Des Moines Register
02/05/06
Can Iowa innovate?
Gov. Vilsack voices the importance of developing homegrown
ideas, new businesses and products.
By DONNELLE ELLER
REGISTER BUSINESS WRITER
Gov. Tom Vilsack would like Kay Swan.
The mom, musician and trainer of trainers bubbles with creativity. She likes to
brainstorm, constantly looks for new ways to do her job and powers through the
nitty-gritty details of implementing a good idea.
Even her license plate screams "CRE8IV."
Honing creativity is critical to the state's economic future, Vilsack says.
"Given the nature of the world economy, we're going to have to compete or we're
going to have to retreat," Vilsack said in an interview with the Register. "I think
we can compete by being innovative and creative."
Already, Iowa is doing a lot of things to encourage innovation, said Vilsack. It's
investing in the transfer of technology from state universities. It's supporting
young, innovative companies, and providing a solid education for tomorrow's
inventors. Iowa also has one of the most lucrative research and development tax
credits for businesses in the nation.
But Vilsack adds: "A lot more needs to be done, a lot more.
"Most people in business understand this, but I'm not sure most people in Iowa
understand it," said Vilsack, who has proposed increasing investment into
university research, helping teachers be more creative and launching a council
on creativity and innovation.
Creativity and innovation are the state's and nation's best weapons against fierce
global competition, say Vilsack and others. Innovative products and services are
less vulnerable to production in low-wage countries, which are gobbling up
industries America once dominated, say experts.
The state has seen a net loss of about 19,000 manufacturing jobs since 2001, for
example.
Iowans need to "understand there are people out there who are willing to do the
same job they're doing for $15 for $1 an hour," Vilsack said.
"It's about creating new products and new services and new ways to do things.
You're talking about a massive transformation," he said. Innovation can be seen
across Iowa — from factory floors and insurance offices to high schools, state
agencies and university laboratories.
It's as varied as the Iowa Business Council's efforts to help hospitals cut waste
and improve services to creation of business accelerators and the Iowa Fund of
Funds, which is designed to attract more capital investment to young companies.
Attracting 3 key areas
In 2003, Iowa leaders created an economic development program to attract
companies in three key areas — biotechnology, information and financial
services, and advanced manufacturing. The 10-year, $500 million effort, which
was revived last year after funding had run out, relies heavily on innovation to
rebuild the state economy.
Vilsack said the need for more innovation drove his call for spending $50 million
to endow chairs at Iowa's universities and the proposal for a five-year grant
program to spur innovative education ideas.
The need for innovation pushed state government's efforts to "reinvent itself," he
said, and $5 million from lawmakers to jump-start the transfer of technology from
state universities.
"The focus on innovation and creativity has to be the key driver of economic
development, the key driver of education, the key driver of how we govern," said
Vilsack.
Major corporations have wrapped their strategic goals around creativity and
innovation. General Electric expects each "imagination breakthrough" it develops
and embraces to add $100 million in revenue and fuel growth.
"You're dead without it," said Ted Crosbie, a Monsanto Co. executive and Iowa's
newly appointed chief technology officer. "If you're not innovating, you're not
moving forward. It's the same whether you're a company or a state."
But moving to the "next generation" of products and services means Iowa will
"see some industries that go and never come back," said Harvey Siegelman,
former state economist. "It doesn't mean that we won't see other industries
replace them. We have to replace them with something."
Those replacements, he said, should be "fat industries."
Fat industries are made up of emerging, high-growth businesses with new
services, new technologies, new products that are difficult for competitors to
replicate.
"They tend to be the ones with more money for R & D because they have a lot of
windfall profits," Siegelman said. "They have the money to pay higher salaries,
money to make investment in new capital equipment."
Ames-based Metabolic Technologies is expert at turning research into products.
One of the company's most popular products, used to help athletes develop
muscle, came from research that centered on ways to build leaner farm animals.
Now Metabolic Technologies is gearing up to develop new products from a plant
— a weed, actually — that grows in Argentina.
The company expects to extract a vitamin D compound from the plant for use in
an existing drug given to kidney patients. It will explore other uses, from
strengthening eggshells from older hens to helping provide calcium for humans.
"We look at this as a continuum of uses — from animal feeds to nutritional
supplements all the way" to human drugs, said Steve Nissen, co-founder of
Metabolic Technologies.
Metabolic Technologies scientists learned about the plant solanum from
colleagues familiar with it through their work at federal animal laboratories in
Ames. .
"The whole idea of entrepreneurialism," said Nissen, "is to bump into people with
good ideas."
Metabolic Technologies received a $150,000 grant from ISU to pursue the
research, but will invest hundreds of thousands of dollars more and possibly
years into the research.
Building blocks
Crosbie, the Monsanto executive, said Iowa has building blocks for creating an
economy driven by innovation: nationally recognized universities, a "fabulous" K12 education system and talented, hard-working citizens.
The state's challenge, he said, is to harness its strengths and focus on industries
where it has "critical mass." Three reports from the Battelle Institute, an Ohiobased consultant the state hired, are expected to help Iowa leaders do just that.
The first report on Iowa's biotechnology industry resulted in creating Biosciences
Alliance of Iowa. Crosbie said the 18-month-old alliance has focused on bring-
ing scientists, business and government leaders together to weigh and pursue
new technologies. "You've never seen that before," he said.
With nearly $3 million in state funding, the group so far has backed projects that
use animal modeling to find solutions to human diseases, test new food and
health supplements, and expand the raw materials used to create alternative
fuels and other products.
All the projects had matching corporate investment, Crosbie said. John
Brighton, vice provost of research at Iowa State University, said the best
ideas are generated with "collaboration on the edges," where different disciplines
overlap.
"We try to get the best brain power we can to think through what is the best
approach in understanding or advancing an issue or building new products," he
said.
Nissen said his company never knows which ideas will stick, but experience and
deep knowledge of a discipline are essential to success.
"Kids think, 'Well, I'm going to be an entrepreneur right out of college,' " he said.
"There's almost no entrepreneurs on Earth that haven't had at least 10 years of
experience."
Crosbie agreed. He called "intense focus" an essential wild card in developing
new products.
"The more focused we are, the more creative we are," he said.
Nissen, who's also co-director of ISU's agriculture entrepreneurial program,
said recognizing a good opportunity is tricky.
"There are thousands of ideas out there, and 98 percent aren't worth doing,"
Nissen said. "It's a hard thing to put your finger on. You just have to iterate an
idea over and over and over in your head and with other people, and sometimes
it just makes sense. It sounds like it should be easy, but it's not."
U.S. shows reasons for concern
Top trends causing concern that America is losing its innovation edge:
• U.S. federal research funding is half what it was at its peak in the mid-1960s,
and corporate R & D sank nearly $8 billion in 2002, the largest single-year
decline since the 1950s.
• Japan, South Korea, Sweden, Finland and Israel spend more on R & D as a
share of gross domestic product than the United States. And China has doubled
its investment in research and development from 1995 to 2002.
• Foreign-owned companies and foreign-born inventors account for nearly half of
all U.S. patents.
• Eleven nations outperformed the United States in a 15-nation assessment of
students' skills in advanced mathematics. Students in four nations had scores
similar to U.S. students and no nation scored significantly below.
Hedding
Iowa universities have a long tradition of sparking innovation and economic
development, Regents President Michael Gartner told a state House committee
last month. Want proof?
• Over the past decade, Iowa State University has licensed 472
technologies and filed for 487 patents - of which 359 have been issued.
• Since 1995, 47 startup companies have been formed through licenses
from ISU-affiliated operations. Of those 47, 35 companies were based in
Iowa and half are still active.
• In 2004, the sale of ISU-licensed products by Iowa companies totaled $22
million.
• At the University of Iowa, 38 active startup companies associated with the
research park employ 1,248 people with an average salary of $57,000.
• U of I had 435 patents awarded since 1987 and 456 licenses or options issued,
with cumulative revenue of $65 million.
Big spenders
Monsanto spends $1.5 million a day researching corn and soybeans in hopes of
increasing value.
Iowa farmers receptive to using new products
St. Louis-based Monsanto Co. spends $1.5 million a day researching corn and
soybeans, says Ted Crosbie, vice president of global plant breeding at
Monsanto's Ankeny facility.
Overall, Monsanto spent $588 million last year on research and development,
equal to about 10 percent of its sales. The company employs about 1,500
Iowans.
"We don't know what life is like without innovation. It's a way of life here," said
Crosbie, who has been appointed by the governor as the state's new chief
technology officer, a volunteer position.
Monsanto constantly looks at ways to increase the value of corn and soybeans
grown in Iowa and other states, he said. "Corn and soybeans are not
commodities anymore."
One example is a soybean food processors can use to reduce trans fat. Iowa
farmers will grow about 500,000 acres of Monsanto soybeans with low linolenic
acid this year and get a premium price in return. "Iowa farmers adopt innovation
faster than any state in the country," said Monsanto spokesman Lee Quarles.
Crosbie also points to a new $15 million joint venture between Monsanto and
Cargill in Eddyville. Renessen, the new biotech company, will work to extract
nutrients, oils and starches for other products from corn used in ethanol.
Push for more math, science
President Bush last week proposed investing $140 billion over the next decade in
basic research in physical sciences and engineering and to boost math and
science education.
The initiatives would help America shape its economic future, not fear it, Bush
said.
Congressional leaders also have embraced innovation. A group of lawmakers
have proposed legislation based on recommendations from the Council on
Competitiveness to build research, double the number of college graduates in
math, science and engineering, and invest in technology that protects national
security, such as energy alternatives.
Without action, the council states, current research and education trends show
the United States will "squander its economic leadership. . . . The result will be a
lower standard of living" for Americans. Many countries are "emulating our
innovation model — leveraging investment in science and technology to create
market leadership — with remarkable success," the group said.
Innovation, says the Council on Competitiveness, is "the intersection of invention
and insight, leading to the creation of social and economic value."
"Efficiency and quality no longer give businesses a comparative advantage," said
Deborah Wince-Smith, president of the council. "You have to propel the next
generation of products and services."
—Donnelle Eller
DIVERSITY OF PEOPLE, IDEAS, EXPERTISE
"You have to have the right people, culture and equipment," said Ted Crosbie,
vice president of global plant breeding at Monsanto Co. "You can't engineer it,
but you can culture it."
WILLINGNESS TO FAIL
"You have to accept that a number of ideas will fail. The sooner, the better. Then
you can zero in on the ones that will make it," Crosbie said.
FREEDOM TO CHALLENGE
"You have to give people a safe environment to question conformity," said Kay
Swan, a trainer at the Institute for Character Development who brainstorms to
reach students with Character Counts.
COLLABORATION
"Sometimes the best ideas happen at the boundaries of the various disciplines,
pulling people out of their specialized interest area to collaborate," said John
Brighton, vice provost of research at Iowa State University.
DEEP UNDERSTANDING OF A TOPIC
Math and science often are the foundation for building innovative ideas.
"Once you understand math and science, you can pretty much do anything," said
Steve Nissen, co-founder of Metabolic Technologies in Ames.