Special Report August 30, 2007, 11:03AM EST

Radical Collaboration

(page 4 of 4)

These days IBM managers are particularly sensitive to cultural issues. Mukesh Khare, a project manager, says that typically in group discussions, Toshiba engineers will say "yes" to signal they understand a proposal—not necessarily that they agree. Later, he'll circle back to them and find out what they really think.

Mutual respect is also key to making these link-ups succeed. When IBM, AMD, Sony, and Toshiba worked together on a semiconductor breakthrough called low-k, metal gate, which makes it possible to place circuits closer together on a chip, each company brought a particular expertise. AMD, for example, was adept at devising experiments to test the group's theories. "I used to have trepidation about these relationships, but not now," says IBM Fellow Dan Edelstein. "Their work was unassailable."

Motto For the 21st Century: Network or Die.

Alain Kaloyeros isn't your typical college professor. The deeply tanned, 51-year-old physics professor at the University at Albany drives a Ferrari F430 F1 Spider with a 500 horsepower engine and a vanity plate that reads: Dr Nano. Readying for a BusinessWeek interview, he tore the tops off of 15 packets of Splenda and poured them into a 16-ounce cup of coffee. "I need sweetness in my life," Kaloyeros explained.

This high-octane prof is one of IBM's key partners in its chip research network. And he embodies two of the most important requirements of successful alliances: nerve and commitment.

In the late 1990s, Kaloyeros and IBM's John Kelly dreamed up a plan to make the Albany campus of the State University of New York a hotbed of semiconductor research. The pair relentlessly pursued their vision until they got the state and corporate funding they wanted. Now, 10 years and $4.2 billion later, Albany Nanotech boasts a staff of 1,800 university and corporate scientists and is the most advanced university chip research complex in the world.

There, Big Blue and its partners gain access to the latest chipmaking equipment and design the processes that they'll use when those machines are installed in their own manufacturing plants. That gives them a head start on other companies that can't afford such early access. And it gives members of the alliance a chance to make up ground on Intel, which, thanks to its vast resources, is typically a year ahead in advancing to each successive generation of technology.

The hookup between IBM and New York State has been something of a high-wire act. Both sides ran into funding hurdles. Now the major investments have been made and the rewards are rolling in. For those who fought the funding wars, the formula for success is simple: Share the risk and stick to the vision. "John Kelly went back to IBM numerous times and said, 'This is going to happen.' He really stuck his neck out," says former New York Governor George Pataki, who backed the project. "Fortunately, the state came through."

IBM's alliances with the likes of Albany Nanotech, AMD, and Freescale have paid off just the way its leaders hoped. Now, the company is expanding its innovation ecosystem to include suppliers of chip materials, chemical companies, and chip-design software companies. "This is a model that will not only survive but will prosper," predicts Kelly, who is now director of IBM Research.

For pioneers such as Kelly and Kaloyeros, there's no turning back. For other R&D leaders, an open-innovation strategy is still new and risky. But as more companies embrace it, the pressure will be on the holdouts to reach across organizational borders in search of ideas and greater productivity. They can delay, but they could be left far behind if they don't play.

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Hamm is a senior writer for BusinessWeek in New York.