MIDDLETON, Wisc.–Years ago, Stanford administrators visited their legendary engineering-department head Fred Terman to tell him they were so pleased with his work that they were erecting a new engineering building for the labs and the students.

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Terman, whose students labored and learned in a Quonset hut, demurred, or so the story goes. A brand new, clean and organized building (with that new-carpet smell!) would hurt innovation and productivity because students and faculty would be more focused on their newly lush surroundings and less on solving problems, rolling up their sleeves and building things.

He eventually lost the argument, but point taken. Today, most engineers live and work in cubicles in a culture that's made Dilbert creator Scott Adams a rich man as he lampoons it. This is even the case when a company has manufacturing operations within the same building as engineering.

And that, as Fred Terman might say, is just nuts. Why would you want two of the most important aspects of your product organization separated?

It's a question that Fred Foster confronted when he built a new facility here, on the outskirts of Madison: