatly, "I wouldn't be here." He has taken this job not because it is easy, he says, but because it is difficult.

Lately, Kim has been thinking about the Black-Scholes model, a set of mathematical equations formulated in the 1970s that forever changed how markets operate by providing a way to price options. In simplest terms, Black-Scholes helps financial institutions reach more precise calculations of risk and reward. Kim may have developed his innovation cube as a nifty visual for a speech, but he soon realized that by plotting Bell Labs' innovative endeavors in the three-dimensional box—based, again, on impact, time to market, and process—he could understand whether his bets were sensibly distributed. Perhaps the cube could do for innovation what Black-Scholes did for the financial markets.

There's no proven model, though, for a well-balanced innovation portfolio. Is your company pursuing too many near-term projects? Is it overestimating their impact? How much should you spend on internal research as opposed to buying new technologies? Research dollars are increasingly limited, and prioritizing ideas is crucial. So Kim has asked his best scientists to address what he calls "a really, really tough problem": quantifying innovations in a mathematical formula. "It doesn't have to be perfect. But if we can create a model that is used by a lot of people as a common tool, that would be a great contribution."

This is not just an example of the kind of "crazy" risks that Kim is willing to take. It's also emblematic of the abstract, ambitious long-shot projects that only a large corporate research operation like Bell Labs would attempt. Kim can search for a formula to define innovation, precisely because he has at his disposal a slew of world-class mathematicians. He can test whatever proposals or theories emerge with distinctive rigor because the Labs' "feedback loops" filter ideas through many minds in a variety of scientific disciplines. An independent entrepreneurial venture wouldn't have the resources—financial or human—to apply to such a project.

One could, of course, view this formula-seeking exercise as self-serving: The scientists at an embattled multidisciplinary lab are working hard to prove the utility of a multidisciplinary lab. Yet it's hard to argue that over its long history Bell Labs and its peers haven't transformed society by solving problems that previously seemed impossible to solve. Kim is quick to point out that plenty of mind-bogglingly daunting challenges are ahead that will require transformational efforts. The future of communications, he says, will be defined by an industry yet to be created. Not the kind of business that simply delivers information (like Alcatel-Lucent's) or organizes information (like Google's) but one that manages the rising tide of information so that it doesn't overwhelm us. The greatest business and engineering challenge on the horizon, he says, is "to organize information in a way that allows you to live the way you want to live, to take time off with your kids without fear you're going to miss out on something." In his view, this is precisely the kind of work—unwieldy, complex, onerous—that is suited to the strengths of a big scientific organization.

Kim is an optimist, both in regard to technology and to life. He knows from personal experience that the future can be better than the past. The innovator, he says, should never lose sight of the actual goal of innovation: not new technology, but what new technology can deliver to us—awareness, insight, interaction. And freedom.?

Jon Gertner is writing a book about Bell Labs, which is in the New Jersey town where he grew up.

A version of this article appeared in the February 2008 issue of Fast Company magazine.