Let’s not mourn the demise of the Natlab

There’s no scenario in which the Natlab would have survived – and yet it lives on, argues Paul van Gerven.

Paul van Gerven

When did the Natlab go under? Many Natlab oldtimers will say in 1989, when contract research was introduced. According to them, the invention engine was being deprived of much-needed oxygen as it was made dependent on funding from the product divisions. In their view, the Natlab needed to be able to grow green tomatoes without too much outside interference and pass them along to the conglomerate to mature.

Others will point to the late 1990s, when the famous laboratory – by now considerably slimmed down – merged into Philips Research. This brought an end to the Natlab’s privileged position within the research organization. The name itself also disappeared from the organizational charts, but not from the collective memory.

Even then, Philips maintained a central research organization. In the 21st century, it lost another important characteristic of the Natlab due to cost-cutting and especially by divesting divisions – multidisciplinarity. Vertically integrated Philips used to have a specialist on board for just about every subject. Following the divestments, the company increasingly had to source knowledge and technology from outside.

Even after the recently announced interventions by CEO Roy Jakobs, a little bit of the Natlab remains. While the vast majority of research will be transferred to the business units, ten percent of the R&D budget is reserved for teams in Eindhoven to cultivate “breakthrough innovations.” There are a few tomato plants left.

The de-facto demise of the Natlab and the floundering of Philips led to nostalgic, not to say somewhat vitriolic reflections. For a long time, the Natlab provided its parent company with one winning technology after another. Inventions in lighting, television, semiconductors and audio made Philips a titan of industry, only to squander that position in the last thirty years. “Philips has been trying in vain for decades to grow by cutting jobs, and now it’s also cutting its research budget,” wrote Chris Paulussen in Eindhovens Dagblad in response to “the dismantling” of the Natlab.

It’s worthwhile to consider another perspective as well: all great industrial research laboratories of yesteryear have disappeared. There are plenty of reasons for this. Research came under pressure when the economic and technological boom of the postwar decades ended and more competitors entered markets. At some point, all the low-hanging fruit had been picked; the laser and the transistor, which started new fields of technology, can only be invented once. Finally, an increased emphasis on shareholder value discourages long-term research.

Philips actually stuck with a centralized research organization for a long time. Perhaps too long. The company’s top brass has always kept believing that research is the best way to outperform the competition – a concept that honors the Natlab. Het Financieele Dagblad recently calculated that Philips, despite a turbulent two decades, still outspent competitor Siemens Heathineers in R&D (measured as a percentage of sales). After Jakobs’ intervention, both companies end up at about the same investment level.

However productive the Natlab has been, there’s no conceivable scenario in which it could have continued to exist. Therefore, let us not look back, but rather celebrate what it’s brought us. The Dutch industrial landscape is dotted with companies that were built on Natlab inventions or that benefited from the brilliant alumni who eventually left the nest. That legacy will prove far more lasting than the compact disc.