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Keynote Address: Building a Self-Sustaining Innovation Ecosystem

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

The Center for Economic Growth
2009 Annual Meeting
Rensselaer Polytechnic Institute
Troy, N.Y.

Thursday, October 29, 2009

It gives me great pleasure to welcome you to the Troy campus of Rensselaer Polytechnic Institute, and to the Curtis R. Priem Experimental Media and Performing Arts Center — as we say, EMPAC. We are delighted to host the 2009 Annual Meeting of the Center for Economic Growth (CEG).

Since 1987, CEG has been committed to the economic wellbeing of the Capital Region and the surrounding Tech Valley corridor, and is an enormous asset to the region, and to its growing prominence. We esteem CEG for its three-pronged mission — to grow local companies, to attract opportunities for local investment and expansion, and to prepare local communities for growth and enhanced quality of life. I congratulate CEG President Michael Tucker, and the CEG Board, for another productive year.

CEG is critical as the Capital Region confronts the most extensive financial crisis since the Great Depression, especially the unique effects felt in New York State. As Governor David A. Paterson points out in a recent report, economic decline has ravaged some parts of the state for decades. In the 1950s, one out of three workers in New York State was employed in the manufacturing sector. Now, it is one out of 20. Over the last half-century, upstate cities have lost nearly half of their population. In 1965, if New York State were a nation, its economy would have been the fifth largest on the planet. In 2007 it would have ranked 13th. The great economic meltdown has only exacerbated these long-term trends.

The good news is that New York is laying the foundation for an economic future based on technological innovation. Since 2007, the State’s economic development strategy has focused on five core principles — the “5 I’s” [pronounced “five eyes”]: Infrastructure, Intellectual Capital, International Efforts, Investment Strategies, and Innovation. Today, I focus on Innovation — especially, on how we can make a self-sustaining innovation ecosystem.

Let us begin with a metaphor. We can envision innovation as a coral reef that builds itself from itself. The analogy was suggested by W. Brian Arthur, an economist and author of The Nature of Technology: What It Is and How It Evolves. He proposes that technology is “alive” — in the sense that a coral reef is alive — in that it thrives on the unique contributions of every sector. The New York Times book review described this as “a profoundly social view of innovation.”

To lay a foundation for economic global competitiveness and leadership, we must assemble a self-sustaining innovation ecosystem, much like that of a coral reef, in which each element thrives by playing a vital, social role that builds upon, and contributes to, the efforts of the others.

How do we do this? Four key elements are necessary. Like its equivalent in the natural world, a true innovation ecosystem rests upon an intricate set of relationships between and among these elements. The elements are:

  • Strategic focus
  • Idea generation
  • Translational pathways, and
  • Capital, of which there are three types — financial, infrastructural, and human.

It is at the points of intersection between these elements where promising ideas may be lost, if the interplay between them is insufficient or counterproductive. To ensure that this does not happen may require new policies and new approaches.

Let us briefly examine each element.

First, we obviously need an overall regional strategic focus. Beyond investments already made, our strategic focus should include two of our urgent national challenges: energy and environmental sustainability, and health care. Transformational technologies are required in each, and unconstrained economic opportunities are embedded within each. Each builds upon historical and newer strengths extant in the Capital Region.

I was privileged to co-chair the Energy Security, Innovation and Sustainability Initiative (ESIS) of the U.S. Council on Competitiveness, which laid out the elements required to create a sustainable energy system for the United States — a system that would address job loss and create new industries. The recommendations, contained in a report titled “Drive: Private Sector Demand for Sustainable Energy Solutions,” were presented at the National Energy Summit last month in Washington, D.C.

They incorporate the need to find and create:

  • New, renewable power sources and storage technologies, such as advanced batteries;
  • Ways to use existing energy sources with less impact, for example, by solving — finally — the challenge of carbon capture and storage for fossil energy sources;
  • The physical, economic, and regulatory infrastructure needed to support new demand for electricity, if the future of transportation is to be electrical; and
  • New forms of intelligence in our national electrical grid — including the ability to deal with multiple types of energy sources; including the intermittency of renewable energy; and including the ability to support smart appliances that draw electricity during low-demand periods.

In New York state, the cornerstone of our energy agenda is the “45 x 15” program — to meet 45 percent of the state’s electricity needs through efficiencies and renewables by 2015, an endeavor which officials estimate will create 50,000 new jobs.

The other grand challenge is health care — on the medical front, and on the policy front. The health care industry will benefit from new technologies, which will generate new industries. These include technologies for the mitigation and cure of diseases, which may soon include revolutionary ways to use biological processes to manufacture new treatments. Technology may soon make genome sequencing and drug development so affordable that personalized medicine will become the standard.

On the policy front, as new requirements and statutes emerge, we will require a range of technological innovations to lower overall health care costs and to spread benefits. These include electronic health records, and new ways to monitor patient health conditions in real-time, or to connect patient health information to broader databases. This multi-faceted issue includes, as well, multiple roles for government as policy setter, investor, regulator, consumer, end user, and endorser, across multiple fronts.

Both energy security and health care are poised for an explosion of technological developments, which will create whole new industries. But, to move forward in these challenging arenas, we need an innovation ecosystem to fast-track solutions, to build new enterprises and enhance existing ones, and to create jobs.

The second and key element is idea generation. Basic research generates game-changing ideas — often the result of serendipity. So, even in a frugal, post-recession mode, we must invest in serendipity. In recent years, and across multiple sectors, we have stinted basic research to meet shorter-term goals. Corporations increasingly have found high-risk, long-term investments difficult to justify. Government agencies, too, have been focused on safe, near-term bets. This hardly makes sense in a world — and an economy — that needs illuminating ideas, dramatic discoveries, and transformational technologies.

Universities are critical players here, because basic research unites seamlessly with the mission to educate. The primary contribution of universities to the ecosystem is the education of bright, motivated young people — people who ask interesting, difficult questions, which may take decades to answer. Out of such open exploration, thriving industries are born.

To wit: it was a Rensselaer undergraduate who, last year, 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 the most widely prescribed drugs. After more than 80 people died from contaminated, animal-derived heparin in 2007, Rensselaer professor Robert Linhardt and his group helped to uncover the source of the contamination. Shortly thereafter, Dr. Linhardt announced the successful creation of bioengineered synthetic heparin. This result came after decades of work on polysaccharides by Dr. Linhardt and his colleagues.

There are other examples. Rensselaer researchers have created the darkest material 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. History is full of startling juxtapositions of initial purpose and eventual application. When we fund basic research, we are funding serendipity. Even a sober, frugal, post-recession United States (and New York State) must invest in serendipity, because without it, there is no vitality in the innovation ecosystem.

It was basic research at the Defense Advanced Research Projects Agency (DARPA) that gave birth to the Internet, and microwave technologies developed for missile detection which, now, are used in cancer treatments.

We, therefore, need to support — not just draw from — our universities.

The third element is the establishment of Translational Pathways, bringing the second element — idea generation — to applied, commercial, and societal use. The protection, regulation, and exploitation of intellectual property are a key example of this in action.

Spurred by the Bayh-Dole Act (passed in 1980), the deliberate exploitation of intellectual property has linked research universities to the marketplace more strongly than ever. The Bayh-Dole Act gave universities ownership of the results of their federally funded research, the right to patent and license them, and to share royalties with researchers, which, in turn, has spun off thousands of new enterprises.

Obviously, innovation has much to gain if universities fling open their storehouses of knowledge. But, as such knowledge is exploited, we need to ensure an appropriate focus on ethical and security issues embedded in technological innovation, and to create mechanisms for vigilance to balance these issues with free exchange.

Here, at Rensselaer, Web scientists are using the World Wide Web to compile and share scientific data on a massive and unprecedented scale. This is done through semantic computer code (known as ontologies), which provides underlying meaning and links to the information presented on a Web page, making the extreme complexity of underlying data readily available. The goal is to hasten scientific discovery and innovation by enabling rapid, easy collaboration between scientists, educators, students, policy makers, and even “citizen scientists” around the world via the Web.

Another translational pathway — the business incubator — was created in the wake of Bayh-Dole. Rensselaer opened one of the first university-based incubators in 1980, and others have taken hold around the region to assist fledgling start-ups. Yet the one-size-fits-all concept — offering standardized services of accounting, legal advice, and fax and phone access — may no longer be sufficient to launch breakthrough technologies, competitively, into global markets.

This naturally leads to the fourth, and final, element in a successful innovation ecosystem — capital — capital of three types — financial, infrastructural, and human.

Financial capital, i.e. venture or seed capital, is critical. We need to attract, or create, more venture capital that is regionally focused — and patient.

We need a new financial model for start-ups. Currently, venture capital is scarce, and, even when available, often supports “sure-risk” enterprises, or companies that are relatively close to “going to market.” We need a new financial model for start-ups. We may want to consider more early-stage government support for potentially transformative technologies. Rensselaer professor Jonathan Dordick and his partners at Solidus Biosciences (a start-up company), for example, have created biochips, cell cultures that allow a rapid screening of the toxicity of drug candidates without the need for animal testing. Solidus spent six years at the Rensselaer Incubator before recently moving its headquarters. This has the potential to be game-changing, yet the chemical and pharmaceutical businesses that have the most to gain are not investing in it, because its applicability is too broad. Instead, federal grants are supporting the start-up company, to scale up and commercialize the technology.

We, also, may need something entirely new — Centers for Innovation Management. These could offer expertise targeted by industry sector, and provide advice on market conditions and regulatory hurdles. Moreover, these centers could build the essential connections to network a technology into a full-fledged innovation system — connecting entrepreneurs to research test and prototyping facilities, to new or established companies, to local and global markets. They could create feed-back loops, advocating for emerging technologies with governments (Federal and state) and industry.

Equally important is physical capital, or infrastructure. This may include research facilities as well as computational power, instrumentation, robotics, and clean rooms and fabrication facilities — facilities that no single company can afford. At universities in the Capital Region such infrastructure exists, but not enough. Moreover, although a university may have critical infrastructure, an institution of higher education cannot become simply an early-stage platform for businesses, or adhere exclusively to corporate interests. Such engagement on university campuses is fraught with potential conflicts that may interfere with a university’s core mission to educate — or with its tax status. Although it has critical infrastructure, a university cannot become an early-stage platform for businesses, or adhere exclusively to corporate interests.

What, then, are the alternatives?

One possibility is to develop infrastructure that can be shared by nascent industries. This could be based at a university in stand-alone facilities — with appropriate safeguards. The Rensselaer Computational Center for Nanotechnology Innovations (CCNI) offers a potential model. Located off the main Troy campus, in the Rensselaer Technology Park, it is a joint project of IBM, New York State, and Rensselaer, and it hosts one of the world’s most powerful university-based supercomputers. The CCNI allows companies of all sizes to perform research, to model devices or processes, and to tap the expertise of Rensselaer faculty. As well, it provides immense computational power for our faculty to use in their research. It is enabled through a broadband connection between the Troy campus and the Rensselaer Technology Park.

Physical capital could be located in proximity to our national laboratories and other Federal facilities, or can be developed by industry consortia, or university-industry consortia. For example, two companies in another part of the country, CDI and vivoMedica, are trying to launch a consortium to validate their method of testing the cardiotoxicity of new drugs. As many of you know, Sematech, the semiconductor consortium formed in 1987 with the support of the U.S. Department of Defense, enables the development of manufacturing processes that no single company could have financed. Sematech laid out a semiconductor research and development roadmap, which has helped to position the U.S. as a leader in advanced chip design and manufacturing. Albany NanoTech is an example of university-based facilities that support such endeavor, and is the home of Sematech North.

Finally — but just as critically — an innovation ecosystem must have human capital. The growing gap between our need for scientists, mathematicians, engineers, and technologically skilled professionals, and our failure to produce them, is what I have dubbed the “Quiet Crisis.” It will scuttle all of our efforts to spur innovation unless it is addressed. We must improve teaching in science, technology, engineering, and mathematics — the STEM fields — from the earliest days of a child’s education. Every sector — universities, government, industry — must contribute to a comprehensive education effort for technology workforce development and deployment. Academic institutions can collaborate, regionally to offer programs consistent with their existing pathways and missions. The TEC-SMART Program at Hudson Valley Community College (HVCC), meant to help provide a technically skilled workforce for Global Foundries, is a nascent example. We, also, must work harder to retain talent from abroad.

The federal government is encouraging education reform at the state level with the $4.35 billion “Race to the Top” fund — U.S. Department of Education grants to states working toward education innovation and reform, and the $650 million “Investing in Innovation” program, which is part of the historic $5 billion investment in school reform in the American Recovery and Reinvestment Act (ARRA). Some are now calling this the start of a “Quiet Revolution” in education.

For its part, Rensselaer is leading a progressive dialogue across the state on ways to improve PK-20 (with a focus on K-12) STEM education in New York State — in order to prepare the next generation of New York’s students to innovate and compete in the knowledge-based, technology-driven global economy. The initiative, funded by the Bill and Melinda Gates Foundation, was launched last summer with a two-day inaugural dialogue at Rensselaer. More than 100 leaders from education, government, business and industry, foundations and not-for-profit organizations, met to commence a state-wide dialogue to identify ways to improve K-12 STEM teaching and student outcomes, and increase the number of students, in New York State studying STEM subjects — especially those from minority and low-income backgrounds. Another 400 to 500 people are participating in regional dialogues across the state this month and next — to flesh out early themes that emerged from the first dialogues, and to begin to shape an agenda for action which will involve K-12 schools, universities, industry, and government — with foundation support.

Major themes, essential to innovation, were presented earlier this month to Governor Paterson’s Task Force on Diversifying the New York State Economy Through Industry-Higher Education Partnerships, which he created earlier this year. It is chaired by David J. Skorton, President of Cornell University, and includes leaders from across the university, business, and government sectors. I am a member, as well. Emergent themes from the Task Force include:

  • Increasing the talent pipeline by engaging a broad spectrum of sectors in creating a culture of life-long learning within a STEM-literate society, and engaging schools and teachers to better prepare STEM-literate students for advanced study.
  • Creating “innovation zones” where new policies and practices for public/private collaborations can be tried, without the constraint of current regulations. One top-rated idea was for a “GI Bill” for STEM education.
  • Developing an “open-source community” to share information about promising collaborative innovation models, leveraging innovative changes already initiated by others, and creating a best practices platform.

This kind of dialogue continues at the national level. It was a great honor for me, this past April, to be appointed by President Obama to serve on his President’s Council of Advisors on Science and Technology (PCAST). Just last week, on October 22nd and 23rd, I attended a PCAST meeting at the National Academy of Sciences in Washington, D.C., at which thought-provoking presentations were given on federal STEM education initiatives and innovative STEM education programs. This attention to STEM education at the highest levels of government is encouraging.

There are encouraging innovation trends in the Capital Region. Vicarious Visions, a company, which develops video games, was co-founded in 1991 by a Rensselaer undergraduate, who moved the business to the Rensselaer Incubator and, later, to the Rensselaer Technology Park. With the early infrastructure support of these two facilities, the company now has grown to nearly 200 employees and was sold to video game developer and publishing power house Activision in 2005.

Albany Molecular Research, Inc. (AMRI), a $229 million company which provides scientific services, products, and technologies that improve the quality of life, followed a similar path. Chairman, president, and CEO Thomas D’Ambra credits Rensselaer for its support of AMRI in its formative years.

This year, GE Healthcare became the latest Rensselaer Technology Park tenant, completing construction of a new $165 million facility that produces state-of-the-art imagers for digital mammography machines – technology that was developed at GE Global Research in Niskayuna. The plant will employ 150 people when fully operational, and it is the company’s first expansion of high-tech manufacturing for its health care operation in New York.

Finally, Ecovative Designs, founded in 2007 by Rensselaer graduates Eben Bayer and Gavin McIntyre, is a biomaterials company that grows environmentally sustainable packaging material using a mushroom spores technology, which can replace less-eco-friendly plastic foam. Four months ago the company “graduated” from the Rensselaer Incubator to new office space in Green Island.

All of the several incubators in the Capital Region provide fertile ground to bring life to innovative ideas through technology transfer and commercialization. By building on their capabilities, by strengthening strategic focus and idea generation, by providing translational pathways, and financial, infrastructural, and human capital, the Capital Region has an excellent start on an innovation ecosystem. But there is more to do to provide all of these things in more collaborative, not competitive, ways. There also may be a need for more physical, or infrastructural capital. The Center for Economic Growth has had, and continues to have, a critical role to play here.

Optimizing the economic potential inherent in our grand challenges requires smoothing the way for innovators to build new ideas into successful commercial enterprises. The Capital Region has enormous assets that, in collaboration — like the coral reef — and with the right policies to encourage and to sustain growth, will create an innovation ecosystem where new industries and enterprises can germinate and grow. The contributions of each sector will make it as rich and diverse and fruitful as we know it can be.

Thank you, and again, welcome to Rensselaer.

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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