From Foresight, Vol. 7, No. 1
published 2000
The science and technology strategies and actions set forth here build on what Kentucky has already accomplished and break new ground with innovative approaches, concepts, and ideas. The strategy confronts and seizes upon the opportunities presented by change. While it presents incredible challenges, a world characterized by instability and chaos also provides a basis for dynamic progress. As the pace of change accelerates, it unleashes forces that can lead to innovation and uncover new opportunities that can be exploited for progress.
For places like Kentucky with unrealized potential, this situation, if properly managed, offers exciting possibilities. But these opportunities can be realized only if Kentucky moves quickly and boldly to develop an innovation-driven economy capable of creating the ideas, products, high-paying jobs and enterprises necessary for success in the new millennium. In a world increasingly running on Internet-time, timid and piecemeal actions will not work.
Change, knowledge, innovation, and speed are the primary forces that drive and shape today’s world. Consequently, a successful science and technology strategy must not only respond to these forces but embrace and actually promote them.
Change is constant and unrelenting. It also has become the predominant force influencing every aspect of our lives. Economist David Birch argues that 50 percent of firms in business today will be gone and the other 50 percent will be much different five years from now. Today’s high school graduate will likely go through eleven career changes, compared to the one or two career changes of the past. Only about 16 of the 100 largest companies around in 1900 are still in business at the close of the century. The life span of products is becoming shorter and shorter, as illustrated by the evolution of the personal computer over the past decade. Many jobs on which Kentuckians now depend will be dramatically altered or gone completely in the years ahead. In short, jobs will change, careers will change, firms will change. Consequently, Kentucky must embrace a culture of change. It must become innovative and entrepreneurial if it is to be a catalyst and facilitator that enables people, firms, and communities to adjust to and manage such relentless change.
In the future there will be two kinds of economies: smart and dead. Today ideas and knowledge are the primary tools of production. The real assets of most successful organizations are knowledge resources and people, rather than equipment, buildings, or other property. John Kao, author and former Harvard Business School professor, concludes, “In today’s new economy ... the minds of gifted people are what truly distinguishes one organization from another.” Knowledge is creating the dynamic companies and jobs that Kentucky must grow if it is going to develop a competitive economy.
To fully grasp the importance of knowledge to the bottom line one only need observe the market capitalization value of many Internet companies and other innovative firms, which are being valued not on tangible assets but on ideas and people. Kao explains that the company Dreamworks was originally valued at about $2.7 billion. “Not bad for a start-up with rented offices, leases on the copying machines, and little if anything in the way of traditional tangible assets.” If it’s not broke ... fix it anyway has become the mantra of business. In today’s economy a company’s only real competitive advantage is to innovate relentlessly and continually. Michio Kaku, noted physicist writing in the book Visions, states that, “In the past decade, more scientific knowledge has been created than in all human history.” This knowledge is driving high-speed progress and innovation in virtually every area of human endeavor.
Speed has become as important as price in defining competitive advantage. James Champy observes in Reengineering Management that Sony Corporation produces four new products a day. The life of an American industrial product, once measured in decades and then in years, is now often measured in months. This is the competitive environment in which companies, organizations, and Kentucky find themselves.
The speed at which technology is changing is fueling this race to introduce new products into the marketplace. Michio Kaku notes that, “Computer power is doubling every 18 months ... The Internet is doubling every year ... In fact if we go back 80 years, computer power has increased by a factor of 1 trillion.”
The interplay of these new forces coupled with other economic changes (e.g., globalization) is leading to the emergence of an age where entrepreneurship, defined as the unconstrained pursuit of new ideas resulting in an innovative creation, is the key integrating element for economic growth and development. Kentucky needs more firms—innovative, growth-oriented enterprises founded on the ideas, creativity and know—how of Kentuckians, companies with real roots in the Commonwealth and the communities in which they reside.
This strategy involves a broad range of factors central to building such an economy, including:
Schools that infuse innovation throughout the learning enterprise, stress science and mathematics, help create an environment in which entrepreneurship is seen as a viable employment option and an alternative to simply “getting a job”;
Universities that promote the development of new knowledge, ideas, products and firms;
A range of capital resources required to support new ideas and start-up and growing enterprises;
Public policies that encourage rather than discourage entrepreneurship, innovation, risk-taking and business expansion;
The scientific and technological capacity to support the start-up and growth of innovative companies;
Communities with dynamic local and regional support systems; and
A culture that supports and rewards high-speed innovation and entrepreneurship.
Research on Kentucky finds a state burdened by relatively low-wage industries and jobs and lacking dynamic growth sectors. Moreover, the Commonwealth has yet to create sufficient knowledge, technological and capital assets needed for real and sustained economic development in the knowledge economy. Kentucky has several underlying weaknesses that, if not addressed quickly, will create significant problems for the state’s economy over the long term. They include:
An inadequately prepared knowledge workforce;
An insufficiently developed entrepreneurial culture and capital base;
A failure to maximize its intellectual capital resources in concert with industry; and
A manufacturing base not taking full advantage of technology for competitiveness.
Independent analyses undertaken in the development of this strategy concluded that:
Closer ties and relationships are needed between emerging industries in the state and research and development emphases being considered by the state’s public universities;
To build a stronger entrepreneurial environment, Kentucky will require increased partnerships, more innovation at all levels, a greater focus on growth from “within” and appropriate state-supported organizations and efforts;
The state’s system for delivering assistance to small and medium-size manufacturing firms suffers from a multiplicity of service groups and organizations;
Manufacturing modernization assistance can help build a critical mass of new industries for the state if this assistance is broadened to product development as well as process improvement;
Technology incubators and related programs in Kentucky are in short supply; and
No clear strategic focus on science and technology exists within state government.
The Kentucky Science and Technology Strategy is driven by a single overriding goal: To create an innovation-driven entrepreneurial economy that makes Kentucky a leader in the development of knowledge and its applications to people, firms and products. Four key strategies will drive Kentucky’s Science and Technology Strategy toward achieving its goal.
Enterprise Development: Create and grow innovation-driven Kentucky enterprises through aggressive support for risk capital and commercialization of research.
Manufacturing Modernization: Modernize existing manufacturers in Kentucky.
Technological Infrastructure: Build the technological infrastructure (i.e., Kentucky know-how) that is essential to ensuring a competitive Kentucky economy.
People: Ensure that Kentucky education systems prepare highly skilled, knowledgeable graduates (including teachers) with the necessary mathematics and science capabilities for successfully maneuvering in the 21st century knowledge economy.
Ten actions are recommended in the four areas of enterprise development, manufacturing modernization, technological infrastructure, and people.
Authorize a limited portion of state pension funds for investing in business ventures-up to 2 percent of pension fund assets.
Create Research and Development (R&D) Vouchers redeemable by small and medium-size firms at Kentucky universities.
Establish the Kentucky Commercialization Fund to support university research prior to garnering a corporate sponsor.
Conduct a review of Kentucky policies and regulations to identify barriers, constraints, etc., that may impede the commercialization of knowledge or technology and the start-up and growth of innovative Kentucky companies.
Establish a statewide manufacturing modernization system.
Establish Regional Technology Service Corporations that serve small and medium-size firms in largely rural areas of Kentucky.
Create the Kentucky Science and Engineering Foundation to further advance Kentucky’s R&D capacity.
Establish the Strategic Technology Capacity Initiative in recruiting technology-based companies.
Increase state investments in targeted higher education trust funds that advance Kentucky’s scientific and technological competitiveness.
Pay premium compensation to all P-12 teachers of mathematics and science and related resource teachers who hold, at a minimum, a degree in math or a science discipline.
Kentucky is at a crossroads. It can continue to build its economy primarily on assembly-line manufacturing and old-line industries, or it can recognize its many assets and aggressively move forward to take advantage of them and create its own knowledge and companies. It can better position itself for the knowledge-driven economy.
Kentucky’s Science and Technology Strategy was designed for widespread ownership. It requires collaboration to be successfully implemented. It focuses on innovation, entrepreneurship, knowledge and R&D to move Kentucky toward higher-value products and processes. A technology management portfolio approach has been proposed whereby the state’s funding commitments are seen as investments, not grants. Recognition has been given to differences and similarities in rural and urban Kentucky.
Finally, the Strategy proposes a reasoned set of Actions but cautions that it will take long-term commitment and results will be seen best over many years. This is a private and public strategy and requires both types of investments for its successful implementation.
For more information contact: Kentucky Science and Technology Corporation, PO Box 1049, Lexington, Kentucky 40588-1049. Phone: 606-233-3502, extension 221; fax: 606-259-0986; email: kstc@kstc.com. Look for online discussions and updates of Kentucky’s Science and Technology Strategy at http://www.kstc.com.