Innovate or Bust: The role of American universities, and university technology transfer, in America’s future competitiveness

The Association of University Technology Managers Annual Meeting
February 3, 2005

I have a single message for all of us this morning:

America’s wake up call is NOW.

Throughout our history we have defined our nation as the land of opportunity and exploration. We are the very icons of forward momentum, social progress and economic success.

We see ourselves, and others have seen us, as a prosperous country.

You might say that for most of our history we cornered the market on prosperity.

But all of that is at risk. The rest of the world is catching up.

The race to translate research and technology into business opportunity is hotly competitive. Others are neck and neck, and some competitors are surpassing us. We are no longer in that privileged position as the unchallenged powerhouse of productivity and ingenuity.

Two years ago I joined CEOs from major American companies, along with leaders in higher education and labor, as part of the National Innovation Initiative. You may have heard of this effort, sponsored by the Council on Competitiveness.

The NII’s task was clear though hardly simple: to assess America’s business challenges and to put forward recommendations that advance US competitiveness in a global marketplace.

Well, I can boil down those recommendations into one eight letter word, the meaning of which is essential to our very economic future:

Innovate. Innovate. Innovate.

It is America’s ability to innovate—its ability to develop and apply new technologies—that will make or break our prosperity in the years ahead.

Sam Palmisano, IBM’s chief executive officer and co-chair of the NII, said in announcing our report that innovation must be a national priority, and that it is “the single most important factor in determining the nation’s success.”

Let me put this challenge into some context for us:

Federal investment in science has accounted for half the growth in our economy over the past fifty years.

Yet, federal funding has been on a long term decline.

As a percentage of gross domestic product, it is now only half what it was during its peak in the 1960s.

At the same time, foreign competitors such as China and India are ramping up their investments significantly—in every area, from their research expenditures to their production of scientists.

In fact, five nations now spend more than we do on research as a share of the GDP.

And currently, foreign owned companies and foreign born investors account for nearly half of all US patents.

The race is global, and America is losing ground.

Jerry Sanders, the co-founder of Advanced Micro Devices, said during the NII symposium in Washington that if we can’t out-produce the competition and we can’t out-invest them, then we have to “out innovate” them in our national effort to generate new industries, new markets, and new high paying jobs.

So, how do we do it? And what does this mean for American universities?

If the key component of our future economic development is innovation, then America’s research universities are among its most valuable assets. Higher education and our technology transfer operations play a pivotal role, one that has become more central to America’s economic prosperity than ever before.

All of you lead the charge to innovation in your work as tech transfer managers.

But as the economic development spotlight shines more brightly on universities, it will challenge the whole academy. We will have to be more nimble, more responsive, and more focused, without losing sight of our core mission to freely discover new knowledge and to share it widely with the world.

Let’s look at two contributions our universities can and must make to economic development in the years ahead:

First, we need to offer America bold new educational strategies.

We simply must educate more of our nation’s citizens so our states have the highly skilled workforce necessary to compete in a knowledge economy. In fact, the transfer of knowledge from our faculty to the next generation is some of the most powerful tech transfer we have to offer.

Just as importantly, we have to encourage our country’s talented young people to study science and engineering.

Here is a fact that often surprises people: America is not producing enough graduates right now to replace the scientists and engineers that will retire by the end of this decade.

And the next generation of scientists and researchers must be as diverse as our nation.

We know that America needs many more women and minorities to join these ranks, or we will be out-paced and out-performed in the global arena. At the University of Michigan, we have an NSF funded project called ADVANCE that has made huge strides in the recruitment and retention of women scientists and engineers.

Now in its fifth year, the ADVANCE project identifies and lowers barriers for tenure-track women faculty, and the results speak for themselves. Since 2001, the hiring of tenure track women in science and engineering at the University of Michigan has increased from 20 to almost 40 percent.

Diversity in our workforce and among our scientific community is crucial for the country’s future economic vitality. This much is clear: Diversity will not happen in the workforce unless it happens at our universities.

In addition to education, a second important university contribution to economic development in the years ahead will be found in our research enterprises.

Here’s where you come in, and why your role in tech transfer is so vital:

Remarkable innovation is fostered when our faculty research intersects with a strong university commitment to disseminate that information broadly.

I think people are often confused about why we are interested in technology commercialization, in nurturing start up companies, and in facilitating more patents and license agreements.

It is not about the promise of future revenues that might be generated from this activity. You heard me correctly. It is not about the money.

Of course, revenue generation serves as an incentive. But first and foremost, tech transfer must serve our core mission: sharing ideas and innovations in the service of society’s well-being.

In fact, at Michigan we expect to re-invest institutional gains back into tech transfer efforts. Revenue generation is NOT the ultimate goal. It is simply the means by which we can increase the transfer of new knowledge into the business sector.

I want to challenge some of the traditional direction university leadership has offered on this topic:

University tech transfer must be more than simply acting like for-profit businesses. We should guard against a culture that makes a fundamental shift from the public good to the bottom line. For me, the core question is not “can we profit from the commercialization of this idea?” but rather “what is the best way to get this idea in the hands of the world?”

Our technology commercialization efforts must be in concert with our values as an academic institution. We are not a marketplace, we are a marketplace of ideas—and innovation is born in the free flow of ideas.

All of you play a powerful role in our ability to make good on that promise.

You help us make the world better, healthier, safer, and more economically robust.

Let me illustrate my point by describing two technology innovations that the University of Michigan helped launch in the past few years.

I should tell you that last year was a banner year for us – our faculty members were responsible for 285 inventions and campus technologies led to 13 new start up companies.

But the real story is about remarkable innovations filling important societal needs.

First I want to tell you about a vaccine.

Michigan epidemiologist Hunein Maassab and his colleagues developed a flu vaccine delivered as a nasal spray. It is called FluMist, and we are hoping that its ease of use, and its painless nature, will encourage more people to protect themselves from the flu virus. The Centers for Disease Control and Prevention estimate that 114,000 people are hospitalized and 20,000 people die each year from the flu just in the United States alone.

I tell you this story not only because we are proud of it but also because, as some of you may know, the FluMist product launch was not an immediate blockbuster. It is just now beginning to take off. The real significance lies in its future promise and the impact it will have on global health in the years to come.

My second example is a company that was born from a unique interdisciplinary approach to laser eye surgery.

Researchers and doctors from our College of Engineering and our Kellogg Eye Center at the Medical School developed a leading-edge laser technology. This formed the basis of a startup company called Intralase. The company had a successful IPO in 2004 and now has hundreds of laser systems in the market. The innovative technology provides new options for surgical eye corrections.

Every one of you here today can tell similar success stories from your own campuses and companies. Your work has an exciting, chain-reaction impact on our universities and our economy. Just as importantly, these stories demonstrate how tech transfer catapults university-based research into a world that desperately needs it.

So I started today by describing this as a watershed moment in American economic leadership—we are getting a wake up call and the front desk won’t try again in 15 minutes.

The time to innovate is now.

The word innovate comes from the Latin novus, or new.

We know the old models will not work. We need new approaches, a new roadmap for our future economic development.

Let me conclude with a four key steps we can take right now that will serve to empower and accelerate innovation:

The first priority: As a nation, we must renew our commitment to research funding.

Clearly the federal government plays a pivotal role, especially for basic research in the life sciences, in the physical sciences, and in engineering. Increased federal funding for research is an imperative if we are to remain globally competitive.

More recently we have seen states step up to make transformational investments in science and technology research as well. California voters just approved a massive $3 billion investment in stem cell research, and in Wisconsin the governor has proposed a $750 million research fund , a combination of public and private money for human embryonic stem cell research and other medical experiments. I believe this trend can generate important economic returns in the years ahead. As we consider our commitments to research funding, we must challenge ourselves to develop fresh approaches.

Perhaps we can find new synergies between university-based work and corporate R&D, for instance. And I am quite interested in the increasing role of private philanthropy as well. As an example, the University of Michigan just announced a $44 million gift from private donors to establish a center for Type I Diabetes research.

It is as simple as this: we cannot innovate without investing in research.

Next, we have to form new partnerships between government, higher education and business.

None of us can do this on our own.

Let’s take my own state of Michigan as an example. We have struggled, and our manufacturing-based economy has not yet recovered from the nation’s economic downturn. The legislature’s most recent budget estimates predict a continuing deficit in the current year and for next year as well. All of higher education sustained serious funding cuts in the last three years.

And yet, Governor Jennifer Granholm called together a task force of business and higher education, led by Lieutenant Governor John Cherry, to study the ways higher education affects the state’s economy and well-being.

The state is continuing its commitment to funding for life sciences and technology research that is already adding new companies and new jobs to Michigan. And for our part, the University of Michigan is investing heavily in complementary life science efforts; each leveraging the other’s investment.

And now the next step is a new kind of partnership to enhance regional economic development in the Ann Arbor area.

With the guidance of our Tech Transfer National Advisory Board, we are at the early stages of developing a regional public-private partnership that puts more resources and a very focused effort behind technology-based economic development.

In fact, we believe the University can partner with business, government and community leaders to make the Ann Arbor region a nationally-known center for business creation and talent. We hope we can double the number of technology companies and triple the number of technology jobs in the next decade by leveraging our collective efforts.

The third course of action I recommend will force universities to be self-critical:

Higher education must commit to innovation INSIDE the academy.

Certainly we need to find ways to foster more interdisciplinary research. For instance, we know the newest advances in medicine will depend on combinations of biology, nanotechnology, information sciences, and engineering. Combinations none of us can yet know will yield miracles now unimaginable.

In addition to our academic pursuits, we’d better look at the way we do our business as well.

We have to work far more quickly in this digital age; we have to come to grips with our tendencies to be too risk averse; and we have to find ways break through the walls of the ivory tower so information can be disseminated widely.

I see Michigan’s recently announced partnership with Google as a perfect example of innovation inside the academy. As we work to digitize all seven million volumes of our library collection, it will enable us to open our doors to those who otherwise would not have access.

And finally, as we consider the steps we should take to create a new roadmap for economic development, we will have to ensure our incentives and our policies are consistent with our values and our goals.

Whether we’re looking at university tech transfer policies or intellectual property regulations at the national level, we have to ensure that the protection of intellectual property is not strangling the free exchange of ideas.

Ideas are more than just a commodity.

Of course, we all realize the importance of protections that allow for the full development of new knowledge. But I caution us against moving ever more steadily toward a model of IP regulation that locks up the very innovation we hope to foster.

In closing, let me emphasize the special role played by every person in this room as we encourage a greater level of national innovation.

Universities will be called on to be major players in economic development in the years ahead, bringing new challenges, new partnerships and new opportunities for us all.

Based on what I have presented to you this morning, maybe “tech transfer” is too narrow a description of your role at our universities. I heard another phrase, from your recent Executive Forum, that better captures the real impact and potential of your work:

Chief Innovation Officers.

And here’s why I think so:

Universities bring ideas to life.

But it is technology transfer that gives them wings and lets them fly.

I thank you for all you do, and for inviting me to speak with you today.

These remarks draw upon material in two recent reports. The National Innovation Initiative report, a project of the Council on Competitiveness, can be found at at http://www.compete.org. The final report of Michigan Lt. Governor John Cherry's Commission on Higher Education and Economic Growth is posted at http://www.cherrycommission.org. President Coleman is a principal member of the Council on Competitiveness and served as chair of the economic benefits work group of the Cherry Commission.