INNOVATION A 21st Century Imperative

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INNOVATIONA 21st Century Imperative

• Charles M. Vest
• President Emeritus, MIT
• NERCOMP
• Worcester, MA
• March 20, 2006

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Innovate or Abdicate-Sam Palmisano, CEO, IBM
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Every morning in Africa a gazelle wakes up.It
knows it must outrun the fastest lion or it will
be killed.Every morning in Africa a lion wakes
up.It knows it must outrun the slowest
gazelleor it will starve.
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It doesnt matter whether youre a lion or a
gazelle- when the sun comes up, youdbetter be
running.-Richard Hodgetts
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Why Everyone is in a Hurry.
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21st Century Competition Requires Fast Innovation

• In todays competitive environment, many
  companies set goals for 20-40 of their business
  to come from products developed within the last
  2-4 years.
• The specific goal and speed depends on the
  product sector.

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Something to Think About

• Goldman Sachs analysts estimate that in about a
  decade 80 of the worlds middle-income consumers
  will live in nations outside the currently
  industrialized world.

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Just 15 Years Ago

• No World Wide Web
• No pervasive cell phones or wireless devices
• No sequenced human genome
• No carbon nanotubes
• No dot-com phenomenon

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Four Facts Three Consequences One
Principle And an Irony
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Four Facts

• People everywhere are smart and capable.
• Science and Technology advance relentlessly.
• Globalization is a dominating reality.
• The Internet and World Wide Web are democratizing
  forces.

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Three Consequences

• Individuals must innovate.
• Companies must innovate.
• Nations and regions must innovate

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One Principle Competition drives Excellence and
innovation.

• Competition among universities
• For the best students, faculty, research, and
  scholarship
• Merit-based awarding of research grants
• Competition among companies
• To create new markets
• To get to market first
• To gain market share

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An Irony

• In the 21st century Cooperation and
• Competition reinforce each other.

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Americas Comparative Advantage

• A Strong ST Base
• Coupled to a Free Economy
• Built on a Base of Democracy
• In a Diverse Population.

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Americas Innovation System from 1945-2005 A
Brief history
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U.S. Science Policy since 1945

• It began with a letter from President Roosevelt
  to Vannevar Bush.
• Roosevelt asked how the U.S. science community
  could work in peacetime to secure the nations
  economic vitality, health, and security.

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The Bush ReportScience the Endless
FrontierPrimary Recommendations

• Universities should be the primary national Basic
  Research Infrastructure.
• Federal dollars do double duty
• Procure research results
• Educate the next generation
• Award research grants based on competitive
  merit.
• Establish a National Science Foundation.

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The Bush Reports Economic Development
Assumptions

• Linear Basic Research --? Applied Research
  --? Product Development --? Market Products
  and Services
• Laisser-faire Do basic research in
  universities and leave its commercialization to
  chance and market forces.

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What EmergedThe U.S. Innovation System

• Government, Academia, and Industry working
  together to
• Create new knowledge and technology through
  RESEARCH
• EDUCATE young men and women to create and
  understand the new knowledge and technology and
• Move it to the MARKETPLACE as new products,
  processes and services.

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The Vannevar Bush Modelis an Enormous Success

• Economists broadly agree that more than 50 of
  U.S. economic growth during the last 60 years was
  due to technological innovation.
• Much of the technological innovation came from
  our research universities.

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Or, if you prefer a longer-term view
Everything we know about history, technology, and
economic theory tells us that an increase of this
magnitude would not have been possible in the
absence of technological change. --Paul Romer
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University Innovations(Sole or Dominant Role)

• Computing
• Laser
• Internet
• GPS (fundamentals)
• Numerical Controlled Machines

• WWW (organization)
• Financial Engineering
• Genetic Revolution
• Modern Medicine
• Etc.

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From 1945 - 1985

• American research universities, public and
  private, grew to excel.
• American companies dominated
• Large corporations dominated- especially mass
  production.
• Corporations developed massive central research
  laboratories
• Attracted outstanding university graduates
• Conducted outstanding pure and applied research
• Contributed to the commons of ST knowledge

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Tectonic Shifts in the 1980s and 1990s

• Japanese companies suddenly dominated
  manufacturing and U.S. manufacturing companies
  could not compete.
• Quality
• Throughput
• Product cycle times
• American entrepreneurship expanded explosively,
  driven by
• Information technology from microprocessors
• The Internet
• Biotechnology

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U.S. Corporations Responded

• Painful, basic transformations
• Downsizing
• Process Management
• Quality Control
• RD merged with product development
• Many American companies emerged strong and
  globally competitive.
• But the U.S. innovation system had changed.

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The Japanese Total Quality Movement was the
Major Innovation of the 1980s.It changed
everything.
Comment
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Evolution of U.S. Corporate Innovation and RD

• 1970s Central Corporate Research Labs
• 1980s RD Absorbed and Transformed into Product
  Development
• 1990s Purchase High-Tech Startups to acquire
  Innovation

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Evolution of U.S. University Research

• Basic Scientific Research remains the core, but
• 1970sThe Engineering Science Revolution
• 1980s Design, Manufacturing, Computer Science,
  Joint Management/Engineering
• 1990s Life Science, Interdisciplinary, More work
  in Pasteurs Quadrant

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U. S. Innovation

• In any event, Long-Term Basic Research is the Key
  to our Future.
• But, things are changing.

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A New Century

• 20th Century
• Physics, Electronics, and High-Speed
  Communications and Transportation
• 21st Century
• Biology and Information,
• but also Energy, Water, and Sustainability

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21st Century Change
Science Engineering Research Interdependent,
Interdisciplinary, Pasteurs Quadrant
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Interdependent

• Science now depends on technology.
• Technology now depends on science.

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Interdisciplinary

• The Genetic Revolution in medicine and
  agriculture is an integration or fusion of
  Biology, Combinatorial Mathematics, Robotics and
  Automation, Microfabrication, and
  Clinically-Based Medical Insight.
• Nanotechnolgy is a rapidly evolving integration
  or fusion of technologies and science that
  involves almost every discipline.
• Synthetic Biology is an amazing melding of Life
  and Information sciences.

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RD is increasingly performed in Pasteurs
Quadrant
Research is inspired by Consideration of use?
No
Yes
Pure Basic Research (Bohr)
Use-inspired Basic Research (Pasteur)
Quest for Fundamental Understanding?
Yes
Pure Applied Research (Edison)
No
Adapted from Pasteurs Quadrant Basic Science
and Technological Innovation, Donald E. Stokes
1997
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RD is increasingly performed in Pasteurs
Quadrant
Research is inspired by Consideration of use?
No
Yes
Pure Basic Research (Bohr)
Use-inspired Basic Research (Pasteur)
Quest for Fundamental Understanding?
Yes
Former University Presidents (Vest)
Pure Applied Research (Edison)
No
Adapted from Pasteurs Quadrant Basic Science
and Technological Innovation, Donald E. Stokes
1997
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Good News This is the Most Exciting Era Ever
for Science and Technology.
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What We See Today.

• Exponential advances in
• Knowledge
• Instrumentation
• Communication
• Computation
• These create huge possibilities.
• Students are crossing disciplinary boundaries in
  unprecedented ways.

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Engineering Frontiers of this Exciting Era
Macro Energy Environment Manufacturing Communicati
ons Logistics
Bio Info Nano
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Engineering Frontiers
Macro Energy Environment Manufacturing Communicati
ons Logistics
Bio Info Nano
Smaller and Smaller Faster and Faster More and
More Complex
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Engineering Frontiers
Macro Energy Environment Manufacturing Communicati
ons Logistics
Bio Info Nano
Larger and Larger More and More Complex Great
Societal Importance
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Frontiers and Synergies
Natural Science
Macro Energy Environment Manufacturing Communicati
ons Logistics
Nano Bio Info
Science and Engineering Are Merging.
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Frontiers and Synergies
These engineering systems need social science,
management, and humanities / communications.
Macro Energy Environment Manufacturing Communicati
ons Logistics
Nano Bio Info
Social Science
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Frontiers and SynergiesMust be reflected in
university education.
Natural Science
Macro Energy Environment Manufacturing Communicati
ons Logistics
Nano Bio Info
Social Science
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21st Century ChangeWhere the expertise is and
will be.
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Where the Expertise is
Source Competitiveness Index 2007, Council on
Competitiveness, Washington, DC
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Where the Expertise will be
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First Engineering Degrees(China Rises.)
China
Japan
US
Source Science and Engineering Indicators 2006,
National Science Foundation, Washington, DC
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21st Century ChangeThe Rise of RD and
Innovation in the Service SectorEspecially in
North America
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What we produce is changing. (The Information
Age) U.S. Employment by Sector History and
Projection
Source Stuart Feldman, IBM Research,
Presentation at Carnegie-Mellon University, 29
June, 2005
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Source IBM Research http//www.research.ibm.com
/ssme/
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Source Science and Engineering Indicators 2004,
National Science Foundation, Washington, DC
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21st Century ChangeInnovation is
Global.Investments in RD
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U.S. RDOn Top / Losing Share

• The U.S. leads in RD investments
• The U.S. is among the leaders of the pack in
  RD/GDP.
• However, our global share declined in every
  category from 1986 to 2003.
• Domestic RD -9 New U.S. Patents -2
• Sci. Publications -8 Sci. Researchers -8
• SE BS Degrees -10 New SE PhDs -30

Source Competitiveness Index, Council on
Competitiveness Nov. 2006
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Location and Innovation
A Debate
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Location Does Not Matter.

• The World is Flat -- Tom Friedman
• In 1989 the Berlin Wall came down, and
  Microsofts Windows went up.
• 1.5 trillion worth of optical fiber connects the
  world.
• Globalization has accidentally made Beijing,
  Bangalore, and Bethesda next door neighbors.
• Many jobs are now just a mouse click away from
  anywhere..

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Location Does Matter.

• The power of regional innovation clusters
• Proximity of small companies and corporate labs
  to universities
• Venture capital tends to converge.

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Both are correct. But in any event,

• Globalization is the new reality.
• Collaborative innovation - locally or globally -
  is the trend.

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GLOBALIZATION Our Reality and Opportunity
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Life today isnt simple.

• Sony and Toshiba
• Excel at Computer
• Games
• IBM excels at
• sophisticated chips.

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Life today isnt simple.

• Sony and Toshiba
• Excel at Computer
• Games
• IBM excels at
• sophisticated chips.

IBM, Sony, and Toshiba Develop Cell
Processors In Austin, TX
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Life today isnt simple.

• Sony and Toshiba
• Excel at Computer
• Games
• IBM excels at
• sophisticated chips.

IBM, Sony, and Toshiba Develop Cell
Processors In Austin, TX
Los Alamos orders Largest Supercomputer Based on
these chips
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So New Innovation Models Emerge
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For exampleHarry Chesbrough (Harvard Business
school)

• Open Innovation
• Companies today must integrate the best ideas, no
  matter where they originate.
• In other countries
• In other companies or laboratories
• Even in competing organizations.
• New, dynamic business models are needed for an
  open, connected world.
• Licensing
• Partnering
• Joint Venturing

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OrSam Palmisano(CEO, IBM)

• The Globally Integrated Enterprise
• Supercedes the multinational corporation
• Driven by globally shared technologies and
  standards built on global IT
• Focus shifted from products to production
• New borderless strategy, management, and
  operations for integrated production and value
  delivery.

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But people are concerned byManufacturing
Migration

• From the U.S.
• To Taiwan
• To Korea
• To China
• To Viet Nam
• An Inevitable Migration?

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Inevitable or not, this is serious business.

• Between 2000 and 2003, foreign firms built 60,000
  manufacturing plants in China.
• In 2004 chemical companies closed 70 facilities
  in the U.S. and have tagged 40 more for
  shutdown.
• 120 major chemical plants are under construction.
  
• One is in the U.S.
• 50 are in China.

Source Palmisano, Foreign Affaiirs (May/June
2006) Rising Above the Gathering Storm
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Or consider American IT manufacturing jobs

• 400,000 jobs were lost from Jan. 2000 - Dec.
  2002.
• Overall U.S. manufacturing declined 6 1997-2001,
  but computer manufacturing declined 20 .

Source George Scalese, PCAST, 2003
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Industry, RD, and Innovation are Migrating and
Morphing. Why?

• Economics and Wage Rates
• The Internet and World Wide Web
• Tax and Trade Policies
• But also

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Industry, RD, and Innovation are Migrating and
Morphing. Why?

• Economics and Wage Rates
• The Internet and World Wide Web
• Tax and Trade Policies
• But also Speed and Complexity

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To Summarize

• The U.S. is the most innovative nation on the
  planet.
• We have the best research universities.
• We are king of the hill in RD.
• We have comparative advantages
• Strong ST base
• Free-market economy
• Democracy and freedom
• Diverse society.

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To Summarize

• The U.S. is the most innovative nation on the
  planet.
• We have the best research universities.
• We are king of the hill in RD.
• We have comparative advantages
• Strong ST base
• Free-market economy
• Democracy and freedom
• Diverse society.
• But, we cannot be complacent.

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Securing the Future

• Building a Base for U.S. Competitiveness and
  Innovation

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In the Beginning was
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And there was light
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NII Agenda

• TALENT
• INVESTMENT
• INFRASTRUCTURE

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Recommendations of the Augustine Committee

• Ten Thousand Teachers, Ten Million Minds
• Sowing the Seeds
• Best and Brightest
• Incentives for Innovation

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And Then a Miracle Happened
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?
?
Council
Academies
President
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MEDIA ADVISORY March 5, 2007 SENATE
LEADERS TO ANNOUNCE NEW COMPETITIVENESS
LEGISLATION Washington, DCMonday at 200 p.m.,
Senate Majority Leader Harry Reid, Senate
Republican Leader Mitch McConnell, Senator Jeff
Bingaman, Senator Ted Stevens, Senator Joe
Lieberman, Senator Pete Domenici, and Senator
Lamar Alexander will join to announce the
introduction of the America COMPETES Act. This
new bipartisan legislation will make our country
more competitive in the global marketplace by
significantly increasing federal research
investment and strengthening educational
opportunities in science, technology, engineering
and math for students of all ages. WHO Senate
Majority Leader Harry Reid Senate Republican
Leader Mitch McConnell Senator Jeff
Bingaman Senator Ted Stevens Senator Joe
Lieberman Senator Pete Domenici Senator Lamar
Alexander WHAT Press conference on the
America COMPETES Act WHEN Monday, March 5, 200
p.m. WHERE Mansfield Room, S-207, U.S. Capitol
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Securing the Future
Building a Base for U.S. Competitiveness
and Innovation
It may actually come to pass.
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Thank you.