In 1991, Microsoft founded Microsoft Research, a division for the company's army of PhDs and scientiststo pursue the coolest, wildest, most science-fictional ideas that they possibly could, with the very noncorporategoal of expanding human knowledge.They came up with some incredible stuff. Over the years, Microsoft Research contributed to a whole mess of inventions, including Google Maps-style global mapping,voice-recognition software, and the smartwatch.The problem was, very few of those cool academic discoveries were actually making their way back to Microsoft's actual commercial products. Microsoft may have invented the tablet, but the Apple iPad ran away with the market.Meanwhile, the world of tech has changed drastically. Facebook, Uber, Google, Apple, and pretty much every other company in the tech market are trying to buildproducts that require solving really hard computer-science challenges,likeartificial intelligence and self-driving vehicles. So all of these companies arehiring their own crack internal science teams.That's why, about 18 months ago, Dr. Peter Leea longtime Microsoft Researcher, formerly of DARPA and Carnegie Mellon's computer-science departmentthought that it was time for Microsoft Research to take a risk and make some changes."Twenty-five years in the tech industry is an eternity," Lee says, and he had these "crazy thoughts" abouthow to give Microsoft Research more impact.Lee's big idea would manifest asMicrosoft Research NExT, or "New Experiences and Technologies." In its short life, NExT has been responsible for Microsoft technologies like Skype Translator, some of the intelligence behind the Cortana digital assistant, and robotslike China's beloved Xiaoice and the notorious rogue Twitter bot Tay.Behind the scenes, too, Microsoft Research NExT is responsible for the more subtle, but still important, leaps that make modern tech possible. If Alex Kipman, development lead for the Microsoft HoloLens holographic goggles, needs "four technological miracles for HoloLens," then it's a NExT team that gets the call.But building NExT required a big change in howMicrosoft Research didbusiness or, perhaps more accurately, how it didn't.What's NExT'In his "wildest dreams," Lee says, he saw maybe 15%of Microsoft Research adopting this new way of doing things. Lee loves Microsoft Research and didn't want to rock the boat too much.But when he took his ideas to Microsoft CEO Satya Nadella and Microsoft Research boss Harry Shum, they pushed him to go further."This is really interesting, but you're being way too timid,'" Lee says Shum and Nadella told him.As a result,about half of the division, around 500 researchers, was reorganized into Microsoft Research NExT with Lee at the head. Distinguished computer scientist Jeanette Wing has control of the other half of Microsoft Research, still focused on more academic areas of study.The idea, Lee says, is that "every great research mind is special." Some PhDs and scientists will still want to come to Microsoft Research to pursue the more academic experience that the company has provided for the last quarter of a century, and where science will still be pursued for science's sake without corporate oversight."There's a big part of Microsoft Research still focused on that life goal," Lee says.By splitting off NExT, though, the company is diversifying its appealfor recruiting top scientists. Companies like Facebook and Google are "snapping up PhDs like crazy," offering the chance for academicians to tackle practical problems that will have a direct and tangible benefits on people's lives, from self-driving cars to cutting-edge quantum computers.And so, NExT is designed to encourage a more entrepreneurial mindset.Science startupIf teams at Microsoft Research NExT want funding and access to Microsoft's vast store of resources, then they have to go through a process similar toany private startup.First, Lee says, each team has to "declare very clearly,a very specific goal in the world." That has to be a yes or no question, like "Can we build a bot that humans will want to interact with every day'" because it's the metric on which they'll be judged.Then, the idea has to be vetted by the so-called launch team, a group of executives who act "very similarly to the managing partners of a venture-capital firm," Lee says. If they like what they hear, then the launch team will authorize the necessary resources and the capital for the project.From there, each team is placed under the auspices of one of three groups, Lee says, as makes sense:One, led by Yi-Min Wang and focused on "execution," workson solving specific problems on a case-by-case basis. So if HoloLens needs a miracle, then Wang's team gets the call.Another, led by Norm Whitaker, is in charge of "special projects," whichis similar to Google's idea of "moonshots." Big ideas like building Microsoft data centers underwater came from Whitaker's lab.Finally,Dr. Hsiao-Wuen Hon leads Microsoft Research NExT's efforts in China, which Lee considers to be a huge opportunity. Xiaoice, the smash-hit chatbot in China that has users literally falling in love, came from Hon's team.The end result: Science from Microsoft Research has been moving into the real world much more quickly than it used to.That's good news for Microsoft, which has been betting big on cutting-edge advancements in security and artificial intelligence as it moves past Windows and into a new age.SEE ALSO:I spent 5 minutes inside the quietest room in the worldJoin the conversation about this storyNOW WATCH: Microsoft has created an AI bot that captions photos and it's shockingly accurate
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