From Kentucky and the New Economy/Challenges for the Next Century: The
Conference Proceedings
p. 19-30, published 2001
Moderator
Panelists
Larry Vignola, Fidelity Investments
Kristy Folkwein, Director, Information Technology Solutions, Ashland Inc.
Larry Jones, Professor, Department of Agriculture, University of Kentucky
I’ll introduce myself after our panelists introduce themselves and give each one of you all a good sound bite, starting with Larry.
Larry Vignola
Good afternoon. My name’s Larry Vignola. I work with Fidelity Investments. My specific responsibilities are to oversee distribution for Fidelity’s emerging corporate market which, essentially, sells retirement plans and services retirement plans to small and mid-size employers. When I talk about channels of distribution, it includes everything from face-to-face sales, telesales and, most recently, Internet sales, hence the reason why I’m here.
Kristy Folkwein
Hi. I’m Kristy Folkwein. I’m Director of Information Technology for Ashland Inc.; one of their divisions, the Distribution Company. Within the Distribution Company, I’m also in charge of e-commerce. We started our e-commerce efforts about two years ago, and that’s probably why I’m here.
Larry Jones
My name is Larry Jones and I’m professor of Agricultural Economics at the University of Kentucky, and I believe my role today is to talk about the role of the Internet and e-commerce in agriculture.
Jim Gray
Thank you, panelists. My name is Jim Gray, and I’m from Lexington. My family’s been in the construction business. This is our fortieth anniversary year and four years ago my brothers and my mother gave me the opportunity to put a little lifeboat into the New Economy and do what is conventionally now called corporate venture capital. What that translates into is the company, the enterprise, the corporation, will actually take some of its capital and invest it in other companies, and my charge was to find these opportunities. The startup companies, principally, and our first investments were a couple of companies in Kentucky and the next several have been companies both inside and outside Kentucky. As the winds of March came this year, we experienced the market really challenging whether or not investments in technology was really going to be the thing to continue with. I describe it as the geologic plates shifted and a lot of casualties occurred. Some of the companies that we invested in, frankly, were very nice successes, a couple of those, and the others have been what amounts to on the emergency ward in intensive care. And so we are experiencing some of the casualties of a highly speculative market, while, at the same time, we are looking at this going forward. OK. That’s my story. Now, the first question I’d like to give to the panelists; but I also want you all to be thinking about your questions because I want to play Montell, I guess, and I’m going to get this wireless mic right out here and in your face with your question. My first question, since this is Monday following the election, is what effect on Kentucky and the New Economy in Kentucky will a Bush/Gore coalition government bring us? (Laughter)
Larry Jones
That’s such an easy question, I’m going to let my brother, Larry, handle it.
Jim Gray
I think this is a very meaningful question, actually, with these epoch-setting effects or events of the last week. Larry, in your business, I think that’s in the significance and the breadth of Fidelity; tell us about what effect this has in your view and maybe what you’re hearing from colleagues in your world.
Larry Vignola
Well, this is my opinion—and I’m going to state that right up front—and perhaps not the Fidelity point of view. We’re really not convinced that the political outcome is going to have that significant an impact on the path that we’re already taking as a business and the economic impact. When it comes to e-commerce and the economy in general, we’re pretty comfortable that the path we’re on is going to continue and, regardless of what the outcome is, the gridlock we’ve been experiencing for the last few years is going to continue. That’s not necessarily an unhealthy thing for the economy or us.
Jim Gray
This question I’m going to present to Larry. We talked earlier this morning, and as he mentioned, he’s at the University of Kentucky College of Agriculture. I was reading Larry a story in the last issue of the Harvard Business Review. There was an interview with a guy named Vinaud Koslaw who is a principal in the preeminent venture capital firm called Kliner Perkins in Silicon Valley, the guys that launched Intel and a couple of other very successful companies in the last 20 years. Anyhow, Koslaw says that, in terms of the development of technology and its impact on the world, we’re just a couple of minutes past the big bang. In other words, it’s just starting. He goes on to say, in this interview, that he looked back at the United States and at the turn of the century, seven in ten workers in this country were farming. By the 1950s and 1960s, that had changed to only three in ten. Seven in ten now were in an industrial environment. His speculation was that by the year 2030 that those seven will have been reduced to two and now between farming and industrial economy, only two in ten. I don’t know if my ratios are exactly right, but something like that. Only 20 percent of our working population would be engaged in a meaningful way in an agricultural or an industrial economy. So, tell us what you think about that, one, and what you think in terms of the impact of the Internet and new technologies on our farming community in Kentucky.
Larry Jones
Well, first of all, the actual number is about 2 percent of the population are directly involved in farming today. So, it’s only 2 in 100 rather than two in ten. And I would suggest to you that is the mark of an industrialized, advanced society. We don’t need as many people to feed ourselves. Having said that, however, Jim, it seems to me that we also need more people to provide some of the services that we expect in the food system. I’m sure I’ll go home tonight and my wife will have baked homemade bread, mashed potatoes, I’m sure she will have pounded the meat and cooked it all day, and will have baked a homemade apple pie. And, if you believe that, I have oceanfront property in Kansas I’d love to sell you today. My point is there aren’t many of us, as consumers in this dynamic economy and world in which we live, that are going home tonight and bake something or make something from scratch, so we want more services. We want more foods that are prepared and pre-packaged to throw in the microwave and eat in five minutes. I think that’s all a sign of an advanced economy. We don’t need as many people to feed ourselves and I don’t think that’s anything to be ashamed of. I think that’s something to be quite proud of. And a good part of that is due to the technological advancements we’ve seen in production agriculture. I’m not sure we want to get off into biotechnology, but biotech is one of the later technologies that means that fewer people can produce a tremendous amount of food to feed us and parts of the world.
Jim Gray
It’s a big opportunity, in other words, maybe.
Larry Jones
Well, you know, we talk about biotech and it has a bit of a negative connotation because of everything we heard, from mad cow disease in Europe to the taco fiasco a few months ago. My spin on that is that all we’re doing with biotechnology is hastening up the natural evolution that we used to do through breeding in a field or with an animal that often took years and now perhaps we can do it in weeks and months instead. So, I’m not sure we’re really doing it that different. I’m not going to argue we don’t need safeguards. We certainly do. But, on the Internet, we do have one benchmark study, if you will, that was done by the U.S. Department of Agriculture last year, 1999, and they showed one in three farmers now use the Internet in some capacity. And I don’t think as small business people they’re really using it that differently than other business firms. We don’t know for sure. They’re accessing information. They’re using, of course, e-mail and all the things that other businesses use it for. We are finding that most of the e-commerce transactions involve the purchase of inputs. They’re not selling that much yet via the Internet, but they’re buying lots of inputs: fertilizers, chemicals and used machinery has become a big market. So that’s some of the current trends we’re seeing in terms of agriculture’s use of the Internet.
Jim Gray
Good deal. Let's pause for just a second. I’d like to get a census of our audience a little bit. It will help our panelists. How many in the room are just private sector and public sector? Just show of hands. Private sector first. Public sector. OK. Good deal. Kristy, I’ve got a question for you. This same article that I was reading, Vinaud Koslaw said he predicted that broadband would be the equivalent in the knowledge economy to what oil and gas have been in the industrial economy. Coming from Ashland Inc., tell us about how Ashland is transforming itself in the knowledge economy.
Kristy Folkwein
Over the past couple of years, we’ve spent a lot of time, starting out with strategy. How do we take the company we have today and the value we bring to customers and what strategically should we be looking at as it relates to the e-world? We did this two years and then we identified different areas, both from our customers’ side, the customers we serviced, as well as the supplier side, since being a distributor our supplier relationships are very important. On those two fronts, we looked at them and tried to find where we could add value with e-commerce. So, those are the pilot projects we took on two years ago. Through today, there’s been a lot of learning. I think we as an organization are better positioned now. We know what B2B means because we’ve done it and we’ve experienced the issues that come with doing it. We also know web. You know, 24 /7, what does that really mean? It means that you have to have customer reps there that can support the e-channel, the phone channel, the walk-in channel and you have to do that seamlessly, so there’s a lot more that comes with it than just the technology.
Jim Gray
Tony Sholar, I saw you earlier. I was talking with Tony, and Tony is, as many of you all know, the icon of the Kentucky Chamber of Commerce. He’s been in the role of government liaison for a long time. Why don’t you share with us, Tony, what you were saying earlier about the significance of this event today, how you felt good about it, and how you see where Kentucky is compared to where we were a couple of years ago?
Tony Sholar
You know how powerful this thing is? There’s so much stuff. I’m privileged because of my association with the State Chamber. We’re involved in a lot of things. We run the gamut from environmental policy, labor policy, to education, to health care, and all those things. And I have the privilege of seeing a multidimensional state of Kentucky in agricultural policy as well. But one thing about that probably as a business organization concerns us. My age gives me away, but in the 1970s there was a fellow named Alvin Toffler who wrote a book called Future Shock. Not a lot of people paid attention to it because the premise of it was that we would reach a point in our society where the evolution of the technology and the ability of the technology to replicate itself would exceed our culture’s ability to adapt. I’m concerned that in Kentucky we’ve had a cultural stagnation relative to our educational expectations. Listen to folks like Ron Crouch with the University of Louisville Urban Studies Center about the percentage of our population that is not fulfilling their educational expectations. Mr. Martin, who just spoke to us, talked about 800,000 IT jobs in the year 2000 that will go unfilled. And if our Workforce Development Cabinet survey of Kentucky adults, even though I think there was some statistical significance within three to five points, is true, about four out of ten adults between the ages of 16 and 64 are marginally or functionally illiterate. That means that they can perform at the 8th grade level. Now, we have a very significant educational divide in this state. And the concern we have is how do we sustain the economy that we have if we’ll “dance with them what brung us,” which tends to be agriculture, manufacturing, and natural resource extraction, and yet prepare for where the economy is going, which is information technology? Our workforce skills may take longer to accomplish the needs than we have time for relative to the rest of this globalization.
Jim Gray
So, any of our panelists, take a stab at that, the bricks-to-clicks transformation and all the tension that that generates within a traditional economy as we have here.
Kristy Folkwein
I guess I’ll take a stab at it since no one’s jumping at it. I’m actually in the IT world and we always have a challenge to find people within the IT area. In IT, in general, there are some misnomers. I think everybody has a perception that you have a lot of programmers behind a screen and they just sit down all day and write code. Well, that’s not really reality. At Ashland we spent a lot of time looking in other areas of the company where they have certain types of skills that can add value within the IT area. We’re bringing a lot of people from different areas, different backgrounds, into IT and providing the training to take them to the next levels. So far, it’s working quite well and there’s a lot of satisfaction, both for the employer as well as the employees.
Larry Vignola
Yes, I would just add that our experience at Fidelity has been very similar in that it really has to start from the top. Our Chairman on down has really made it clear that the use of technology and the Internet in particular are the way that we will do business, and, as a result, I think we’re going out of our way to make technology available to people. We are slowly but surely practicing a little tough love for our own associates where we’re taking away the paper and we’re giving them one and only one choice to do business. That message from the top has really started to hit home with all of our associates that this is real, it’s here, it’s going to stay and we’ve got to adopt it and adopt it quickly.
Jim Gray
A lot of people would challenge where we have been and what amounts to a paper transaction environment. A lot of people would challenge that we really are gaining value or efficiency in that transition. How do you all characterize it within your own environments? I mean, Fidelity, you all have really chased that and so has, you mentioned, GE, and Jack Welsh has made it a strategic imperative for the companies.
Larry Vignola
Well, for starters, and I hate to use our current ad pitch, but our new ads really end with “call us, click us, visit us.” So I think in many instances, particularly when it comes to our interaction with our clients, we’re not looking to take away a channel of communication, but rather trying to find ways of augmenting what we’ve done historically. When we are using technology, which is very often, we’re trying to ensure that that experience, the customer experience, is as good as or better than they would have received through the other channels. So, particularly when it comes to client interaction, we’re not necessarily doing away with the paper. We’re trying to show that there is another way of doing it that may be better.
Bill Roberts
I’m with Lex-Tech, Lexington, Kentucky, and we pretty much live in these trenches between the big divide of the Coldstream Development Park and the Chamber of Commerce. We’ve been all over the country studying these things and trying to see if we could get it off the ground. A comment and observation I’ve always made and shared is that we don’t have the horse industry in Lexington because the grass is blue. We have an infrastructure there to support it. We’ve got the veterinarians, the farriers, and the horse hospitals, everything necessary to support this. We need the infrastructure. It seems that the problem we continue to come across is when Kentucky dollars are available to purchase infrastructure, we send those dollars out of state. We send them to the big eight accounting firms. We feel like we’re backwards and we need to bring in the top talent. But we end up bringing in boilerplate solutions from industrial northeastern cities that just aren’t workable in the hinterlands of eastern Kentucky. So that’s one of the reasons we had some legislation in Frankfort this past year that was trying to equalize the sales tax disadvantage that we were suffering in Kentucky trying to build these businesses in Lexington. That legislation was mysteriously vetoed. The question that I have is how can we work more closely with state government, city governments, and businesses that are already existing indigenous to Lexington and familiar with the culture of this area to grow this grassroots effort and build that infrastructure necessary to support these higher levels of technology?
Jim Gray
You guys want to take a stab? I think I know somebody who might actually help us with that if our panelists will allow it. I am walking up here to Alan Hause and Alan is predictably provocative, but let me tell you a little about him. He’s going to go on Bill Goodman’s tonight, Kentucky Tonight, on KET. He’s one of the panelists and Alan is a Kentucky native. He worked in Silicon Valley for a company called Cyprus Semiconductor. He’s an electrical engineer. He went to his boss a couple or three years ago and said he wanted to go home. His wife wanted to go home to Georgetown. He already had two jobs lined up in Lexington. The president of the company said, “Alan, you can go home to Lexington, but you’re going to start up an outpost for us in Lexington. You can design chips as well in Lexington, Kentucky, as you can in Silicon Valley, so you go home and hire who you need to hire.” What he’s done since then is created an outpost, not only in Lexington, but also he’s got engineers working in India and in Mississippi which he leads. But in Lexington, here in Kentucky more importantly, he has now about 30 and, by the end of the year, he will have 45 employees in his shop designing chips for Cyprus Semiconductor. He has importantly repatriated three Ph.D.s, people who were native Kentuckians who had left the state and wanted to come home. As Happy Chandler said, he never went anywhere in the world that he met a Kentuckian who wasn’t on his way home. And, so, Alan has identified those people and brought them home. So, I think, Bill, Alan probably has pretty good on-the-ground response for you on that subject. How do you do it?
Alan Hause
First of all, a couple of comments. One is, from my point of view, the infrastructure that matters the most is education. I’m an electrical engineer and to really understand electrical engineering in a real kind of way, you have to understand calculus. To really understand calculus in a meaningful kind of way, you have to understand trigonometry and to understand trigonometry in a meaningful kind of way, all the way down you need to add. (Laughter) So, what I’m saying is that to fix most of the infrastructural problems relating to engineers anyway, you have to fix it 20 years earlier than anything that anybody is working on. You have no hope of turning a high school student who is not solid in math and science into a real engineer. It’s just too late. So the thing that makes my industry go is brainpower. Although it was somewhat compelling because I have some kind of weird skills for Cyprus to setup an organization here, one of the things that really made it work is the University had changed some of the curriculum in the electrical engineering department and it became feasible to hire some engineers here.
So people are the key to making engineering and a lot of these information things go. It’s nice to retrain and that’s somewhat feasible for a lot of things, but the information technology business and the engineering business aren’t simple and it’s things that you have to pay in the long term to make work. There are strategic decisions and that’s clearly what education is. Making the education work right is clearly the most important thing to make this business work right. My question for you is, engineering is totally male-dominated and it’s particularly male-dominated in Kentucky. How do we fix that and what do we need to do to make that work better because we’re not taking advantage of half of the brains in the world and certainly half of the brains in Kentucky are in women and, just culturally, it’s a serious problem.
Kristy Folkwein
I can speak to it from the standpoint within Ohio. Several years ago in Dublin, which is where our Ashland Distribution Specialty Divisions are located, at their local high school, they have a career day for girls. The first year I was invited to attend representing the IT source of a future, I had three girls out of about 250 show up. They all went to the Fashion Merchandising and other areas like that. The second year I went I had a few more, but it’s very difficult to get girls interested in the technology type fields. I know within the school systems within the Columbus area, there are two different schools I work with, just to work with the girls and help them realize that technology isn’t exactly what they think it is. There’s a lot of power in what you do. I have a daughter and I have her convinced she’s going to MIT someday. So, again, you just have to keep at it and you have to work with these girls as a role model within the high schools and that’s what we’re doing and there are very few girls in IT in Ohio also.
Questioner
I guess this isn’t a question so much as a comment to reassure those in the audience that we do have in place a program in Kentucky that is focused on children, girls, and minorities. With your help we can continue to work that program and get more of our students in that young age and not wait, as you said, until it’s 20 years too late. That program is Student Technology Leadership. If your school does not have one, or if you want to be involved, I do want to be getting hold of you all to come and talk to children that are in our Kentucky schools and get them involved because they have some of these skills. They have some of these opportunities. You have to help us make those happen. So, if anyone wants to talk to me about ESTLP, I’ll be glad to talk to you and we do have a web site.
Questioner
Well, I guess I was picking up on this notion of 40 percent of the people in Kentucky are illiterate or functionally illiterate. Is the Internet a verbal environment? And, if it is a verbal environment, then we ought just not put up with that. I mean, I’m sure we can talk about technology. Then, if our market is Kentucky and we want to create a community in Kentucky and 40 percent of our people are functionally illiterate, why are we putting up with it?
Jim Gray
Well, let’s see, there are a lot of folks in the government. I don’t know if our panel is going to field it. Who? Ginny? Yes, that would be a wonderful question. I’m giving you plenty of time; I’m walking slowly over here. Now, you all know Ginny Fox is Executive Director of the Kentucky Educational Television System and every time we have a conversation, it is about the subject of outreach and education to these places in these populations.
Questioner
In fact, there are 800 - 900,000, about half of whom are literally illiterate and the others operate up to the 8th grade level. Bill Wilson over here works with me and we’ve worked on this for the last 15 years. We’re redoing workplace essential skills that teaches math and language in the context of work, in the context of the jobs that people who operate at this level work and there’s an online version of it. It’s kind of like “click us, call us, or come in and see us” and these things are in the adult learning centers. We’re coming online with a new GED. Let me give you some other statistics that frighten me more. We have handling the 632,000 children in this state nearly 40,000 teachers. Every one of them has a degree, did you know that? Some of them may be teaching out of field, but they have a degree, a college degree, an AB degree. I didn’t even look up the higher ed statistics, but they’re equal. Do you know how many people there are for those 900,000 people? There are 666 qualified teachers who are called adult educated to teach them, and nearly half of those do not possess a college degree. They are not qualified to teach adult ed. They have not been schooled in the pedagogy. They know nothing about distance learning. Ninety percent of them have GEDs. Many of them have an Associate Degree. We touch people on nearly every place on the arch of learning from graduate education back to kids. My concern is how we turn that culture around to care. There is not enough state money to train those adult educators. I need your businesses. We need your businesses. The Council on Public Higher Education is getting ready to put out a program and we’ll be partnering with them in which we will be certifying adult educators. And the first two things will be how adults learn and what a win-win is. Doesn’t every employer need all their employees to learn because aren’t you teaching people all the time? And the second thing is we’ll be using technology and distance learning technology and read that to mean computers, satellite, and television and video conferencing to teach adults. We need literally thousands of volunteers to become certified because I say it is a soft underbelly and they are not online. They love online once they get it, but it takes somebody to take them by the hand. It takes a friend. They don’t just go to it naturally. They don’t like to admit that they can’t read. They’re embarrassed. This is a great social embarrassment and so, these are people you have to handle very gently. And, so, Richard, we can’t put up with it.
Questioner
Well, I mean, I was just talking Kentucky. We’re trying to say we want to join the information age, we need to do all these things, and we need to do them at the highest level. It seems like we’ve got a problem if we want to have it in Kentucky.
Questioner
We do. We have to change our culture.
Jim Gray
Well, that’s what Tony was talking a lot about and I see him shaking his head. It’s about a culture change that permeates the entire system. And I will come right back, I promised these guys. Dr. Wilson. Emory Wilson, as you all know, is Dean of the College of Medicine at the University of Kentucky.
Questioner
As you know, Mark Twain once said that he wanted to die in Kentucky because things happened here 20 years later. Personally, I’d like to die in a faculty meeting because I think there are times in a faculty meeting when the distinction between life and death can go almost totally unnoticed. (Laughter) But getting back to the genesis of this group, although we have made great strides and progress in education at all levels, can we afford to educate our own people in this process or do we need to import people to get us where we want to go? Because I think we’re already about 10 years behind.
Jim Gray
I think, Emory, that was this repatriating strategy that Alan’s talking about. Is that what you’re suggesting? Anybody want to take a stab? What have you all done? Let’s take a corporate environment, which can share our experiences with the public sector.
Kristy Folkwein
I guess I’ll take this first. Early on, we did a strategy. After we did the strategy, we tried to find a company we could partner with, someone that had been through this and had made mistakes before. We would partner with them and, when we chose to partner with them, it wasn’t to have that firm come and do it for us. It was to partner ourselves at all aspects to learn together. So, through this first pilot that we did, we put in place a process and a methodology. So, now we’re about on our thirtieth project and we do them always the same. The business and the IT group and corporate communications and law and all the people within our corporate culture know how to do these projects now and we can do them much faster and much more efficiently. So bringing the experts in to teach us how to work in a different way was how we approached it. Now, we do these projects on our own or we’ll bring in people if we’re missing different types of resource needs that we have. But, again, it got us a head start in how to work and now we just consistently use that same approach.
Larry Vignola
We’ve had a similar experience. We at Fidelity are fortunate that we import some experts from our own Boston information technology team. But a year ago, we rolled out a new product where, while we did have some support from those folks, we essentially were able to find roughly 50 associates and also hire some new folks locally. We created the first 401K bought, sold, and delivered through the Internet, so we’ve had a very good experience in terms of being able to find professionals locally. And, very much like Kristy’s experience, one of the things that it taught us is that we have to do things differently. It seemed like an unnatural act at first, but, essentially, putting business and technology people together has allowed us to be much more successful than we’ve ever been before and speed up time to market.
Kristy Folkwein
And the interesting part, too, is, if you came into a room and met 20 people within our e-commerce e-business group, I think you’d have a hard time recognizing which ones were IT and which ones were business. They’re all melding together at this point.
Jim Gray
I want to come back to Emory’s comments a little bit in a second and maybe lift up a little bit higher on the strategic level with you guys. But, before that, Steve Stevens is from the northern Kentucky Chamber and he has a comment and question.
Questioner
Thank you. You all have been at a very lofty level here with your dialogue and I appreciate that, but I would like to go down a little bit closer to grassroots level and maybe get some “how to’s” and talk about a fear that I have. You know, we work with local business and existing industry primarily as do other Chambers of Commerce representatives and business organizations. One of the things that we obviously try to do is bring along those folks who have been involved in traditional operations into a new way of thinking. The very last question, I think, that the speaker that we had just previously answered was, how do we get these folks transitioned, and there’s a distinction between new versus better. There is a new way of doing things and a better way. I don’t know if the panelists share a fear that I have, but as we work with local business, I think there might be a divide being created between big business and small business in terms of their ability to adapt to the New Economy. The fact that the financial resources are not there, there is a great fear factor. They may only have one shot in making a leap in technology. Even though I realize it’s a major undertaking for big business to overhaul and to go to new systems, but you might be able to afford a trial and error from time to time; whereas some of these smaller businesses, at least in their perception, can’t afford to do that. So, I guess, I have this fear that they may find themselves falling farther and farther behind, while big business outpaces them and either gobbles them up or there’s no chance for them to compete. I don’t know if you share this same fear or if you have any suggestions for us as we try to bring these guys along and help them embrace the New Economy. But certainly we’ve got a couple of representatives from our good large corporate citizens here in northern Kentucky and I’d certainly like to hear it. Thank you.
Jim Gray
Yes. You all go ahead and then somebody who maybe has an on-the-ground experience, we’ll invite your comments in response to that. I think it’s a great question. In a business that is under 1,000 employees, which is what our company is, there’s been a lot of anxiety and tension associated with this migration in our bricks-and-mortar business.
Kristy Folkwein
I guess I can take a stab at it first, coming from the other side—big business. I know the Internet and how we look at smaller competitors we have throughout the United States. A gentleman that runs a small company to distribute product is a competitor. Some of those with the Internet have a capability, again by joining consortiums or marketplaces, if there are larger providers where you can join those types of organizations where you can be a regional provider of a service or a product. I guess that’s the first thing that comes through my mind.
Questioner
Yes, as a big business, one of the things that Chuck mentioned that I couldn’t help but notice, was that bricks and mortar is an asset and, so, I think we do have a little advantage. By the same token, I think we have an obligation to provide some of the angel funding and some of those things to try to get these small firms off the ground and running. Typically, the initial investment for one of these firms is not that great and I do think that we need to look to the large business to provide some of that contribution and support.
Questioner
My question is probably off what Steve had mentioned. We deal with a large company and they set standards for e-commerce with them. We’re a supplier to them. My question relates to what Steve is mentioning. What do you do with your suppliers and your business partners with regard to enhancing and promoting that technology divide that small business is concerned with?
Larry Vignola
I can’t speak to our relationship with our suppliers, so much as I can with our clients. We have several different platforms that we try to make available. One is this product we rolled out last year––e-401K, which as the name implies is truly an Internet-based product. It’s not for everybody. One of the things it has allowed to do, though, is provide a very competitive product to a small subset of the economy that just can’t afford all the bells and whistles. But, we haven’t gotten away from all of the other products as well, and so we are trying to provide choice. What are they comfortable with? There are different price points to each of those and we leave it up to the client.
Kristy Folkwein
We do, as I said earlier. Our suppliers to us are very important and we do have a lot of partnership programs with them. We have different types of transactions we do with a B2B environment. We want them to be connected. There’s more efficiency in that and what we’re doing is we end up partnering with our suppliers and a couple of different transaction sets we’ve automated. We did that in partnerships with our suppliers. We sat down with them and looked at the supply chain from their process all the way through our process to see where the benefits for both companies were. And that’s how we approached it as more of a partnership than design.
Questioner
Do you have any specifics as to what you targeted at first and worked up the ladder, or was it just whatever you wanted to do?
Kristy Folkwein
What we targeted at first with suppliers is within our industry. It’s a type of rebate between our suppliers and ourselves. So if we go out to a customer, we have to get a rebate in order to sell that product. We have to go back to the supplier on an individual customer-by-customer basis. That’s something that within our industry has been a very difficult process to monitor. There are a lot of people involved, so that was the first target for our suppliers and ourselves. We’ve put that in a web system now, where we enter the rebate, they approve it online, and we have no reconciliation. So there’s a lot of value to both sides with the people and less people required to do the task, less mistakes and those types of things. We decided, just based on an ORI, a very manual, complex task.
Larry Jones
If I may, I'll put an agricultural twist on this a bit. We have 15,000 large, full-time farmers in this state. We have 65,000 small, part-time ones. With the development of supply chains, as it’s called in the industry, where are the 65,000 small ones going to sell their products? And, I would suggest to you that the Internet has the potential to perhaps level that playing field for those small firms that may find themselves foreclosed out of markets and I’m not sure agriculture is that unique vis-à-vis other small firms in other industries.
Jim Gray
Brian Daly thinks that he may have some data that can help us. Brian is now the Director of the McConnell Technology Training Center in Louisville and was formerly with the Kentucky Science and Technology Center.
Questioner
I have a couple of things just from bouncing around. We call it the guerrilla warfare of dealing with the digital divide. For those of you who aren’t familiar with what the Kentucky Community and Technical College system is doing with their Cisco and their Nortel and their Microsoft Certified Engineer programs, talking about building infrastructure and people who know something, that’s what they do. The Kentucky Institute is a new program instituted just recently by the National Center for Family Literacy on dealing with these adult education issues that we’ve been talking about. One of the programs that we started at the McConnell Technology and Training Center is the Outreach Computer Resources Program, which is to get computers to families who don’t have computers and to businesses that don’t have computers at an affordable cost. Usually, with scholarships, it’s free. E-commerce handholding is something that’s being done by a variety of companies, but it’s something the McConnell Center does in particular. So, there are lots of things available, and if you haven’t had a chance to check them out, I strongly suggest you might look at those.
Jim Gray
Betty Regan is Chairman of Morehead’s Information System Department and she has some thoughts to share with us.
Questioner
I wanted to comment on that education issue because I’ve been at Morehead. This is my third year there, and I’ve been on the industry side and the academic side my whole career, so I have both sides of the picture. We’re building the Information Systems Department there, expanding it, and we’ve done a lot in the last couple of years. We’ve seen our enrollments double with both men and women, but I think there’s a need to do some things differently if we’re really serious about growing and addressing the technology education issues in Kentucky because there are just so many things. We can’t get faculty fast enough. I have three openings in my department right now. We’re competing. The salaries are incredible that we’re competing against. I signed up five people last week who were coming back and wanted to do a Bachelors in Information Technology as a second career. I think the opportunities are there. I think the students are there. It’s our ability to be able to do some things differently, to be able to meet those needs, if we’re really serious in Kentucky about taking a leadership in technology. I have been at three or four different economic conferences or meetings where we’ve talked about economic development in eastern Kentucky. Not one of the speakers talked about technology and the potential for technology for economic development. Yes, it was a real disappointment to me. So, I think there are a lot of places where our last speaker suggested we need to find new ways of doing things and I think we need to do it quickly and move quickly. I don’t know if our panel has a response to that.
Jim Gray
We’re going to take one more question, OK. I’m sorry. Jim is with the Department for Adult Education and I think his views could be really valuable considering the theme today does circle us right back to education. It does seem like wherever we go in the state, any conversation, it brings us right back to there, Jim.
Questioner
Thanks, Jim. I’ve known Jim for a long time. We both go back in the economic development field for years. Virginia, you’re right on track. We’ve got a long ways to go. You threw out the figure of 800-900,000. We use the figure of a million people in Kentucky that are operating at the two lowest literacy levels. Do your math. The unemployment rate in Kentucky is about 5 percent, maybe less than that, of that one million people. If you take away that 5 percent, that means that the majority of them are in the workplace already, and, if you think about that, you all need to be commended on the KET series, The Workplace Essential Skills series. I’m in the Workforce Development Cabinet. I’m also in the Workplace Essential Skills branch, which promotes training in business and industry that deals with those levels. Online KET programs on the Internet, that’s where we’re moving. We’re using computer software that’s interactive for strictly those basic skills. I just came from a Council of Postsecondary Education meeting in Morehead, Kentucky, a few minutes ago. The Council just approved our action plan for the 20-year vision for adult education. A year and a half ago, the Governor decided to take a hard look at adult education in Kentucky. Things are not exactly the way they should be. They outlined a plan. We’re in the Workforce Development Cabinet, but they also put us jointly with the Council on Postsecondary Education for visioning. They approved that plan. There are a lot of things in there that look at distance learning. We served 50,000 people in Kentucky this year. There are a million people out there that need to be served. We’ve got to do something different. One of those components of that plan includes community assessment. I was in a community recently within the last three weeks in east Kentucky that has a new facility coming into that community. They felt like they were going to get all those jobs. When it comes down to it, their people would not be able to qualify for those jobs. Fifty-one percent of that community’s population were at those two literacy levels. There’s no way they’ll get those jobs. They’ll go to surrounding counties to pull those people in. So, it has to be driven locally by the community also.
Jim Gray
I’ve just got a real quick question that layers on that. How do we compare with those numbers? Where are we in the lineup with our million that you’re describing vis-à-vis other states? I mean, 48th, 47th, 45th? Ginny, you got any barometers on that?
Questioner
I saw a comparison that’s kind of more telling, and this is maybe five years old, from the Herald. There’s like one Ph.D. for every 16 miles in certain parts of our state. There are 222 per square mile in New Jersey and Manhattan. This is several years old. You know what I mean. We used to look at the low end or the high end.
Questioner
Serving those individuals, though, we certainly count 5 percent of that population. You know we need to jump ahead of everybody else.
Jim Gray
I don’t know how we compare with Florida, but I can tell you I happen to have been in Palm Beach County, Florida, last week, and we do have better polling machines in Kentucky. (Laughter) I can tell you that. I was there and I saw those polling booths.
Questioner
It’s not the states that we’re competing against. It’s countries.
Questioner
Yes.
Questioner
I don’t need a microphone. So, every year I go to India, at least once a year because I run a software-engineering group. It’s more happening in Bangalore than it is in Lexington by a lot. There are more players there. The education is better. The people are better trained. There are more engineers and that’s a sad, sad situation to be in.
Jim Gray
And you also, though, have a higher ratio of undereducated there as well. Then the dynamic is similar. Is that what you’re saying?
Questioner
Right.
Jim Gray
Right. But they’re overcoming it through pushing the top end up?
Questioner
Right.
Questioner
It’s an important distinction, I think. That’s why I gave you the number of Ph.D.s per square mile. You can attack it at either end. But attack it you must, the top and bottom. You can’t forget the top.
Jim Gray
OK. You all, we are past our deadline, but thank you all for being here and let’s have a thank you for our panelists. (Applause) Thanks so much.