Accelerating Innovation

Returning to Growth Built on Innovation and Productivity Urges Microsoft’s Steve Ballmer

Key excerpts from a forward looking and thoughtful speech given by Microsoft CEO Steve Ballmer at the Democratic Caucus Retreat in Williamsburg, Virginia, February 6, 2009.

"....In my view, what we now have will be a fundamental economic reset.  The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate. 

This may not be the thing that people really want to hear, but it's certainly what we're planning on, and it's the truth on which we're basing sort of our model, if you will, at Microsoft.

In our opinion, in order to reach the reset point, three things need to happen.  First, the economy must be deleveraged.  Private debt as a percentage of GDP has to be reduced.  Restoring health to the nation's financial system is a fundamental part of this.

Just for historical note, not only during the Depression, but actually in 1837 and in 1873 we had similar style resets in the economy.  We actually have at least three historic periods that we can study in which similar phenomenon occurred.  I think it was 1873 where even the state of Florida filed for Bankruptcy.  So, we need to be thoughtful about being students I think of the history.

Second, confidence must be restored.  The stimulus package, in my opinion, is vital.  It will provide a cushion as we reach the reset point and it will help restart our economic engine.  (Applause.)  I certainly want to applaud the steps that the House has taken under the speaker's leadership to quickly pass a strong stimulus package and to help shore up our financial institutions. 

Third, America really has to return to growth that's built on innovation and productivity, rather than leverage and private debt.  That must happen.

The good news is that the U.S. economy is still the world leader in innovation.  Our universities are the envy of the rest of the world.  The American workforce is the best on the planet, and U.S. companies continue to drive technological progress in almost every industry. 

But the time has come when we need to renew our innovation capacity. 

We went back and studied what innovation companies did during the time of the Great Depression.  One company that stands out, if you study the Depression, is RCA. 

Now, the fact that RCA is not around today, this has nothing to do with their behavior during the Depression.  There's probably good learnings for a lot of technology companies in that. 

But during the time of the Depression, RCA was probably the most broad-based R&D-centric company in America.  And while it cut costs certainly to survive the Depression, it never retreated from its commitment to core research and development.  And as a result, after the Depression had ended, it really led and the U.S. led TV technology developments for the next 25 years. 

That was good for RCA; it was good for America. 

In my view, American companies aren't going to be able to weather this economic downturn just by cutting costs either.  You may have heard that Microsoft, our company has decided that we need to reduce 5,000 positions.  What you may not know is that at the same time we've decided we'll also create two to three thousand new jobs -- mostly in the US -- as we continue to push into new areas that require investment. 

In addition, despite the tough economy -- I might even say because of the tough economy -- our company will continue to invest more than US$9 billion a year in R&D, because we think it's that R&D spending that will cause us to remain strong.  (Applause.) ..."

......To harness this potential of this transformation, I think it's going to take a lot more than investment by the private sector.  We need investment and we need leadership by government as well.  I don't understand all of the issues and interests that you have to deal with.  As I was sitting listening this morning, I understand more that there are hundreds of unwritten things that citizens just don't really know about what it takes to catalyze these things to happen.  But I would at least like to offer a couple suggestions on some things I think are important.

First, we really need the federal government to invest in human capital, in the citizens of our country.  (Applause.) 

I sit here and talk, talk, talk about innovation, but it's people who turn ideas into positive and productive innovation.  And in today's knowledge-driven world, innovation will depend on people who are actually technologically sophisticated, have strong critical thinking skills, have expertise in math and science and engineering.

This is true not only for people who live in places like Seattle and work at places like Microsoft, but live in places like Detroit, where I grew up, and work for companies like Ford Motor Company, where my father worked when I was a child.  I think this is going to be true for anyone, anywhere in this country, who hopes to earn a wage that can really properly support their family.

This means investment in education is critical, and I'm really encouraged by the very heavy emphasis on education that's in the stimulus package.  (Applause.) 

We really need to transform math and science education in America.  We need to improve teacher training, teacher quality. 

I was talking earlier in the day with some folks about just how many of our math and science teachers don't have the correct training and accreditation, and that stands in the way of us really breaking through.

For those who are already in the workforce, we need programs that provide ongoing education and training, so they can be successful in this knowledge-based economy.  For those who are unemployed, we need new technical skills training to give those people a start back up the economic ladder.  And we are going to need lifelong learning programs to keep people fresh, as innovation and technology continues to power the economy. 

The second thing we need -- and I'll tell the Speaker this was written even before our meeting this morning -- we need greater government investment in our nation's science and technology infrastructure.  (Applause.) 

I came in, flew in red eye, was a little groggy this morning when I got here.  I sat down with the speaker at 8:00 AM, and she woke me right up.  She said there are four things I want you to make sure you understand are a priority: science, science, science, and science.  I was awake by the end of the fourth science for sure, and I couldn't agree more wholeheartedly.

Science and technology is the backbone for productivity and innovation; has been, not always information technology, but science and technology has been a driver of economic success.  Government investment in science and engineering as a percentage of GDP is half, in this country, what it was in 1970, and it would be growing rapidly, particularly in countries in Asia, off a small base albeit, but in places like India and China and Korea the trend is the other direction.

We need to pursue breakthroughs over the coming years in green technology, alternative energy, bioengineering, parallel computing, quantum computing.  Without greater government investment in the basic research, there is a danger that important advances will happen in other countries.  This is truly I think not only an issue of competitiveness, but also in a sense of national security.  Companies like ours and others can do our fair share in terms of funding of basic research, but government needs to take the lead.

This is also a moment when government should invest, I think, in information technology to help transform healthcare.  We deliver information technology that we think can help create a connected health system that delivers predictive, preventive, and personalized care, a system that I think can improve the health of Americans and reduce the cost of health care in this country. 

Government support for innovative development, rapid adoption of information technology in health care is important.  I was talking to Congressman McDermott this morning.  Government has a big role to play, including the fact that Medicare and Medicaid pay over 50 percent of all health.  If Medicare and Medicaid want to take on some issues and use its authority to push health information standards, I'm sure this industry and this area of technology innovation can move even more quickly.

There's always broadband.  My number one encouragement to you is start with government itself.  Every school, every hospital, every government building, is it wired, have we funded that infrastructure; very important.  (Applause.)

This is a once-in-a-lifetime economic crisis.  There is a lot of history around that, and frankly if you stop and think about it, 1837, '73, '29, 2008, it's almost exactly a whole lifetime between each of the major economic difficulties that we face.  But I think it's also a once-in-a-lifetime opportunity to think about our priorities again and make the investments that put us on the right foot....."

LINK to full speech: Ballmer Urges Congress to Reinvest in America's Long-Term Growth

Entrepreneurship Training Program to Kick Start Job Creation

Today Carl Schramm, Ewing Marion Kauffman Foundation president and CEO, announced a $1 million initiative to offer the FastTrac LaunchPad entrepreneurial training programs in communities across the nation that have been hit hard by layoffs and the recession. The Kauffman Foundation is partnering with the Deluxe Corporation Foundation, which has provided $500,000 in funding, to bring this new national initiative to communities across the nation. The first FastTrac LaunchPad program, which will begin in New York in March, was announced today by Mayor Michael Bloomberg as part New York's broader plan to bolster the city economy. Other hard-hit communities around the nation are scheduled to launch similar programs in the weeks to come. Read More 

"Strengthening the entrepreneurial sector in Washington State is critical to long term job recovery," comments Egils Milbergs, executive director, Washington Economic Development Commission. See the The Washington Innovation Economy report at www.wedc.wa.gov

Leveraging Billions for the Washington Innovation Economy

The Economic Recovery Act includes multi-billion dollar increases in science and technology funding for the National Science Foundation (NSF), the National Institute for Standards and Technology (NIST), National Telecommunications and Information Administration (NTIA), National Oceanic & Atmospheric Administration (NOAA), Department of Energy (DOE), and the Advanced Research Project Agency-Energy. Note that the final stimulus bill provides no funding for the Technology Innovation and Manufacturing Extension Partnership Programs at the National Institute of Standards & Technology (NIST).

 

Egils Milbergs, executive director of the Washington Economic Development Commission, stated: "Washington State has a huge opportunity to compete for these funds in renewable energy, energy efficiency, broadband deployment and mapping, transportation electrification, advanced batteries, environmental technologies and accelerated adoption of information technology in the health care sector. Leveraging these federal resources will help enable the Innovation Economy called for in the strategy report released by the Washington Economic Development Commission." Download the strategy report "Building the Washington Innovation Economy" at this link: www.wedc.wa.gov

 

Download a detailed analysis prepared by ASTRA at: http://usinnovation.org/files/ARRAFinal21309.pdf

 

Additional information at www.usinnovation.org

Stimulus Bill Could Mean Over $10 Billion for Washington State

President Barack Obama is expected to sign the American Recovery and Reinvestment Act this week. The 1,071-page American Recovery and Reinvestment Act cleared the House Friday 246-183, without any Republican support, and received final passage in the Senate later that night on a 61-37 vote with three Republicans supporting it.

 

According to an analysis by the Center for American Progress (www.americanprogress.org) Washington State receives a recovery package equivalent to 3.34% of its Gross State Product which is estimated at $10.41 billion for the state. This map shows state-by-state allocations of the provisions for which we could establish where the money is going. This constitutes 69 percent of the total cost of the act. The map compares the amount that each state will get relative to the size of its economy, measured using each state's 2007 gross state product.

 

In a speech on the Senate floor Senator Patty Murray (WA) said the bill will help put thousands of Washingtonians to work rebuilding roads and bridges, cleaning up Hanford, and helping to expand green energy options through the Bonneville Power Administration.  The bill will also direct millions of dollars in aid to the state and to local communities, enabling them to help working families and keep teachers, firefighters, police officers, and other essential workers on the job.

 

Senator Maria Cantwell (WA) stated the state could receive $3 billion to invest in infrastructure which would create green manufacturing jobs and provide for tax incentives for consumers buying new plug-in vehicles. "More than 200,000 job cuts have been announced this year, and in Washington State, the unemployment rate has skyrocketed to 7.1 percent," said Cantwell.  "We still have a long way to go to get our economy back on track.  However, with this federal support, Washington state will be able to make investments in infrastructure projects and improvements, create jobs, provide training and education, provide the neediest among us with health care, and invest in areas critical to the development of clean, renewable energy technologies."

 

Senate Energy and Natural Resources Chairman Jeff Bingaman (NM) appointed Senator Maria Cantwell (WA) to lead the Subcommittee on Energy. The subcommittee's jurisdiction includes oversight for: new technologies research and development; commercialization of new technologies including, solar energy systems; Federal energy conservation programs; energy information; global climate change; nuclear, coal and synthetic fuels research and development; nuclear and non-nuclear energy commercialization projects; nuclear fuel cycle policy; DOE National Laboratories; nuclear facilities siting and insurance program; liquefied natural gas projects; oil and natural gas regulation; refinery policy; coal conversion; utility policy; strategic petroleum reserves; regulation of Trans-Alaska Pipeline System and other oil and gas pipeline transportation systems within Alaska Arctic research and energy development; and oil, gas and coal production and distribution.

   

"The next few decades will be all about finding ways to make our energy supplies cleaner and more affordable, efficient, diverse, and distributed. We must seize this opportunity to invest in clean energy technologies in order to make America more energy independent, mitigate global warming, and lead what will be the largest growth industry of the 21st century," said Cantwell. "Working closely with Chairman Bingaman, I also want to find ways to make our nation's transmission grid smarter and more robust, leverage the incredible brainpower and innovation at our national labs, get our nuclear waste clean up efforts back on track, and ensure fair and functioning energy markets. I believe the Committee also has an important role to play in crafting climate change control legislation, and I'd like to focus on innovative ways to make climate policy simpler, more equitable, and more transparent."

 

The quest for clean and green energy is generating a lot of interesting ideas and policy proposals. The latest comes from a group of researchers affiliated with the Brookings Institution that recommend the creation of a nationwide series of Energy-Discovery Innovation Institutes.

The institutes would serve as regional hubs for a network linking the nation's best engineers, scientists, and facilities. Each hub would compete to receive Federal funds (up to $200 million per year) and would specialize around key theme or research focus, such as solar or wind power. Each hub would be located at a major university, a Federal lab, or a satellite research center. In addition to spurring regional development, the centers would be linked into a national network that would enhance collaboration and build important cross-sector partnerships.

Report: "Energy Discovery-Innovation Institutes: A Step Toward America's Energy Sustainability" from the Brookings Institution.

Innovation: Washington State’s Pathway to a Long-Term Economic Recovery

Olympia, Washington. The Washington Economic Development Commission (WEDC) has released its strategy report:  “Building the Washington Innovation Economy: New Economic Strategy for Prosperity.”  WEDC Chairman Bruce Kendall and Vice-chairman Steve van Ausdle explained that innovation will be the way to forward to a sustainable long term economic recovery.  The ten year vision is to make Washington the most attractive, creative and fertile investment environment for innovation in the world.

 

Governor Chris Gregoire participated in the roll-out event in the State Legislative Building and praised the commission’s report: “This report confirms that Washington is on the right track to build a more sustainable economy. I applaud the commission for its tireless work to review our programs and ensure that Washington will continue to support and strengthen our local businesses.”  Key legislators expressed their bi-partisan support of the strategy including Senator Jim Kastama and Senator Joe Zarelli and Representative Phyllis Kenney and Representative Barbara Bailey. 

 

The commission report addresses three key drivers of an innovation economy—talent, investment and entrepreneurship, and infrastructure—and proposes 22 action items to address those drivers. The 17 member commission’s innovation economy strategy was formulated by business, education, research and government leaders from across the state.

 

“An innovation economy requires doing new and different things very well,” said Egils Milbergs, executive director of the WEDC. “No single institution alone will lead the way.  Countless organizations and individuals across the state, interacting and acting in a larger innovation ecosystem will evolve the Next Washington.  Collaborative innovation will be the essential ingredient for the state’s future growth and prosperity.

 

Download the Strategy Report at www.wedc.wa.gov

 

Egils Milbergs remarks at the event.

This is an unprecedented time of economic uncertainty. Uncertainly leads to fear. We cannot be afraid to lead.  We need a strategy. The challenges the commission identifies in talent, investment and infrastructure are worthy of our attention right now. 

 

A time of crisis is the best time to examine the fundamentals, set new directions, make necessary changes, and transform our fortunes.  At the root of our growing unemployment problem and budget deficit is a growth deficit. To grow our economy again we need to do some new and different things very well.  To thrive our economic development system must be nimble, adaptive and more resilient to a rapidly changing world and disruptive technologies.

 

 

In the 1960s and 70s the nation’s competitive advantage relied on cost and economies of scale.  In the 1980s our competitive advantage depended on quality to meet the Japanese challenge. Today our competitive advantage rests on our capacity to innovative. Other nations can imitate, but for us we have to innovate. New boots—big steps.  The next wave of growth, job creation and prosperity will be based on our capacity to nurture new to the world products and services. Growing the top line, not just the bottom line. This requires implementing a new way of doing business which is more collaborative. A model that relies more on multi-disciplinary solutions, openness  to ideas outside organization boundaries, drawing on  capabilities all across the state and empathy with customer and social needs.

 

Our strategic intent is to create a new dynamic in relationships—we call it an innovation ecosystem—that sees all the capabilities of the state as a toolbox for growth.   The purpose of these relationships: knowledge creation, smarter workers and transformational systems, products and services.  

 

No single institution will lead the way.  We cannot command creativity or innovation. The industrial revolution was not the product of a single business or government program. The same can be said for the information revolution.  Countless businesses, entrepreneurs, educators, researchers, non-profit organizations, communities and individuals across our state will be actors in the innovation revolution that we foresee. To realize this vision we will need a mindset of discovery, innovation, continuous learning, entrepreneurship and stronger, deeper and more productive collaboration.

 

Our work does not end with this report. In this first step we strategize, the next step we organize and the third step we operationalize.  The report is a draft. It is not the last word.  It is a set of ideas. We hope it will lead to thoughtful and imaginative discourse and constructive debate.  We are starting a new narrative and an exciting journey.

In the weeks and months ahead we will advise the Governor and legislature on the status of our recommendations.  We will work with agencies to align policies and the portfolio of economic development programs to ensure their relevance to the innovation economy.  We will take the innovation framework to the communities that helped shape this report. Ask them to weigh in, fill in their unique innovation contribution.  We will inform our congressional delegation of how this strategy relates to various components of the stimulus package. The state has the opportunity to garner and compete for a significant share of these funds

 

The long term view matters.  In fact it is an imperative to make decisions for the present.  We cannot neglect developing the next generation of talent, broadening the R&D base so more industry sectors can innovate, financing entrepreneurs, nurturing nascent industry clusters and transforming the state’s infrastructure to be smart, clean and green.  We should lead the nation in transitioning from oil dependency. A full and lasting recovery must be investment driven by both the public and private sector. 

 

We have a fortunate history of entrepreneurship. We have demonstrated strengths and assets to build on.   This is not a prescriptive top down approach. Rather bottom up with key reliance on local initiative and self organizing behavior.  We must leave behind the notion that regions are competing for a fixed pie and a zero sum game.   If our regions collaborate it becomes a value creation game and win-win. We can pioneer a powerful new model for innovation from the bottom up and come out stronger. I am confident our political, business and civic leadership will take on the mission.