Under [Vannevar] Bush's plan [of the 1940's], universities researched basic science and then industry developed these findings to the point where they could get to market. The idea of R&D as two distinct activities was born. Firms soon organized themselves along similar lines, keeping white-coated scientists safely apart from scruffy engineers.

This approach was a stunning success. AT&T's Bell Labs earned six Nobel prizes for inventions such as the laser and the transistor. IBM picked up three, two from its Zurich Research Laboratory alone. And Xerox's Palo Alto Research Centre (PARC) devised the personal computer's distinctive elements, including the mouse, the graphical user interface and the Ethernet protocol for computer networking (although it was criticized for failing to commercialize such leaps forward).

Now the big corporate laboratories are either gone or a shadow of what they were. Companies tinker with today's products rather than pay researchers to think big thoughts.

You tinkerer, you!

The "smart people on the hill" method no longer works, says Eric Schmidt. "This is getting to be a new kind of game," says John Seely Brown.

This reflects IBM's transition into "services science". The services business is becoming commoditized, as hardware did before it, and IBM knows it must add intellectual property to its offerings.

And not just IBM, of course. I argue that Cisco's moving in this direction, too.

The fusion of research and development is meant to solve the central shortcoming of Bush's plan: how to turn ideas into commercial innovations. Great ideas may moulder without a way to develop them.

Hmm, mmm.

Failure is an essential part of the process. "The way you say this is: 'Please fail very quickly -- so that you can try again'," says Mr Schmidt.

Yes, yes, yes!