Promoting Innovation

The Role of R&D Investment

NGA’s Innovation America Initiative Kick-OffPhoenix, December 5, 2006

Mary Jo Waits, Center DirectorPew Center on the States

The Idea-Driven Economy

“The first 100 years of our country’s history were about who could build the

biggest, most efficient farm.

The second 100 years were about the race to build efficient factories.

The third 100 years are about ideas.”

-- Seth GodinFast Company, August 2000

New Growth Theory: Stanford Economist Paul Romer’s Perspective

Ingredients

• Intellectual capital

• Human capital

• Financial capital

Recipes

• New ideas

• Entrepreneurs

• Networks

Results

• Productivity

• Prosperity

• Cluster vitality

Source: Collaborative Economics

In 1971, a small coffee shop starts in Seattle’s funky Pike Place Market with a new “recipe”

“Recipes” combine resources in new and different ways

“Recipes” combine resources in new and different ways

Nanotech: You start with building blocks like nanowires, nanotubes, and nanoparticles. Put together one way, these building blocks make a computer. Put together in a different way, they make a biological sensor.

Biology is another example. You have a limited number of building blocks, like proteins and DNA. Depending on how you put them together, you end up with a tissue, a worm, or a human being.

Charles Lieber, Harvard Chemistry Professor & co-founder, Nanosys

Implications for Companies New Business Model

Companies and entrepreneurs moving from “closed innovation” (in-house research capability) to “open innovation” model.

“Many companies are starting to innovate with research discoveries of others.”

Harvard Professor Henry Chesborough, Open Innovation, 2003

Small-sized research facilities adjacent to top university research centers

Intel expects to benefit from proximity:

gain early access to promising new technologies

Intel’s “lablets”

Applies to all companies, not just high-tech

Procter & Gamble names director of external innovation—Goal: 50% of its innovation from outside the company in 5 years

Why? Inside more than 8,600 scientists advancing the industrial knowledge that enables new offerings; outside are 1.5 million.

“So why try to invent everything internally?”

Implications for WorkRe-Valuing the Right Brain….

Logical Mathematical Linear Sequential Verbal Rational Serious

Intuitive

Artistic

Nonlinear

Simultaneous

Visual

Emotional

Playful

See Daniel Pink, “The Whole Mind: Moving from the Information Age to the Conceptual Age”

Can StayWill Go

Implications for States Shifting Sources of Wealth

Created Assets Top universities Research centers Talented people Entrepreneurial

culture Networks Vibrant downtowns

Inherited Assets Geography Climate Natural Resources Population

From: To:

Three Things to Remember

1. The 21st century will be driven by innovation.

2. Many of the factors that give regions and states an innovative edge are created—not inherited.

3. The new century will be a highly competitive one—especially as places realize that key features are “buildable” and thus can be had by nearly any place that puts its mind to it.

Big Money is being Invested in R&D Assets

California: $3 B for Stem Cell research

Florida: $ 800 M for East Coast facility for Scripps Research Institute and Burnham Institute for Medical Research; state covers operating costs for 7 years ($310 M)

Georgia: $400 M for Georgia Research Alliance allocated to endowed chairs

Kansas: American Century Funds founder is spending $1 B to build mega-biomedical research complex

Indiana: Lilly Endowment offers $100 M to recruit “intellectual capital” to state colleges and universities

Question is, will research turn into enterprises ?

Important to have Strategic Continuum of Programs

• Arizona Bioscience Research Enhancement Fund

Gaps: Tactics:Drivers: Drivers:Research Technology Development

BioFirmFormation

Firm Expansion/Attraction

• Consortia/Centers around Tech Platforms

• Federal Funds

• Matching Challenge Program

• Technology CommercializationProof of Concept Fund

• Bioscience SBIR Support

• Bioscience Entrepreneur Assistance Cntr.

• Technology Zones

• Incubators

• University Equity

• BioSeed Fund

• Accelerators

• Research Parks

• Incentives/ Tax Study Reviews

• Marketing & Brand

• K-12 & Workforce Development

Prop

osed

Act

ions

Source: Battalle, 2002

Expertise Diversity

Interaction

Creativity

EXPERTISE means talented people

INTERACTION when people come together, there’s a better chance for the passionate exchange of ideas & synergies that create new business models, marketing plans or products

DIVERSITY is important in generating the “Next Big Thing”; people learn most by interacting with people less like themselves.

Just as important to understand Must-Haves for Innovation

Building Expertise

State-sponsored Research Funds: CA, GA,TX, NJ, NY, MI, AZ, OH, OK

Strategic, Focused Excellence: Georgia Research Alliance, CA Institutes for Science and Innovation

Talent: Lilly Endowment’s $100 M for “intellectual capital,” Georgia's 100 eminent scholars, Science Foundation Ireland recruiting 50 world-class scholars by 2008

New Fields and Young Talent: ASU’s new master’s in genomics and biotech law; new era medical schools; research funds marked for young investigators

Orchestrating Interaction

Networks: UCSD CONNECT “Meet the Researcher”, BIOCOM

ASU’s supercomputer and Engineering school moves to main street Tempe

Innovation Districts: Atlanta’s Technology Square, San Diego Torrey Pines, Research Triangle Park, PA’s Keystone Innovation Zone

Partnerships: Georgia Cancer Coalition, Joint Medical School University of AZ and ASU, CITRIS combines 4 CA universities—Berkley, Davis, Merced, Santa Cruz-- St. Louis Coalition for Plant and Life Sciences, more and more international partnerships

The Proximity Edge

Today: 3rd Biotech hub behind San Francisco & Boston

North Torrey Pines Road: Densely packed 2-mile stretch w/ Scripps Research Institute, Salk Institute for Biomedical Studies, UCSD

“We can throw a rock and hit UCSD. I can hit a golf ball and hit Scripps. Everything is within walking distance. That means more heads get together and we do a lot of collaboration.” VP at Salk Institute

San Diego: Rise of a BioTech Cluster

Putting people from Diverse knowledge fields and cultures together

Silo, Solo is Passé AZ Biodesign Institute—co-locates researchers from 3

fields; designed for interaction UC Discovery Grants stress industry-university

collaboration Incentives to encourage interdisciplinary research Right brain and left brain—”MFA is the new MBA” Wanted: Charismatic, Collaborative scientists and

researchers

Arizona’s Strategic Moves

Five “Big Bets” on an innovation future

Top Down and Bottom Up

Five “Big Bets”

Big Bet No. 1Target export-oriented, knowledge intensive clusters to build strengths in: Electronics/Information Technology Aerospace Software Advanced Business Services Optics Biosciences

Five “Big Bets”

Big Bet No. 2Prop 301, a sales tax increase which citizens approved in 2000, earmarks $1 billion over 20 years, distributed among the state’s 3 universities

Arizonans recognized that K-12, community colleges, top-tier universities are a critical infrastructure for the 21st century

In 2003, AZ legislature approved $440 million in research facilities at 3 universities—12 new research facilities

Five “Big Bets”

Big Bet No. 3Genomics – $90M raised in 2002 to jumpstart the bioscience industry with attraction of TGen and IGC

Battelle Biosciences Roadmap to develop 3 areas: Cancer therapeutics Neurological sciences Bioengineering

Five “Big Bets”

Big Bet No. 4

Personalized Medicine—The Virginia G. Piper Foundation creates a $50 million fund for purposes of attracting to AZ’s public universities, research institutes, and medical centers 10 world class scientists, engineers, researchers and physicians to make AZ a pioneer in personalized medicine

Five “Big Bets”

Big Bet No. 5Science Foundation Arizona—state allocates $35 million to make investments in new medical, scientific and engineering research and to attract top-notch research talent. Business leadership agree to raise $15 million over 5 years to support SFAz’s operation.

Lots of Alignment

Biodesign Institute at ASU BIO5 at University of Arizona Technopolis – entrepreneurial support Arizona Board of Regents - metrics for 301 funds Arizona Biomedical Collaborative—3 universities Legislature passes Angel Investor tax credit Maricopa Community College district-- $100 M of

bond issue slated for bioscience workforce prep Foundations continue to support TGen and top

talent Greater Phoenix Leadership—Bioscience Task Force Science Foundation Arizona ASU first to introduce a master’s program in

genomics and biotech law

Cities connecting to AZ’s Big Bets

Phoenix commits land and $50 M to secure TGen in downtown

Phoenix uses $250 M of voter-approved bond money to bring ASU downtown

Scottsdale invests $125 M in Los Arcos for new ASU-Scottsdale Center for New Technology and Innovation and provides support for Mayo Clinic R&D

Tucson’s UA Research Park and new Critical Path Institute Flagstaff’s NAU partners with TGen Surprise opens biotechnology incubator

More Big Bets UA/ASU Medical School Tribes plan biomedical campus Maricopa Partnership for Arts and Culture Discovery Triangle- Phoenix, Scottsdale & Tempe

Key Success Factors

Requiring funding mechanisms that create collaborative research with tangible incentives

Improving the interface between academia and industry

Facilitating contact between researchers and entrepreneurs

Focusing on areas of strength and relevance Necessitating excellence as a driver of research Using metrics that drive innovation and

competitiveness

Strategic, Sustained Effort

“There was no single defining action, no grand program… no solitary lucky break, no wrenching revolution.

Good to great comes about by a cumulative process--step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.”

Jim Collins, 2001