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The Power of the Energy of Innovation

  • Date: 05/14/2012
  • Author: Dr. Luis M. Proenza (President, The University of Akron)
  • Location: Hilton Akron/Fairlawn
  • Thank you, Lisa, for that kind introduction.

    And thank you all for being here today, and in particular, thanks to Fairlawn Mayor William Roth for making time in his busy schedule to join us. I would also like to recognize Mr. Carl Albright, president and CEO of InfoCision, and two of my colleagues from the University, Mr. Clifford Isroff, and our Vice President of Strategic Engagement, Mr. Jim Tressel.

    It is always with some trepidation that I address a chamber of commerce because I always am reminded of the story of the business executive who returns home after a luncheon meeting like this, and is asked by his wife, “Who was the speaker at the Chamber today?”

    “The university’s president,” he replied.

    “How nice, she says; and what did he talk about?”

    To which he replies: “I don’t know. He didn’t say.”

    So let me be clear right from the start by telling you what I am going to talk about!

    I want to talk about the Energy of Innovation. First I will review how innovation has created the prosperity that our nation enjoys. Then, I will explain why innovation has never been more important than it is today, about how innovation also relates to manufacturing, and share some encouraging news in that area. Finally I will describe some of the ways in which The University of Akron is creating the energy of innovation to promote economic development right here in Northeast Ohio.

    Alan Kay, a pioneer in the field of computer technology, once said, “The best way to predict the future is to invent it.”[1] Indeed, I suggest that the future always has been predicted by the technologies that invented it. And even a cursory review of the history of America reveals the role that research and commercialization have played in building America’s global economic leadership.

    Americans invented the light bulb, the airplane, credit cards, the integrated circuit and the Internet.

    American ingenuity transformed agriculture with innovations ranging from the self-polishing steel plow and the cotton gin to today’s genetically modified crops and livestock. Agricultural productivity soared by such a scale that the percentage of the U.S. population involved in production agriculture dropped from 50% in 1899, to less than 2% today. And by the way, that’s exactly the same thing that’s happening in manufacturing...but more about that later.

    Even when we aren't inventing something, it seems we Americans are always finding new ways to apply the discoveries others have made.

    We didn't discover penicillin, the Brits did. But during World War II Americans figured out how to produce it fast enough and cheap enough to make it available globally.

    We didn't invent the internal combustion engine, or the automobile, but Americans perfected the assembly line and mastered mass production with world-changing results.

    When you factor in the discoveries that ushered in the computing and wireless age, the effects are even more breathtaking.

    In 1965 Gordon Moore, a co-founder of Intel, predicted that processing power would double every 18 months, with corresponding price decreases. That prediction, which has come to be known as Moore’s Law, has taken us from the era of mainframes to PCs to what are today’s BlackBerrys and now iPads. And we still can’t see the end of that progression.

    By leading the way, Americans have carved out a competitive position that has been the envy of other nations for more than a century.

    Yet, at the dawn of the 21st century, we find that the primacy that the United States has long enjoyed around the world is increasingly being challenged by the very same forces of technological innovation that America itself unleashed.

    And that is because other nations are learning how to play this game, very, very well.  “…in the past, citizens of any one nation generally had to compete for jobs with their neighbors living in the same community…in the future they will increasingly be required to compete with individuals who live half-way around the world.”[2]

    Or, as the New York Times columnist Thomas Friedman wrote, “In the past, workers with average skills, doing an average job, could earn an average lifestyle. But today, average is officially over.[3]

    If that doesn’t quite hit home for you, let me tell you the story of two corporate executives flying back home across the ocean in the first-class cabin of an airline. As they begin to relax, one says to the other, “You know, I’ve finally figured out what this global economy is all about.” “ Oh yeah,” says his companion, “Tell me about it; I still don’t know.” To which the first one says, “It means I’m finally going to get paid what I’m worth. And I’m scared to death about that!”

    Since the time of the Luddites - those 19th century English textile workers who took to smashing mechanized looms for fear of losing their jobs - people and politicians have feared the loss of jobs whenever innovation makes some jobs obsolete. Of course, loss of jobs is no laughing matter, but as Tom Friedman quipped, “if horses could have voted, there would never have been cars.”[4]

    What is missing from the ongoing debate about jobs is the historical understanding and appreciation of ". . . the social and political tumult caused by America's dynamism. The rise and fall of industries and regions, the convulsions that attended industrialization and mass immigration, the revolution in values catalyzed by widespread affluence, (and) the never-ending struggle over dividing the pie . . .” All of these and more have their counterparts in today's economy and will surely be evident as technological innovation unfolds in the decades and centuries ahead.[5]

    The fact is that "industry structures are in constant churn - firms are merging, acquiring, leaving, dying, entering, growing, downsizing, outsourcing and spinning off. At a faster and faster pace, the U.S. economy is experiencing the phenomenon the economist Joseph Schumpeter called ‘creative destruction'..."[6]

    Indeed, I have yet to meet an economy that grows without adding new jobs at its leading edge while at the same time not also destroying old jobs at its trailing edge. And so, rather than political fear mongering, our politicians would do well to tell the truth about economic growth and encourage displaced workers to acquire the new skills required by newly created industries, because the old jobs are not coming back!

    What does this challenge mean for us? Three things: First, It means we must resolutely dismiss all calls for protectionism; second, we must become much better at developing talent and managing the talent supply pipeline; and, third, we must do what Americans always have done best, namely innovate!

    Indeed, as Jeremy Seigel, a professor of finance at The Wharton School of Business, once observed, “Economic growth is based on advances in productivity, and productivity is based on discovery and innovation.” [7]

    In fact, nearly every economist agrees that the creation of new technological knowledge through research is our most direct economic avenue for acquiring added value.

    They understand that when new knowledge is quantified in a market environment, it creates fuller employment, capital formation, growing profits, and surpluses for reinvestment.

    Put more simply, research begets new companies, which beget new jobs, which beget economic expansions and ultimately the creation of new wealth.

    However, it seems to me that most of us have no idea how new wealth is created; it seems to me that most of us have never learned the economic version of the birds and the bees – you know, that special conversation that your parents should have had with you?

    So here is the analogy: sex is to babies as research & development are to new wealth creation.

    Conception is the common element.

    Far too often, people in government and business behave as though the only avenue for economic growth is to lure away the business assets of other communities through tax breaks and other incentives. The philosophy is “go someplace else, steal their cookies, bring them back and forget about it.”

    Sure, that approach adds some measure of short-term economic activity to your community…that is, until someone plunders your cookie jar. In the end, that strategy is a zero-sum game.

    Now perhaps some of you are thinking, “OK, Proenza, innovation may be important to your big research university, but it doesn’t really apply to those of us in the manufacturing, retail, financial, insurance or other service industries.”

    Yes it does, and I’ll share with you two recent reports that help to explain why.

    Last December, the Council on Competitiveness – for which I have the privilege of serving on the executive committee – marked its 25th anniversary by issuing a report titled, “Make: An American Manufacturing Movement.”

    That report says that “U.S. manufacturing is more important than ever, employing more than 11 million Americans directly, and creating close to 7 million additional jobs in related industries.[8] That’s 18 million jobs.

    Manufacturers contributed $1.7 trillion to the U.S. economy in 2010…(and manufacturing) has the highest multiplier effect among economic sectors, pays higher wages and drives innovation.”[9]

    An equally compelling study was released last week by the Brookings Institute. It is titled “Locating American Manufacturing: Trends in the Geography of Production,”[10] so please allow me to share a few of its key findings.

    First, the long-term shift of manufacturing jobs toward the South has halted. The Midwest, not the South, had the greatest gain in manufacturing jobs over the past two years.[11] In fact, between the first quarter of 2010 and the fourth quarter of 2011, the Midwest generated a 5.2-percent increase in manufacturing jobs while the South rose only 2.2 percent.[12] And please note that many companies that had taken their manufacturing offshore are returning to manufacturing right here in America!

    Second, the report noted that metropolitan areas have not only the greatest concentration of manufacturing jobs, but 95 percent of all very high technology jobs and 78.6 percent of all moderately high technology jobs.[13]

    Third, American manufacturing is highly differentiated by geography. Groups of manufacturing industries cluster systematically in different types of metropolitan areas.[14]

    And fourth, the report stated that the Akron metropolitan area, which includes Summit and Portage counties, had 37,324 manufacturing jobs.[15] Manufacturing makes up 11.7 percent of all jobs in Akron, ranking us 13th in the nation.[16]  We were 19th in the nation for “moderately high-tech jobs,” but we have a long way to go with very high-tech jobs – we were 77th out of 100.[17]

    Let me review these points.

    First, manufacturing is growing again in the Midwest.

    Second, the best kind of manufacturing, very high-tech or moderately high-tech, is overwhelmingly located in the cities.

    Third, manufacturing industries tend to cluster by geographic areas and provide a good focus for economic planning, and

    Fourth, if someone tells you that we don’t make things in Akron anymore, give them a pleasant handshake and walk away, because they don’t know what they’re talking about.

    The problem is that too many of us have an outdated view of manufacturing, so a vital first step is to readjust our attitudes toward manufacturing. “The image of manufacturing as dumb, dirty, dangerous and disappearing is far from accurate. Today, manufacturing is smart, safe, sustainable and surging.”[18]

    Last week, I – and perhaps some of you – attended the grand opening of a University of Akron start-up company, Akron Polymer Systems’ new headquarters in Akron. It is an example of one of those very-high-tech manufacturers that we need in this region; a company that makes polymer coatings and new polymers for industries as diverse as defense, biomedical and consumer electronics and one that has the potential to grow significantly.

    That can be the new future of Akron. Instead of a dozen or so large companies that employed thousands, what’s wrong with thousands of small companies employing dozens? Indeed, in many ways, the latter provides an even stronger economic basis than the former!

    I believe we can continue to grow a stronger regional economy if we place innovation at the center of our strategy.

    And that, ladies and gentlemen, is precisely what we are doing at The University of Akron. We understand that in the 21st century, universities must produce the energy of innovation that fuels economic development.

    The role of universities has changed in this century. We are now anchors for clusters of innovation and generator of multiple forms of capital, including creative, social, financial and natural capital. We have become conveners and developers, founded upon the principals of relevance, connectivity and productivity.

    So allow me just a few more minutes to share with you how The University of Akron is creating that energy of innovation.

    We have moved beyond the traditional tools for licensing and commercialization – to create a very broad-based and robust platform, or “tool-chest” for economic development.

    For example our decade-long New Landscape for Learning campus enhancement campaign has injected more than $625 million into the local economy. The New Landscape for Living project, which created the University Park Alliance initiative, has produced $300 million in investments to the neighborhood and downtown areas adjacent to our campus.  

    In 2001 we created The University of Akron Research Foundation, or UARF for short. This organization itself has developed a multiplicity of tools, such as the reallocation of resources and encouragement of entrepreneurial networking to stimulate new economic growth.

    Another of our major collaborative initiatives is the Austen BioInnovation Institute in Akron. It was launched in 2008, through a partnership with three area hospitals and a medical school, to establish Akron as one of the world’s leading centers for the application of biomaterials in medicine, particularly in orthopedic and wound-healing applications. The ABIA has made amazing progress in its three years of existence. In 2010, the ABIA and UARF partnered to win a $1million i6 Challenge Award, one of only six awarded nationally by the U.S. Economic Development Administration.

    Let’s look at another initiative. Do you recall the pejorative term “Rust Belt,” that was applied to much of the Midwest? Well, rust and corrosion are a problem throughout the world, not just in the Midwest. It is a huge drain on economies and must be addressed.

    So as it happens, a local business leader and representatives of the Department of Defense and the National Association of Corrosion Engineers approached us a few years ago. They asked, “Given your university’s expertise in polymers and engineering, would you consider creating the world’s first baccalaureate degree program in corrosion engineering?” I replied, “We’d be delighted!” And so we have, and in the process received more than $20 million to get the program going.

    Another new and significant initiative is our collaboration with the Timken Company, which wanted to explore an innovative way to continue technical development for one of its business units. So the company signed an open innovation agreement with The University of Akron and provided $5 million to link their researchers to our scientists and engineers, and to establish the Timken Engineered Surfaces Laboratory on our campus. Eventually, this collaboration will result in perhaps one or more spin-out companies, and that is an exciting proposition that is likely to serve as a model for the nation.

    I hope that by now it has become clear that The University of Akron has done much in recent years to enhance this region’s innovation ecosystem, and I use that term advisedly.

    If you don’t take my word for it, consider what Rosabeth Moss Kanter recent had to say in her article in the Harvard Business Review titled “Enhancing the Ecosystem.”  Rosabeth, by the way, was born and raised here in Northeast Ohio.

    In this article, Rosabeth’s primary point was that “By collaborating to bridge the gaps between them, business, academic, and policy leaders can help generate more ideas, start-ups, company growth, global competitors, and prosperity.”[19]

    And that is precisely what we have done here in Akron.

    Before I conclude, let me tell you about one last item that I believe will positively affect the citizens of Fairlawn and all of Northeast Ohio.

    Earlier this year, our Board of Trustees endorsed a new strategic plan for our University entitled Vision 2020: Toward 150 Years of Distinction & A New Gold Standard of University Performance. In it, we outline our plans for bold new initiatives and set firm benchmarks for our university.

    So what does a strategic plan have to do with innovation and economic development? Everything! Because it is built around the three principles of relevance, connectivity and productivity – in other words, we intend to be an even greater positive force for the economic success of our region; we intend to ignite the Energy of Innovation.

    You can examine the details of Vision 2020 for yourself by visiting our website, but by way of a teaser, let me give you a few of the aspirational goals we have set for ourselves:

    By 2020 we intend to:

    • grow enrollment to 40,000
    • achieve a $1 billion development portfolio
    • record $200 million in annual research expenditures
    • and hire 160 new faculty and staff

    Audacious? Maybe. But we know that we can achieve great things because we have achieved great things. And I believe that our past is prologue for a successful and productive future.

    In closing, this evening I have shared with you some thoughts about innovation’s role in creating new wealth. I reviewed some of the ways in which innovation has produced waves of prosperity for America, and how we must anticipate and leverage the process of creative destruction that accompanies all economic progress. I spoke of the vital role manufacturing plays in our national economy, and the equally vital role that innovation must play in that important economic sector right here in Northeast Ohio.

    And finally, I shared with you just a few examples of the types of collaborations and innovations that The University of Akron has undertaken in becoming a broad-based and robust platform for economic development in our community. Our university generates the energy of innovation for Northeast Ohio, and is a place where you can dream and dare and do what it takes to change the world.

    So, let us be cheerful and plunge ahead.

    Thank you!

    [2] National Academy of Sciences, National Academy of Engineering, and Institute of Medicine of the National Academies. (2010). Rising Above The Gathering Storm, Revisited (ISBN 13: 978-0-309-16097-1, ISBN-10: 0-309-16097-9). Washington D.C.: National Academies Press. p. 18

    [3] Friedman, Thomas. (2012, January 25). Average Is Over. New York Times, http://www.nytimes.com/2012/01/25/opinion/friedman-average-is-over.html

    [4] Friedman, Thomas, Ibid

    [5] Lindsey, Brink. (2004, September 23). The Biggest Rags to Riches Story Ever (Review of “An Empire of Wealth” by John Steele Gordon). The Wall Street Journal, p. D10

    [6] Reamer, Andrew. Icerman, Larry. Youtie, Jan. (2003, August)  "Technology Transfer and Commercialization: Their Role in Economic Development," Georgia Institute of Technology, p. vii

    [7] Roubini, Nouriel. (2010, April 8). The Shape of Things to Come. Newsweek, April 8, 2010. http://www.newsweek.com/2010/04/08/the-shape-of-things-to-come.html

    [8] Council on Competitiveness. (2011, December). Make: An American Manufacturing Movement (U.S. Manufacturing Competitiveness Initiative full report, page 8). Washington, D.C.

    [9] Council on Competitiveness, Ibid.

    [10] Brookings Institute, Metropolitan Policy Program. (2012, May). Locating American Manufacturing: Trends in the Geography of Production. Washington, D.C.

    [11] Brookings Institute, Ibid, p. 1

    [12] Brookings Institute, Ibid

    [13] Brookings Institute, Ibid

    [14] Brookings Institute, Ibid p 2

    [15] Mackinnon, Jim. (May 9, 2012) Akron’s cluster of manufacturing jobs is good base for growth, report says. Akron Beacon Journal. http://www.ohio.com/news/break-news/akron-s-cluster-of-manufacturing-jobs-is-good-base-for-growth-report-says-1.305872

    [16] Mackinnon, Ibid

    [17] Mackinnon, Ibid

    [18] Council on Competitiveness, Ibid, p. 5

    [19] Moss Kanter, Rosabeth. March 2012. Enriching the Ecosystem. Harvard Business Review.

  • Topic Category: Innovation and the Akron Model
  • Tags: innovation, Akron Model, manufacturing
  • Filed in:

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