At Bell Labs the combination of the three "F-Factors" was very effective.
Funding was simple at Bell Labs. Support was decided not by a committee or a panel but by your manager, who most of the times was an excellent scientist himself, after you had discussed with him your ideas and needs.
Bell Labs ensured its people were free to pursue problems and no one pressed us to follow certain research paths. Creative people thrive on challenge and Bell made sure there were a lot of problems for us to tackle. There was also a lot of cross-fertilization of ideas, though I don’t want to give the impression that it was always easy. Peer pressure can be brutally blunt and more than once I was told, "That will never work!" It was deeply satisfying to come up with a solution to the insoluble.
Pressure was also created by the Darwinian approach at Bell Labs. If you did not come up with something significant, say within more or less five years after being hired, you would be politely asked to leave. I called the totality of the desire to tackle exciting problems and the demand to perform at your best, "good pressure." Good, because it encourages the focus necessary for major advances in science and technology.
Just as Bell Labs implemented them to encourage innovation, the "F-Factors" can guide any company toward creating an environment where innovation can thrive. A critical question is how to achieve focus without unnecessarily curtailing freedom. For that to occur, researchers must have open access to the most important problems and challenges a company faces. These problems often come in the very practical, non-academic context of new products that could be enabled by an innovation - this is the situation of a problem looking for a solution. More interesting is the opposite situation - that of a solution looking for a problem, an invention that creates a new application. Take the laser that created many applications that could not be fathomed at the time it was invented, such as fiber optic communications. IEEE Medal of Honor Herbert Kroemer in his 2000 Nobel Lecture in Physics called this process the "Lemma of New Technology": The principal applications of any sufficiently new technology have always been and will continue to be applications created by that technology. Companies, managers, funding agencies and science policy wonks should keep in mind this often forgotten wisdom in their quite often futile efforts to plan and guide research because the most impactful fruits of innovation are largely unpredictable.
Innovation at Harvard