Thriving in a World of Challenge and Change Suzy Tichenor

1. Council on Competitiveness National Innovation Initiative Thriving in a World of Challenge and Change Suzy Tichenor Vice President and Director, High Performance Computing Initiative Council on Competitiveness

2. Who We Are

3. The Council on Competitiveness “Our agenda is at the nexus of necessity and opportunity—and we all have an obligation to serve the nation.” –Duane Ackerman, CEO, BellSouth Corporation, Chairman, Council on Competitiveness • 2006: 20th anniversary year • Non-partisan, Non-profit 501 c (3) • 170+ members: CEOs, university presidents and labor leaders • Goals: • Drive U.S. productivity growth • Bolster high living standards • Ensure success in global markets

4. Why Focus on Innovation?

5. We Are at a Tipping Point “To thrive in this new world, it will not be enough – indeed, it will be counterproductive – simply to intensify current stimuli, policies, management strategies and to make incremental improvements to organizational structures and curricula.” -Innovate America

6. Innovation: the single most important factor in determining success in the 21st century Economic Growth High Wage Jobs Quality of Life INNOVATION Competitive Advantage Meeting Social Challenges

7. Innovation – More than Just New Technology What Is Innovation? 21st Century Innovation • “the intersection of invention and insight” • Improves on the existing way of doing things • Generates value for society • Can come from anyone and anywhere • Can be a product, process, service, strategy, etc. • Faster • Collaborative/ Open • Multidisciplinary • Demand-driven • Global

8. The Pace of Innovation Is Quickening 100 Television Telephone Electricity Radio Automobile VCR 50 % Penetration PC Cellular 20 Internet 0 25 50 75 100 125 150 Years

9. The National Innovation Initiative

10. National Innovation Initiative Goals: • Bring together America’s top minds on innovation • Look beyond the traditional tools for economic stimulus– and develop new innovation metrics, networks and best practices • Sharpen our understanding of how innovation is changing and how it can be harnessed for economic growth, higher living standards, etc. • Advocate a strategic, actionable agenda to create a fertile environment for innovation Why?

11. NII 2004 Principals Committee 19 distinguished senior leaders from industry and academia Program Cte. PR/Media Political Liaison Events Mgmt. Tech. Support Advisory Cte. 40 innovation leaders from industry, labor, academia, govt. W O R K I N G G R O U P S Innovation Frontiers 21st Century Innovation Innovation Skills Public Sector Innovation Innovation Finance Innovation Environment & Infrastructure Innovation Markets

12. Findings

13. Innovate America – Thriving in a World of Challenge and Change • 225,000+ Internet Downloads

14. America leads in many areas – but challenges abound…

15. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality

16. Europe and Asia: each producing more PhDs in natural S&E than the US Natural science and engineering doctoral degrees in the US, Europe, and Asia Source: National Science Foundation, Science and Engineering Indicators 2004

17. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain

18. Most US regions lost young, educated residents in late 1990’s Net migration of young, single, college-educated people 1995-2000 600 400 200 Net Migration Rate (Per 1000) 0 -200 -400 -600 U.S. Metropolitan Areas Source: U.S. Census Bureau. Note: Rate calculated on a per thousand population basis, using 1995 as base year . Based on data from 318 MSAs.

19. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain Interested public sector Diffuse structures and understanding of innovation

20. The innovation ecosystem concept shifts the debate We See a Single Innovation Policy with a Broad Constituency Most Policy Makers See Discrete Issues With Narrow Constituencies Federal R&D Spending S&E Workforce Regional Economic Development Workforce Training INNOVATION POLICY Intellectual Property Entrepreneurship Manufacturing Accounting Rules Healthcare Higher Education Technology Transfer Business-University Collaborations Offshoring K-12 Education

21. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain Interested public sector Diffuse structures and understanding of innovation Vibrant capital markets Short-term focus

22. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain Interested public sector Diffuse structures and understanding of innovation Vibrant capital markets Short-term focus and cyclicality Strong intellectual property protection Effectiveness of Patent and Trademark Office

23. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain Interested public sector Diffuse structures and understanding of innovation Vibrant capital markets Short-term focus Strong intellectual property protection Effectiveness of Patent and Trademark Office Growing economy Growing Deficit — Trade, Federal Budget and Personal Savings … and Unfunded Liabilities

24. (Billions of dollars) Source: Global Insight, Inc. US Twin Deficits:Federal Budget and Current Account

25. The Unfunded $45 Trillion Dollar Baby The US has now promised away in PV terms the entire net worth of the country – unprecedented in postwar US history Source: Federal Reserve, Trustees Report on Social Security, Medicare

26. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain Interested public sector Diffuse structures and understanding of innovation Vibrant capital markets Short-term focus Strong intellectual property protection Effectiveness of Patent and Trademark Office Growing economy Triple Deficit — Trade, Federal Budget and Personal Savings Sustained, high productivity Measuring and capturing contribution of “innovation”

27. America leads in many areas – but challenges abound… Strength Weakness Talented scientists and engineers Quantity and quality Flexible workforce Health and retirement benefits and Brain Drain Interested public sector Diffuse structures and understanding of innovation Vibrant capital markets Short-term focus Strong intellectual property protection Effectiveness of Patent and Trademark Office Growing economy Triple Deficit — Trade, Federal Budget and Personal Savings Sustained, high productivity Measuring and capturing contribution of “innovation” Performance and reputation as global innovation leader We are not alone – and we are not young

28. Recommendations

29. The NII recommendations are based on three platforms • Build the Base of Scientists and Engineers • Catalyze the Next Generation of American Innovators • Empower Workers to Succeed in the Global Economy TALENT • Revitalize Frontier and Multidisciplinary Research • Energize the Entrepreneurial Economy • Reinforce Risk-Taking and Long-Term Investment INVESTMENT • Create a 21st Century Intellectual Property Regime • Strengthen America’s Manufacturing Capacity • Build 21st Century Innovation Infrastructures – the health care test bed INFRASTRUCTURE

30. NII Talent Agenda – Selected Recommendations • National “Investing for the Future” S&E scholarship fund • Provide tax credits for companies or individuals who contribute scholarship funds • Portable graduate fellowships • Fund at least 5,000 competitive, merit-based fellowships for up to five years • Expedited immigration process for foreign S&E students • Provide automatic work permits and residency status for foreign students who: a) hold graduate degrees in S&E from American universities, b) have been offered jobs by U.S.-based employers and who have passed security screening tests.

31. NII Infrastructure Agenda – Selected Recommendations • Federal innovation strategy • Develop an explicit national innovation strategy and agenda led by the President • Perform an inter-agency policy, program and budget review and propose initiatives designed to foster innovation within and across departments • National and regional alliances • Create a public-private partnership to advocate for national initiatives and to build broad public support for the NII agenda • New innovation metrics • Track and understand national innovation performance

32. NII Investment Agenda – Selected Recommendations • Innovation Acceleration grants • Spur radical innovation by reallocating 3% of all federal agency R&D budgets toward investment in novel, high-risk and exploratory research • Long term research at Department of Defense • Direct at least 20% of the total DoD S&T budget to long-term, basic (6.1) research performed at the nation’s universities and national laboratories • More support for R&D in physical sciences and engineering • Ensure that the federal commitment of research to all federal agencies totals 1% of U.S. GDP • Complete the commitment to doubling the NSF budget Continued 

33. NII Investment Agenda – Selected Recommendations • Permanent, restructured R&E tax credit • Extend the credit to research conducted in university-industry consortia • Innovation HotSpotsTM, to capitalize on regional assets • Create institutions that foster knowledge transfer, collaboration and support for start-ups, combining and accelerating the deployment of key elements of the innovation ecosystem

34. 34 National policies set the context for innovation, but regions are where innovation happens

35. TM Community Development Regional Hotspots™Initiative: Fostering Integration for Regional Prosperity

36. Regional Hotspots™ Initiative Objectives • Establish regions as the key geographic unit for economic development efforts; establish innovation as the key economic driver for regional prosperity • Integrate workforce, community and economic development programs into a single regional strategic effort • Create regional groups of public, private, and non-profit sector leaders that will implement strategies regionally and serve as part of a peer-to-peer network nationally • Foster more responsive, flexible, and demand-driven workforce development systems at the national and regional levels The ultimate goal is to catalyze the development of competitive firms that will expand employment and advancement opportunities for American workers

37. Implementation

38. We are now in the implementation phase • Leadership Teams • Public Outreach • Federal Outreach • Global/National/Regional Meetings • Public-Private Sector Collaborations

39. 39 The NII Leadership Council • Co-chair Craig R. Barrett, Intel Corporation • Co-chair William R. Brody, Johns Hopkins University • Michael J. Burns, Dana Corporation • John T. Chambers, Cisco Systems, Inc. • G. Wayne Clough, Georgia Institute of Technology • Mary Sue Coleman, University of Michigan • Denis A. Cortese, Mayo Clinic • Robert C. Dynes, University of California System • John M. Engler, National Association of Manufacturers • Robert M. Gates, Texas A & M University • E. Gordon Gee, Vanderbilt University • Sheryl Handler, Ab Initio • Karen A. Holbrook, Ohio State University • Jeffrey R. Immelt, General Electric Corporation • Shirley Ann Jackson, Rensselaer Polytechnic Institute • Martin C. Jischke, Purdue University • Douglas J. McCarron, United Brotherhood of Carpenters & Joiners of America • Clayton Daniel Mote, Jr., University of Maryland • Peter O’Donnell, Jr., O’Donnell Foundation • Samuel J. Palmisano, IBM Corporation  • Luis M. Proenza, The University of Akron • Robert L. Reynolds, Fidelity Investments • Kenan Sahin, TIAX, LLC • Carl Schramm, The Ewing Marion Kauffman Foundation • Jeffery Wadsworth, Oak Ridge National Laboratory • Mark Wrighton, Washington University BOLD = SURA Member

40. Business-Higher Education Forum The NII Presidents Council

41. CASC The NII Presidents Council cont’d…

42. We are now in the implementation phase Public Outreach • Over 250,000 copies of Innovate America downloaded • Extensive press coverage of December Summit • Press coverage continues: Fortune July 25, 2005

43. We are now in the implementation phase Federal Outreach • Senators Ensign and Lieberman to propose omnibus legislation based on the NII recommendations • Meetings with Senate Majority Leader Frist, Senate Finance Committee Chairman Grassley and Secretary of Labor Chao • Listening session with Senate Commerce Subcommittee on Technology, Innovation & Competitiveness • Wayne Clough testimony on manufacturing before Senate Commerce Subcommittee on Technology, Innovation & Competitiveness • Testimony by Leadership Council representatives before House Science Committee

44. We are now in the implementation phase Federal Outreach Draft Omnibus Legislation…some key points • Will authorize NEW $$$ in physical sciences (NSF? NASA? DoD?, DOE?) • Recognizes basic research as an investment…not a cost • Embraces innovation acceleration grants • Increases portable graduate fellowships (DOD, NSF) • Executive Focus on national innovation policy (interagency cmte?) • Focus on patent quality • Advanced manufacturing technology language related to the defense industrial base and DOC MEP program • Plan to introduce in September 2005 Continued 

45. We are now in the implementation phase Federal Outreach Draft Omnibus Legislation • Coalition forming to work for passage • Group of NII leadership companies • Council providing policy direction • Contact Bill Bates, Council Vice President for Congressional Outreach Bbates@compete.org

46. We are now in the implementation phase Global/National/Regional Meetings • First Regional Innovation Summit in Atlanta: Symposium on Southern Innovation (Hosted by Duane Ackerman, Wayne Clough and Gov. Perdue) Oct 30-31 • http://www.southern.org/main/STC/SI2/symposium.shtml • National Summit on Competitiveness: Investing in US Innovation, sponsored by Rep. Wolf (Chair of the Science-State-Justice-Commerce Appropriations Subcommittee), Council on Competitiveness, AEA, NAM, BRT Dec 2005 • Aichi World ExpoSeptember 2005 • EU SummitApril 2005

47. We are now in the implementation phase Public-Private Sector Collaborations • Innovation Metrics • Innovation HotspotsTM • Healthcare Grand Challenge • Energy Grand Challenge

48. The (New) Path to Prosperity Prosperity • The most important sources of prosperity are created not inherited • Productivity does not depend on what industries a region competes in, but how it competes. Competitiveness(Productivity) Innovation

49. Council on Competitiveness National Innovation Initiative Chad Evans Vice President, National Innovation Initiative 202.969-3380 cevans@compete.org Randall Kempner Vice President, Regional Innovation 202.969.3403 rkempner@compete.org Suzy Tichenor Vice President and Director, High Performance Computing Initiative 202.969.3398 stichenor@compete.org Bill Bates Vice President for Congressional Outreach 202-969-3395 bbates@compete.org