Education + Infrastructure + Innovation

Today, the competition is keener; the challenge is tougher; and that is why innovation is more important than ever. It is the key to good, new jobs for the 21st century.  That’s how we will ensure a high quality of life for this generation and future generations. -- President Barack Obama, Aug 5, 2009

Back in 2000, Alan Greenspan, former Fed Chairman, observed that the U.S. was in the midst of a period of rapid innovation that would produce “substantial and lasting benefits to our economy.”

The technologies and innovations allowed Wall Street to leverage high-performance computers and make trades faster than the blink of an eye producing fantastic salaries/bonuses for them!

Okay, not a good example. But it proves that innovations are only as good as the hands/minds that develop, manage, use them.

Today, the hue and cry is that even though we live in a period of rapid innovation, the U.S. has lost its edge and prospects for tomorrow are grim.

But global leadership isn’t the sole property of Americans. It is won by each generation. So it would appear we’ve done a lousy job of preparing the next generation of innovators.

New Plan
President Obama outlined a plan a while ago that few disagree with.

• Improve a stagnant education system with stronger emphasis on engineering, science
• Improve the country’s infrastructure
• Foster innovation

There’s not a lot new in the goals but as Thomas Edison, arguably one of the more prolific inventors, observed, “Restlessness and discontent are the first necessities of progress.”

The challenge is that the U.S. has been drawing dividends from the investments of the last 25-plus years.

Even with a sour global economy, other countries have been investing in projects/programs that will enable them to adapt to change:

• Despite Ireland’s economic condition, they are funding basic research.
• Russia is building an “innovation city.”
• Saudi Arabia has a university of science and engineering with a $10B endowment.
• China will soon open their high-speed train system which will connect major business/manufacturing centers.
• China is creating dozens of new technology universities.

To compete tomorrow, they are educating their youth and giving people the tools to innovate.

Some will say they gained by being the manufacturers/copiers of the U.S. technology.

Quality Management
Peter Drucker, management and quality guru, spent his career spelling out the need for clear, concise management direction, quality manufacturing and listening to what wasn’t being said.

The “low-cost” countries listened.

The U.S. has been living off the fruits of the past:

• Consumers spend more on potato chips than the government invests on energy R&D.
• Two years ago, half the U.S. patents were awarded to non-U.S. companies. (Figure 2)
• China has replaced the U.S. as the world’s number one high-tech exporter.
• Between ’96-99, 157 new drugs were approved in the U.S, 10 years later – 74.
• The world economic Forum ranks the U.S. #48 in quality of math, science education.

U.S. Patents vs. Foreign Patents

Source: U.S. Patent and Technology Office (USPTO)

Idea Masters – The U.S. is no longer the sole source for technology innovations, patentable ideas. While breakthroughs, advances can come from almost anyone today, U.S. firms still have a corner on the understanding, the expertise needed to monetize the patentable ideas. Source – U.S. Patent and Technology Office (USPTO)

Government officials love to blame companies for not investing in tomorrow’s technologies, but that doesn’t hold a lot of water.

IBM invests $6B a year on R&D. Their ROIC (return on invested capital) is 29 percent.

They aren’t alone:

• Microsoft produced 36% ROIC
• Intel produced 10% ROIC
• Average ROIC for most tech firms was 9.5%
• GE earned $11.3M per patent
• Cisco earned $6.6M per patent
• HP earned $6.3M per patent

Patents Plus
While foreign firms have excelled at getting U.S. patent awards, U.S. firms outperform foreign competitors on their ROIC for investors.

Toshiba and Panasonic had negative returns while Canon, Samsung had modest returns.

Individuals who have benefitted financially are investing in tomorrow.

Warren Buffet, Bill Gates and 40 of America’s billionaires who made their fortunes from technology have pledged huge portions of their wealth to education.

Why?

The companies and executives look at the numbers.

Asian Competitive Investment

Investing in Tomorrow – While governmental and private investment in R&D has remained flat as a percentage of gross domestic product in the U.S., Asian nations have been accelerating their investments to produce tomorrow’s advances. Source - UNESCO

They can see that perhaps for the first time in U.S. history, we could leave our children, grandchildren with a lower standard of living than we’ve enjoyed.

That’s a helluva’ legacy!

Even with high unemployment, there is a crying shortage – everywhere – for engineers and scientists.

If you look at the population demographics in the U.S. – or any country, for that matter – there is a growing skills gap between today, tomorrow.

The “replacements” simply aren’t interested in science, technology, engineering, math educations.

For some reason, it’s been a tough sell.

Gates and other technically-educated industry leaders devote a lot of time with educators and young people to add luster to technical careers.

As Edison pointed out, “there must be forethought, system, planning, intelligence, and honest purpose, as well as perspiration. Seeming to do is not doing.”

Perhaps that’s why China and India are producing more engineers than the U.S.

Six years ago, an independent U.S. Competitiveness Commission issued their Rising Above the Storm report.

Bureaucrats/politicians agreed that the Commission’s recommendations would prepare the next generation of innovators:

• Improve K-12 science and math education
• Invest in long-term basic research
• Attract and retain the best and brightest students, scientists and engineers in the U.S. and around the world
• Create and sustain incentives for innovation and research investment.

Unfortunately, governments set rules/guidelines work at their own pace.

Black Swans
But Black Swan advances – unexpected events with huge positive benefits – don’t follow rules.

Or, as Edison said, “Hell, there are no rules here - we're trying to accomplish something.”

To fill the gap and leverage the most up-to-date business/technology information available – anywhere, executives are using the Internet more and more to gather data, trends, developments.

Executive Business Research Sources

Source: Forbes Insights

Information Resources – Senior executives have found their ability to tap into resources around the globe almost instantly is of tremendous assistance in keeping ahead of competition and the marketplace. Interestingly, they want to capture the information by themselves, rather than have it filtered by staff members. Source – Forbes Insights

The wired executives may not blog, Facebook or Tweet, but they are online looking for competitor analysis (53%), customer trends (41%), corporate developments (39%), technology trends (38%) and compliance/legal issues (26%).

While the problem – in the U.S. and every country – is obvious, the solution isn’t as simple as stringing three words together – education, infrastructure, innovation.

People need a single objective, a goal not unlike the one Kennedy gave is in the ‘60s.

“We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.” – President John F. Kennedy, Rice University, 1962

One goal.

One objective everyone -- in a company or country – can get their heads around.

Preparing the coming generations to be the inventors, innovators of tomorrow isn’t as sexy as going to the moon, but it can produce the same results.

The dynamic pace of change will not slow down.

A new set of “breakthroughs,” innovations to transform your life, shift an economy isn’t an overnight process.

Even Edison discovered 10,000 ways to do something wrong.

It’s time to start down that long, winding road.

Andy Marken is CEO of Marken Communications, and an all round great guy!