Giant service providers such as AT&T Inc. (NYSE: T) are not known for innovation. In fact, many of those arguing for net neutrality believe that large ISPs actual stifle innovation. (See FCC Chairman Defends Calls for Net Neutrality.)

But under a program implemented by AT&T's CTO John Donovan, the company is actively working to make its slogan, "Rethink Innovation," more than just a marketing tool, by mining the brain trust AT&T has in place at AT&T Labs and throughout the organization. At AT&T's recent Analyst Day in Bedminister, N.J., Sanjay Macwan, assistant vice president for research and development for AT&T Security, explained how this new program is involving employees across AT&T.

When he came into the CTO post two years ago, Donovan initially created a 14-person Tech Council that actively sought ideas and did best practices research across the many different functions within AT&T. From that effort came the notion of an innovation pipeline within AT&T that used a three-phased approach, Macwan says.

The hard part was cutting through all the layers of bureaucracy and the many different functional silos within AT&T.

"We wanted to think about how to drive innovation across different functional groups," Macwan says.

The answer was a TIP portal, into which any employee can not only pitch new ideas but also comment on them or add suggestions, promoting greater discussion.

"Any employee can log into the TIP portal and enter their ideas," Macwan said. "Then employees can rate ideas up and down. What we got were honest comments, sometimes brutal and merciless so you had to have a thick skin, but the ideas that got the most support were the ones that went on to the VC committee."

That Venture Capital group, consisting of major executives within different AT&T segments such as business and consumer, as well as the CTO and CIO, looks at the 10 top-rated ideas from each quarter. "The idea originator does the pitch, with help from advisers that AT&T provides," Macwan explains.

The VC group then picks the top three ideas to fund. More than 2,000 ideas were "crowd sourced" in 2009 and seven concepts have received the first round of VC funding, with several now moving into Series B funding, Macwan says.

The amount of participation by AT&T employees varies widely, he admits, with some employees becoming passionately involved and other much less so. AT&T has built complex algorithms into its TIP portal so that social commenting and voting is also rated -- employees develop a "reputation index" based on their previous activity. By participating, employees earn points, which they can use as personal "wealth" to be an angel investor in someone else's idea.

When ideas are chosen, the originators get a $5,000 reward, but angel investors can also earn up to $5,000 for their contributions, and there are awards given for both the top idea and the "wealthiest" individual, based on money earned through smart participation.

Employees have avatars that are used in the online discussion, Macwan says, and one of the payoffs for employees is seeing a CTO or CIO avatar in the crowd during a particular session.

"There are also specific events -- an Executive Challenge -- that puts a problem out to the entire company as a challenge," Macwan says.

The ultimate phase of the process will be a customer challenge, he adds, as AT&T opens up to innovation from partners, suppliers, and others "for the benefit of the industry as well as our mutual benefit."

AT&T has opened up sites in three cities -- Palo Alto, Calif.; Tel Aviv; and Plano, Texas -- for suppliers to come and work with AT&T, so that technical experts can pool resources, Macwan says, and Alcatel-Lucent (NYSE: ALU) is one vendor that has already done this.

As part of this process, AT&T is also rewriting its intellectual property agreements, Macwan says, to reflect AT&T's invitation to others to jointly collaborate in innovation, but that process is not yet finished.

— Carol Wilson, Chief Editor, Events, Light Reading