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Creating the Conditions for Growth Within an Innovation Ecosystem

Shirley Ann Jackson, Ph.D.
President, Rensselaer Polytechnic Institute

GE Leading and Learning Conference
Ossining, NY

Tuesday, May 11, 2010

I am delighted to be here today. I want to extend my compliments to General Electric for inviting such a fascinating and diverse group of women to the Leading and Learning Conference, including Ursula Burns of Xerox, Madeleine Albright from the world of diplomacy, Li Edelkoort from the world of art and design, Wendy Kopp from the world of education, and all the remarkable women here today.

At Rensselaer as well, we believe that the best ideas arise when, for example, diplomacy meets design, or when business meets the psychology of market players, or when disciplines of all sorts interact in serendipitous ways.

At the university, we often speak of people, programs, and platforms. What we do as a university is to attract and support faculty (and student) initiatives in research and education, and to create platforms that allow the cross-pollination of ideas. For example, our Curtis R. Priem Experimental Media and Performing Arts Center has helped us create one of the finest experimental media programs in the country, where art and technology of the highest order are able to intersect. Our new Center for Architecture Science and Ecology, a New York City-based partnership with the global architectural firm, Skidmore, Owings and Merrill, is designed to bring many disciplines together, across multiple sectors, in order to create radically new and sustainable built environments. Our Center for Biotechnology and Interdisciplinary Studies houses research at the leading edge where the life sciences, the physical and computational sciences, and engineering meet. The platforms undergird what people do, and allow us to stretch into new domains of national and global importance.

So today, I want to put our work at Rensselaer within a larger context. Like GE, Xerox, and other companies and institutions, we are part of the American innovation infrastructure. In fact, it is innovation that represents our best hope for economic and social renewal, both nationally and globally, in the wake of the continuing severe economic downturn.

How can we recover the wealth and confidence lost over the past two and a half years, and create the conditions for a richer, wiser future?

Jeff Immelt has answered that question as incisively as anyone: “Technology,” he has said more than once, “is what makes people and countries feel wealthy.”

Clearly, Mr. Immelt is not referring merely to the consumption of technology, but also to its invention, development, production, and export. And, how technology can be used to elevate the quality of life for individuals and entire countries. Indeed, that is the history of American prosperity. After World War II, the United States emerged as the world’s greatest economic power, largely because it became the world’s greatest scientific and technological power — thanks to an energetic wartime partnership among industry, universities, and government in research and development.

This was extended and institutionalized after the war through government support of basic research in universities, and the advanced training of students in science, technology, engineering and mathematics. There was concomitant investment and support from, and to, industry, and the creation of robust university-government-industry partnerships in research and development.

Economists have demonstrated that the return on investment for both public and private support of research and development is robust: in the case of public investment, around 30 percent annually. So it is no accident that America’s post-war focus on scientific discovery and technological innovation coincided with a real per capita gross domestic product that nearly tripled between 1960 and 2008. In fact, in the late 20th century, some economists have attributed half of GDP growth to the discoveries and applications arising out of scientific research.

Over and over during the past sixty years, breakthrough scientific discoveries have led to new technologies, which have created new industries, which, in turn, have generated millions of good jobs.

Today, emerging fields such as renewable energy, nanotechnology, and biotechnology promise to improve many lives, and to spur substantial economic growth. The rapidly expanding revenues of GE’s Ecomagination initiative merely offer a hint of what might be. In 2008, the United Nations Environment Programme estimated that renewable energy alone could create 20 million jobs worldwide by 2030.

Yet, no matter how much we may want and need those jobs, the industries of the future will not belong to America by fiat. Developing nations such as China, India, and Brazil also are determined to take a technology-driven path to prosperity. Research and development expenditures worldwide doubled between 1996 and 2007. Developing countries are investing substantially in higher education in science and engineering, in order to create a culture of innovation — and a workforce ready for the industries of the future.

Consider the case of China. The number of students earning first university degrees in the natural sciences and engineering in China increased more than threefold from just 1998 to 2006 — to more than three times as many as in the United States. Admittedly, China has a larger population base. By 2007, China had 25 percent of the world’s researchers, and by 2008, had moved to second in the world in its publication of peer-reviewed research, behind the United States.

Fortunately, technological progress is not a zero-sum game. A world that devotes more of its resources to research and education can only be a better world. But business itself is global, and as such, it also is a world where the products of yesterday — and the jobs attached to them — are commoditized, instantly, around the globe. Continuous innovation is now demanded of us, if we hope to retain our own high standard of living.

Unfortunately, in recent years the United States has suffered a loss of focus when it comes to innovation: we do not always capitalize on our opportunities. For example, our failure to put a price on our carbon emissions and create a robust market for clean energy has allowed other countries to take the lead in the production of many clean energy technologies.

In addition, business and government have become somewhat cautious in supporting research projects, preferring less risky short-term projects, rather than the long-term, high-risk basic research that yields the most transformative innovations.

We also no longer export as much as we should. Over the last decade, as the assembly of computers and their components has moved to Asia, our trade surplus, even in high-technology goods, has turned into a substantial deficit.

Possibly most worrisome of all for our future is a looming gap between our economy’s need for scientists, mathematicians, engineers, and technologically skilled professionals — and our success in producing them.

While the World Economic Forum still ranks the United States second on its latest Global Competitiveness Index and first in innovation, it does note “institutional weaknesses” — in other words, policy weaknesses in both our public and private institutions that stand in the way of growth.

And a recent Information Technology and Innovation Foundation study found that, out of 40 nations, the United States has made the least progress over the last decade in improving its international competitiveness and innovation capacity.

To turn things around, we must turn, once again, to that historically powerful partnership of industry, government, and universities. This partnership remains vital, but there are weak points at the intersections of the three sectors that must be addressed. We need to transform the current piecemeal approach to exploiting new technologies into a true innovation ecosystem — one that helps ensure that truly groundbreaking ideas move from scientific discovery to new industry, that current enterprises are not impeded in making transformational change, and that new innovative enterprises cross the “valley of death” to sustainability — if they meet market demand.

History and the lifecycles of technologies suggest that four elements are necessary for such an innovation ecosystem:

  • First, strategic focus;
  • Second, transformative ideas;
  • Third, translational pathways that bring those ideas into the marketplace;
  • And fourth, the capital to make the system work: financial, human, and infrastructural capital, which includes advanced manufacturing capacity.

Let us begin with strategic focus.

President John F. Kennedy’s 1961 charge to the country to put a man on the moon before the end of the decade offers us an example of the startling power of strategic focus. By setting such a grand challenge, he unleashed a flood of investments in science and education, and ignited a new spirit of discovery that not only benefitted the scientists of my generation, but the United States economy as a whole.

There are important parallels between the moment of President Kennedy’s challenge and today. The glories of the Apollo era, too, grew out of the fear that America was falling behind as a scientific and technological power. Then, we feared being eclipsed by the Soviet Union. Today, many worry about being eclipsed by China.

Now, let me say that, unequivocally, it is important that other countries grow their economies, and strengthen their standards of living. However, if the United States intends to remain globally pre-eminent, two challenges clearly demand our strategic focus: first, the need to improve both our health care system and its outcome; and second, the need to address energy security and climate change.

The health care legislation signed into law last month by U.S. President Obama is intended to create a more inclusive health care system. But if that system is going to spread its benefits to all Americans, it requires policies, processes, and technological innovation of the highest order to lower its overall costs, and to improve its effectiveness. This would include electronic health records, and new ways to monitor patient health conditions in real-time, or to connect patient health information to broader databases, and to research results, in ways that allow better prevention and mitigation of disease. We know how to do electronic health records, but protocols for interoperability of systems, information and data formatting, and privacy are critical. These issues propagate forward to the other elements of a robust, integrated healthcare system.

Clearly, new treatments also are required for stubborn scourges like cancer. Technology soon may make genome sequencing and drug development so affordable that personalized medicine will become the standard. New methods of manufacture, including using microbes as pharmaceutical factories, may lower costs and guarantee the supply of new treatments. The important idea here is that, within the needs of our health care system, lie the seeds of many new industries.

On the energy front, we need first and foremost a national energy strategy. The Energy Security, Innovation, and Sustainability initiative of the U.S. Council on Competitiveness, which I was privileged to co-chair, has suggested a sensible strategy and action plan.

We must find new, renewable power sources and storage technologies, such as advanced batteries. We must find ways to use existing energy sources with less impact. We need to develop and deploy new methodologies, and technologies, to lower the energy intensity of commercial enterprises, as well as our day-to-day living. If the future of transportation is to be more electrical, we need to determine where all this electricity is going to come from, and what physical, economic, and regulatory infrastructure is needed to support such a future.

One key to this is that we must develop two forms of intelligence in our national electrical grid — the ability to deal with multiple types of energy sources, including the intermittency of renewable energy; and the ability to support smart appliances that draw electricity during low-demand periods. I know that some companies represented here today — GE clearly among them — are moving innovations into the marketplace that will have impact in these areas.

But, the strategic challenge of energy security and climate change cannot be addressed without an explosion of technological innovations, and the new industries that flow from them. One of the fundamental truths about innovation is that society’s greatest challenges and greatest economic opportunities are one and the same, as long as those challenges are faced honestly and determinedly.

However, before there can be new industries, or innovation within existing ones, there must be transformative ideas, the next key element in a vital innovation ecosystem. Game-changing ideas tend to arise out of basic research, which pushes the boundaries of human knowledge. History also shows that out of such exploration, thriving industries are born. It was basic research at the Defense Advanced Research Projects Agency (DARPA), for example, that gave birth to the Internet and also our GPS system.

Unfortunately, in recent years, across multiple sectors, we have stinted basic research to meet shorter-term goals. Many corporations have found high-risk, long-term investments difficult to justify — particularly given the attention that investors give to quarterly results. As a consequence, universities are increasingly the locus of basic research, which unites seamlessly with our mission to educate.

However, government agencies, in supporting university research, have themselves focused, increasingly, on safe, near-term bets, preferring to fund incremental projects proposed by researchers well along in their careers with a history of success. This means that the median age at which university-based researchers are offered grants is rising.

This hardly makes sense in a world that needs world-changing discoveries and innovation, which do not all emerge from the most senior researchers.

It was a Rensselaer undergraduate who, two years ago, invented an artificial cellular organelle called the Golgi Apparatus, which builds complex sugar molecules. Artificial Golgi show great promise for the manufacture of sugar-based medicines, including a safe, synthetic version of the blood-thinner heparin, one of the most widely prescribed drugs. This bioengineered synthetic heparin was developed by Rensselaer Senior Constellation Professor Robert Linhardt after more than 80 people died from contaminated, animal-derived heparin — and after decades of work on polysaccharides.  Professor Linhardt understood what caused the problem in heparin – and he understood how to create a solution. Basic research is clearly an intergenerational pursuit — at Rensselaer, and at universities and research laboratories worldwide.

Basic research is also inherently a high-risk, potential high reward endeavor. At Rensselaer, researchers have created the darkest material (most light absorbent) ever made, produced a paper battery, and attacked the flu virus, for the first time, on two flanks — at both its H and N proteins. These discoveries may transform entire industries in ways that we cannot predict today. The endpoints of basic and even applied research, in terms of eventual use, often cannot be envisaged — even by the researchers themselves. History is replete with startling juxtapositions of initial purpose and eventual application — such as microwave technologies developed for missile detection, which, now, are used in cancer treatments. Since business and government both benefit from basic research done in universities, they should support it in a more robust, more consistent, and more patient way.

But, we must improve the translational pathways that bring new ideas into applied, commercial, and societal use. One pathway involves the protection, regulation, and exploitation of the intellectual property developed in university laboratories. The Bayh-Dole Act of 1980 sought to spur the commercialization of new discoveries by giving universities ownership of the results of their federally funded research, the right to patent and license these results, and the ability to share royalties with the researchers. As a consequence, research universities are now strongly linked to the marketplace.

Bayh-Dole has been very successful — spinning off thousands of new enterprises based on university patents. Yet, it also has raised new questions about the balance universities must strike between commercializing new discoveries… and allowing the free sharing of key ideas to enable further discovery and innovation. These issues are playing out in the courts, as well.

For example, just in March of this year, a federal judge invalidated patents on two gene sequences connected to hereditary breast cancer and ovarian cancer. The sequences were discovered through federally-funded, university-based research, but the patents were sold to just one company — which then established monopoly control over tests for mutations in these genes, and prevented other researchers from developing more cost-effective tests. So, the judge invalidated the patents.

Within such a context, universities may view the question of which discoveries should be kept proprietary, and which should be open-sourced, as a matter of the ethos of research. Data must be shared openly, for easy collaborations among researchers. To that end, computer scientists at Rensselaer are creating a Semantic Web platform, which will compile scientific data on an unprecedented scale, from every imaginable source, and make it, for the first time, accessible to, and manipulable by, citizens, as well as scientists, all over the world. The question of openness should also be addressed as a matter of government policy. It may make sense to grant an automatic exemption to patent law, at least in certain types of cases, for the use of proprietary intellectual property in noncommercial research at a university.

While sharing as much as possible, universities of course also must balance the ethical and security issues inherent in technologies that can be used for good or for ill.

We also need to do a better job of supporting the fledgling start-ups that grow out of university research, as well as those independently created by entrepreneurs, and network them into the innovation ecosystem. At Rensselaer, in the 1980s, we created one of the first university-based business incubators in the country, to help start-ups bring their products to market. Today, the standardized services incubators offer — accounting, legal advice, a fax machine and desk — while necessary, may not be adequate to launch breakthrough enterprises in fields such as synthetic biology or nanomaterials. So we are in the process of refocusing our efforts on targeted innovation in key areas, with new models for incubation and commercialization, tied to regional economic development. This is also a topic of discussion at the highest levels of our Federal government.

The fourth element required by our innovation ecosystem is capital: financial, infrastructural, and human.

Financial capital has been a challenge in recent years, particularly for new technologies requiring seed or early-stage investments. We clearly need a new financial model for start-ups, as venture capitalists increasingly prefer to invest in less risky, later-stage enterprises. Large corporations, too, are not always willing to fund the development of broad-use technological breakthroughs that offer them no exclusive competitive advantage. We very well may need more early-stage government support for potentially transformative technologies that cannot find industry backing.

Infrastructural capital is equally crucial for new enterprises or smaller, evolving, ones. It may include research facilities, as well as computational capability, instrumentation, robotics, clean rooms, and materials fabrication and process facilities — facilities that no single start-up company can afford. Some universities have such critical infrastructure for research and education, but they cannot become simply an early-stage platform for business, since this may compromise both their mission to educate and their tax status. Other models are needed. Larger, established companies, in a given industrial sector, may need to develop technological roadmaps and create broad-based platforms for the development of key, broad-based technological breakthroughs.

What are some alternatives?  Shared infrastructure could be developed in certain sectors by industry consortia. It could be created at universities or federal laboratories in arms-length entities, with infrastructure designed to be shared with nascent industries. An example is provided by the Rensselaer Computational Center for Nanotechnology Innovations (CCNI). A joint project of IBM, New York State, and Rensselaer, it hosts one of the world’s most powerful university-based supercomputers, offering Rensselaer faculty immense computational power for use in basic research. At the same time, it allows companies of all sizes to perform research, simulations, and modeling, and to tap the expertise of Rensselaer scientists and engineers who otherwise would be inaccessible.

Such consortia are not without precedent for larger enterprises. Sematech, the semiconductor consortium formed in 1987 with the support of the U.S. Department of Defense, is one such example. It was created to enable the development of semiconductor design, prototyping and approaches to manufacturing crucial to the industry, which no single company could afford. The consortium laid out a semiconductor research and development roadmap, which has been followed to position the U.S. as a leader in advanced semiconductor chip design and manufacturing.

So, any definition of infrastructural capital also must include our ability to design and manufacture advanced products — or what Gary Pisano and Willy Shih of Harvard Business School call the “industrial commons.” Universities, where new technologies are often discovered and developed, are an important part of the industrial commons. But so, too, are some things that have been neglected in our economy in recent decades:  manufacturing capacity and an infrastructure of suppliers to support that capacity.

Pisano and Shih point out the essential weakness in an economy in which even advanced manufacturing is outsourced:  if we no longer have the skills and experience for high-tech manufacturing, it is difficult to design and develop next-generation products. By outsourcing the manufacture of semiconductors to Asia, for example, we lost some of our capacity in thin-film coating, which has put our solar panel industry at something of a disadvantage in creating the most advanced products.

Jeff Immelt, too, has spoken a great deal about the U.S. need to manufacture and export advanced products once again. Our ecosystem will be far healthier if we make it advantageous for manufacturers to build leading-edge products in the United States.

Many business, government, think-tank, and academic groups are working through the tax and regulatory issues involved. But let me stick to the bailiwick I have been emphasizing: from a technological point of view, the future of manufacturing lies in robotics, advanced materials, sensors, biotechnology, and information technology. We must decide to lead in these fields.

More broadly, we can build upon the type of road-mapping exercise undertaken by the National Science Board in robotics — to identify important leading-edge technologies, and new processes, relevant across multiple fields, that show the most promise for manufacturing in key fields, such as health care and energy; and to lay out the facilitating framework for deploying such technologies in the United States.

However, even the most advanced factory is meaningless if our ecosystem does not produce a workforce capable of staffing and running it. Currently, given our large pool of unemployed workers, nearly every job opening attracts numerous applicants. Nonetheless, manufacturers cite an inability to find the right talent as one of their greatest concerns.

Human capital is the limiting factor in the innovation capacity of our nation. If we want the most advanced industries to be conceived in the United States, to take root here, and to generate the tens of millions of good jobs our economy requires, we must have an educated population well-prepared to work at the leading edge of science and technology. In addition, given the increasingly rapid pace of technological change, the dizzying array of new forms of social media, and promise of continued future innovation in all technologically dependent fields, a new, fundamental educational requirement is emerging: that is, the quality of being adept at optimizing the use of rapidly evolving and shifting technology.

The United States simply is not educating enough scientifically literate people in general, as well as technically skilled workers, scientists and engineers in particular. While job growth in science and engineering fields has been vigorous, at about 4.2 percent per year since 1980, growth in science and engineering degree production has been comparatively weak, at about 1.5 percent per year.

We have compensated for that gap by attracting foreign scientists and engineers, and we must do everything possible to ensure that we continue to attract and retain the best and the brightest from around the world.

At the same time, we are failing, clearly, to inspire many American children with the wonders of the natural world, mathematics, materials, and machines, and to ensure that they have the requisite educational grounding and achievement to move into science, technology, engineering and mathematics careers.

I call this convergence of trends the Quiet Crisis: quiet because it can take a generation to manifest itself fully in our economy, because it takes decades to educate a world-class scientist or engineer; a crisis because our economy depends mightily on the abilities, discoveries and innovations of this relatively small part of our overall workforce.

Clearly, universities like mine increase the capacity of our innovation ecosystem by educating bright, motivated young people. Our challenge is to do more, even as the economic downturn has left us with fewer resources. We need to reach out to a new majority — that made up of women and minorities — which, traditionally, has been under-represented in the sciences and engineering. We have made some progress: the share of science and engineering degrees awarded to minorities has increased somewhat in recent years. Women now earn half or more of bachelor’s degrees in the biological sciences and chemistry. However, in the fields of computer science, mathematics, and engineering, the proportion of young women is — almost inconceivably — shrinking. While women earn approximately six out of ten bachelor’s degrees, they earn just two out of ten degrees in engineering, computer sciences, and physics.

We must move more aggressively to excite, invite, and prepare more young people to pursue STEM careers. At Rensselaer, with the support of the Bill and Melinda Gates Foundation, we are working to design a strategic roadmap for New York State — the Empire State STEM Initiative — to increase the number of students, from all backgrounds, that aspire to STEM disciplines.

Obviously, the process of creating scientific investigators, engineers, and entrepreneurs has to begin long before young men and women even consider coming to our campuses. Any attempt to encourage more minorities to become scientists, for example, must address a high-school drop-out rate that can be called, quite fairly, a national scandal: four of ten African American and Hispanic teenagers fail to graduate from high school on time.

Clearly, there is a mismatch between the needs of our high-tech economy, and the quality of the K-through-12 education we offer our children. American elementary and secondary students do not perform as well as they should on international tests in mathematics and science. Particularly troubling is the performance of American 15 year-olds in the Organization for Economic Co-Operation and Development (OECD) Program for International Student Assessment (PISA) tests, which measure practical problem-solving abilities. In 2006, with 25 nations participating, the United States students ranked near the bottom in both science and mathematics.

Education research increasingly demonstrates that, more than the right curricula or facilities — in fact, more than any other factor — the quality of the teacher determines the success of students. Teachers need the right preparation. They need, also, the opportunity for continuous learning. They need to be invited, by universities and corporations, to join the community of scientists and mathematicians, in order that both their knowledge and their enthusiasm for their subjects constantly are refreshed. We also need more STEM degreed teachers.

Outstanding teachers need greater public recognition for their extraordinary performance in making the gift to their students of their own passions and talent. I am very grateful, personally, that a high school teacher named Marie Smith so loved mathematics that she helped me to see beyond mere equations, and to understand that mathematics is a particularly beautiful way of looking at the world.

If all three partners in our innovation ecosystem — industry, government, and universities — address STEM education, the Quiet Crisis could evolve itself into a Quiet Revolution.

However, improving what occurs in classrooms is only part of the solution. One of greatest challenges we face is cultural. It is a strange paradox that, in a nation whose economy so depends on scientific and technological progress, scientific illiteracy is common and acceptable. Many Americans have an easy intimacy with electronic devices, yet are at loose ends when asked to describe an integrated circuit or semiconductor.

We must evolve our national culture to celebrate not only the iPhone, the Kindle, and the handheld ultrasound, but also the spirit of inquiry, the discipline and focus, and the investment that yields such devices. Teachers alone cannot effect such a change. Scientists, engineers, mathematicians, executives, and entrepreneurs must find a way to communicate the joyous aspects of their work to the young — and the simple truth that America’s future depends on its ability to innovate. We also must commit to transform our educational system — together, and for the long term.

Together, we need to remake a non-system of sporadic support for new technologies into a true innovation ecosystem. It not an accident that I use a word usually associated with a natural environment to describe such a system. In a healthy economy, innovation spurs innovation in the same way that life spurs life in a healthy ecosystem.

In fact, complexity theorist W. Brian Arthur has compared the evolution of technology, rather beautifully, to a coral reef that “builds itself from itself.” The work of brilliant individuals adds substance to that reef. But, we all live within its shelter, and each of us, in our own way, must contribute to it, if it is to be as rich and diverse and fruitful as we know it can be.

Thank you.

Source citations are available from the division of Strategic Communications and External Relations, Rensselaer Polytechnic Institute. Statistical data contained herein were factually accurate at the time it was delivered. Rensselaer Polytechnic Institute assumes no duty to change it to reflect new developments.

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