Transcript 0501WORKFORCETOFT (Indiana`s Statewide Strategic

The Innovation Economy
Presented at
“Innovation Matters! Building Competitive Advantage in States”,
2004 / 2005 National Governors Association Workforce
Development Policy Forum, Miami, January 2005
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Graham S. Toft
Economic Competitiveness Group
Thomas P. Miller and Associates
and GrowthEconomics
[email protected]
[email protected]
317 894 5508
941 383 0316
Outline
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4.
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What Every American Wants to Know - What is Happening to Us?
High Stakes for States - - Who is Getting
a piece of the PIE?
PIE Jobs
Major Implications of PIE for States
Wrap UP – Keep Your Eye on the PIE - Try ILPO Magic!
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1. What Every American Wants to Know
What is happening to us and what to call it?
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1. What Every American Wants to Know (cont.)
PIE = Pan-National Innovation Economy
“Knowledge is the ingredient that underlies the competitiveness of
regions, nations, sectors or firms. It refers to the cumulative stock
of information and skills concerned with connecting new ideas
with commercial value, developing new products and, therefore,
‘doing business in a new way.’ At its most fundamental level, the
knowledge-base of an economy can be defined as:
The capacity and capability to create and
innovate new ideas, thoughts, processes and
products, and to translate these into economic
value and wealth.”
Source: World Competitiveness Index
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1. What Every American Wants to Know (cont.)
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Some attributes of PIE
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High productivity / low inflation (even danger of
deflation)
Rapid technological change
High capital / labor ratios (capital deepening)
Deregulation and market liberalization
Global marketplace
Sub-national regionalism
Mobility of:
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Capital
Innovations / Ideas
Business
People
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1. What Every American Wants to Know (cont.)
Some Attributes of PIE (cont.)
 Churning
─ Business locate, then relocate (some off shore)
─ Small Businesses start – many fail.
─ Businesses grow – Businesses decline( even big
businesses).
─ Jobs increase – jobs decrease (often at the same
time).
─ People come – people go.
 Theoretical Underpinnings:
Joseph Schumpeter: “Gales of creative destruction.” or, is it
“wails” or “sails”
 Many state and local economic policies and fiscal strategies
have not adapted to PIE
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1. What Every American Wants to Know (cont.)
When did it start? When will it end?
Start: During the last business cycle (1991 – 2001) but
many of the discoveries leading to the .com boom began a
decade before. Discernable improvement in U.S.
productivity began in 1995, next is global productivity
improvement – in the BRIC’s (Brazil, Russia, India, China).
End: Barring major geopolitical disruptions, global health
epidemics or natural disasters, this is a long-lasting
“industrial revolution” - - with major consequences for
organization of work, type of work, location of work, global
interdependencies and shifting competitive advantage of
nations, states, localities.
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1. What Every American Wants to Know (cont.)
Why is it different this time?
1. Knowledge explosion (doubling every 10 years)
2. Accelerated exchange of knowledge / ideas due to
advanced telecommunications and transportation.
3. Transforming nature of many new discoveries - transforming health / longevity, lifestyles / work-styles,
urban form, value chains, global relationships . .
4. Speed: Reduced cycle time from discovery to
development to deployment.
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1. What Every American Wants to Know (cont.)
Why is it different this time?
5. Rapid growth in global brain-power - - global talentforce!
6. Global consumerism that offers market niches at scale
economies
7. Without high-level innovation/productivity, the U.S.
would be crushed by its “twin deficits” and global
recession could follow.
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1. What Every American Wants to Know (cont.)
Note: There are several “economies” running in parallel
and overlapping with the “Innovation Economy”.
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Entrepreneurial Economy
Market (free trade)
Economy
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Global Economy
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Asset Economy (wealth
created through assets as
contrasted with income)
Geiser Economy
(dramatically changing global
demographics)
Aspirations Economy
(accelerated by
democratization)
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1. What Every American Wants to Know (cont.)
In summary, great uncertainties today call for discerning the
engines of growth for the future
This is the century of:
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Asia (high savings, emerging middle class, high motivation)
Transforming technologies - - Biotech; Nanotechnology;
Advanced Materials, Energy and Food; IT is now a given - next jump is Internet 2
An Aging Workforce, even in the less developed world (the 50
– 60 year olds are your future!)
The emerging “Creative Sector”
Agriculture / Mining / Construction
Manufacturing
The Creative Sector
Services
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1. What Every American Wants to Know (cont.)
This is the century of:
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(cont.)
Trade / Global Markets
The Entrepreneur
States and localities without an appropriate response to
each of these will hurt; many are not well prepared.
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2. Big Stakes for States - - Who is
Getting a Piece of the PIE?
Top 10 most competitive states 2004 - - The Economic
Competitiveness Group’s State Competitiveness index (2004).
(Measured by five drivers, 88 metrics)
WA
UT
DE
MA
VA
CA
AK
IA
CO
WY
What’s common: strong technology / innovation base or
resource base; most have above average human capital base.
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2. Big Stakes for States - - Who is
Getting a Piece of the PIE? (cont.)
Growth States 2004 - - Dynamism Sub-driver from the
Economic Competitiveness Group’s State Competitiveness
Index (positive change in gross state product, business
growth, head quartered companies, incubators, capital
formation, exports, income per capita, bank deposits, foreign
investment)
HI
NV
AK
NM
WI
MO
FL
OK
VA
PA
What’s common: Many mid-size states on the move. Some
showing multi-year turnaround.
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3. PIE Jobs
Lots of mid-level jobs - - the “new working
class” comprised of mid-level technicians,
professionals, paraprofessionals,
managers / supervisors.
 Multi-skilled:
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Basic skills (literacy , numeracy, basic computer)
Technical skills (specific to the occupation).
Social skills (communication, team work, networking)
Investigative and problem-solving skills
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3. PIE Jobs (cont.)
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Life Skills (time and financial management, selfmastery)
Strategic skills (optimism; leadership, inquisitive about
the future; self-directed, self initiating; agility /
flexibility)
Entrepreneurial skills
Multicultural skills.
More part-college, industry-credentialed
jobs
 More self-employment
 More contingent, contract employment
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4. Major Implications of PIE for States
The Innovation Economy is very fluid,
unpredictable (Schumpeter’s “gales of
creative destruction”). Best suited to
localities, states, nations that provide solid
economic foundations for very agile
firms and talent-acquiring workers. Not
suited to heavy-handed public sector
direction - - operates too slowly and lacks
market signals. A danger in getting it wrong
- - a real opportunity to get it right!
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4.1 The Really Big Picture
Paradigm Shift: Create wealth and good jobs will
happen.
 You and fellow state leaders are in it for the long haul.
Economic transforms transcend political / electoral lead
times,
 Even in tough times you will have pockets of growth - monitor and understand where wealth is being created.
 Don’t walk away from your mainstay industries - - they
are undergoing innovative transformations also.
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 “Go with the flow”; Ride the horse, don’t try to kill it.
You can shepherd but not direct. Avoid picking winners.
 Don’t tax productivity-enhancing investment (e.g.
business equipment taxation); don’t unduly tax human
capital (workers comp and unemployment insc.)
 Do tax real property (especially land value). Growing
real estate values are part of the Asset Economy.
 Keep the public very well-informed and ahead of the
game.
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Innovation development calls for a bunch
of non-economic conditions as well as
economic e.g. quality of life for
entrepreneurs, schools that value math
and science highly, career technical
education that tightly links school and
workplace. Hot jobs grow in cool
places.
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Organize state government around what
matters to the innovation economy: Adult
learning (technical and further education);
entrepreneurial education; small business
development and “growth from within”;
business and industry liaison (engaged S
& L government).
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Remember the state budget is usually
more than 10% of state GDP. How these
monies are used, influences state
economic growth.
 China, get over it!
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4.2 Implications for State Economic
Development
Paradigm Shift: Balance “inside-out” growth with
“outside-in”.
 Avoid “cluster-mania” - - works sometimes,
some places, some industries and not others.
Some economic developers and state leaders
have never seen a cluster they didn’t like!
Become skilled in nurturing industry alliances
and see if they grow (e.g. OR)
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Cultivate an entrepreneurial climate (in schools,
in business organizations, in civic institutions
[social entrepreneurship]). Know your angel
network of potential investors. If not there,
nurture it. Develop an entrepreneur attraction
program to your state – some are foot loose!
Have a very flexible pot of money for your
business assistance / incentives. Traditional
incentive packages may not work.
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Capitalize on your knowledge industries, each state has
them! - - don’t write off your institutions of higher learning:
 Advanced Technology Centers co-located at community
colleges / technical institutes.
 Business attraction efforts in college towns that link
graduate student output and research in specific
university departments with business needs.
 University research parks and technology incubators.
 Economic research on the state’s changing economy
(lots to learn and to track).
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Find ways by which small / mid-size
enterprises can obtain strategic
intelligence at modest cost. (“economic
gardening” approach).
 Find ways to accelerate wide-spread
broadband deployment.
 Aggressively advance trade and foreign
direct investment.
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4.3 Implications for State Talent
Development
Pdgm Shift: “workforce” to “talent-force”
Experiential learning is back. Don’t walk
away from your career technical
education system, transform it!
 No child left inflexible. End senior
high school as we know it.
 Off-shoring, embrace it! Build really
creative economic adjustment strategies
(for individuals and firms) in cooperation
with economic development agencies.
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4.3 Implications for State Talent
Development (cont.)
Paradigm Shift: from “workforce” to “talent-force”
Silos are for losers - - reinvent the
human capital bureaucracy (state
universities / colleges, community
colleges, WIA, Adult education / ABE,
Career Technical Education) for agility /
flexibility.
 Learning is for life, seriously!
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5. Wrap Up: Keep Your Eye on the
PIE- - ILPO Magic!
Four ingredients for successful state economic and workforce
development:
Innovation - Learning - Place-making - Optimism
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Am I fostering and supporting a creative, innovative
climate for large and small businesses alike, especially
for new ventures?
Am I fostering life-long learning, combining classroom
instruction with the experiential?
Am I creating cool places for residents of all
socioeconomic groups?
Do I believe optimism can be learned and am I
attempting to change aspirations and expectations?
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Discussion
Economic Competitiveness Group
Thomas P. Miller and Associates
www.tpma-inc.com
317 894 5508
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