Robotics and the Pennsylvania Economy Vertical Integration Andrew Carnegie coined the term, in the late 1800s, to describe the structure of his company, U.S. Steel, which owned its entire steel supply and distribution chain. I Andrew Carnegie and US Steel established a paradigm for the 20th Century. Vertical integration was typified by a single firm engaged in different parts the production process, acquiring raw materials, manufacturing, marketing new products, transportation and sales of finished goods. Horizontal Integration was the consolidation of many competitive firms, engaged in the same part of the production process, into one company. Horizontally and vertically integrated companies were able to gain competitive advantages in a single market or industry. Companies became self-sufficient ‘castles,’ protecting their products and intellectual property, with little incentive for communication or interaction outside corporate boundaries. Carnegie Technical Institute, 1912 US Steel focused heavily on developing talent internally, from the bottom up, rather than importing it from other companies. Later on, Andrew Carnegie even established an exceptional institute of higher learning to teach the steel making processes to the next generation. Carnegie Technical Institute served as a center of industrial and scientific education in southwestern Pennsylvania. Begun in 1900, and renamed with degree granting status in 1912, Carnegie Tech merged with the Mellon Institute in 1967 to form Carnegie Mellon University (CMU.) At the beginning of the 20th century most universities and government agencies were not involved in commercial applications of science. Vertically and horizontally integrated companies invested in R&D departments to control product development cycles inside their companies. Closed Innovation For years, the logic of closed innovation was held to be selfevident, it was the "right way" to bring new ideas to market. Successful companies all played by the same rules. Firms invested heavily in internal R&D, more than their competitors and they hired the best and the brightest, to reap the rewards of the industry's smartest people. For most of the 20th century the paradigm worked and worked well. One has only to think of the Thomas Edison and Bell laboratories. At its peak, Bell Laboratories was the premier facility of its kind, developing a wide range of revolutionary technologies, including radio astronomy, the transistor, the laser, information theory, the Unix operating system and the C programming language. Closed Innovation: new business development processes and the marketing of new products are isolated and take place within a firm’s boundaries. In 21st century, a number of factors have combined to erode the underpinnings of Closed Innovation… Information flows cheaply and instantaneously over the Internet, corporate isolationism and the bunker mentality cuts people off from new ideas, stifling innovation. Smart people are widely dispersed but more closely connected than ever before. Ideas bubble up in organizations of all kinds and sizes, not just in large research labs. In the 21st century we are seeing a dramatic rise in the number and mobility of knowledge workers, which makes it increasingly difficult for companies to control their proprietary ideas and expertise. Knowledge workers are ever more mobile, willing to jump ship and take their ideas and talent to whatever firm will develop them. Another important factor in the erosion of Closed Innovation is the growing availability of private venture capital. It helps to finance new firms and their efforts to commercialize ideas that have spilled outside the silos of corporate research labs. Open Innovation is a trend that is reshaping how organizations structure innovation processes. An accelerating shift in managing human capital is underway, from closed innovation, in which R&D is vertically integrated within a single organization… … to an open model, in which firms learn to use ideas wherever they find them. A flexible business model is emerging that is open to a broad spectrum of arrangements. Company insiders are contributing to external projects and outside innovators are able to influence internal product development cycles. Henry Chesbrough (University of Berkeley, Haas Business School) In his landmark book, Open Innovation, Henry Chesbrough demonstrates that because useful knowledge is no longer concentrated in a few large organizations, business leaders must adopt a new, "open" model of innovation. Open Innovation describes a new paradigm for the management of industrial innovation in the 21st century. Companies are rethinking the ways in which they generate ideas and bring them to market, harnessing external ideas while leveraging their in-house R&D outside their current operations. "...Companies can no longer keep their own innovations secret unto themselves. ... the key to success is creating, in effect, an open platform around your innovations so your customers, your employees and even your competitors can build upon it, because only by that building will you create an ongoing, evolving community of users, doers and creators." Open Innovation, Henry Chesbrough Open Innovation, combines internal and external ideas as well as internal and external paths to market to advance the development of new technologies, like biomedical engineering, nanotechnology and robotics. Robotics is a 100 billion dollar industry that consists of nextgeneration, intelligent, some times mobile devices, vehicles, and machines. The robotics industry and its rapid technological evolution has become a leading indicator of a regional economy's ability to change. How does the promotion of robotics in the European Union (EU) and the robotdalen (robot valley) in Central Sweden compare with the US and the Robotics Corridor in southwestern Pennsylvania? In the robotdalen companies collaborate with the academic and public institutions to secure Central Sweden in its position as a world leader in the manufacturing, research and development of robot-based automation. The EU uses industry clusters to foster regional development, creating regional brand names for the clusters. The concept of a territorial branding is not a mere marketing wrapper, but a value-added proposal that changes perceptions and preferences and drives investments in the EU community. The EU finances needs-driven research and helps develop open innovation systems, based on the interactions between academia, business and the public sector, the “Triple Helix.” The Triple Helix is a model for understanding and guiding interactions in university, industry and government relations. The linkages implied by this approach are at three levels, between firms, between firms and organizations and between organizations. In the 20th century, each actor had its own tasks: Universities produced science. Industries applied research and manufactured. Governments secured a stable framework for interaction and exchange. The Triple Helix approach evolved from a more conservative co-operation model (often discouraging innovation) to an open model supporting would-be innovators. Open Innovation in regional industry clusters leads to interactions that support invention, creativity and experimentation. Research that leads to radical new innovations is especially important for long-term growth. Engaging industry, academia and the public sector in cofinanced investments in order to increase their impact and share risk is important for achieving this. Geographical proximity between different players creates competitive advantages in terms of co-operation, learning, access to know-how and expertise. Although information flows instantaneously, knowledge is localized in a region and rooted both in the local labor force and in local institutions and organizations. In a rapidly changing economy, résumés alone don’t reflect potential and college degrees are not a proxy for technical skills or competency. Hiring and retention of employees is often based on skills, abilities and competence. This perspective, with its focus on localized knowledge, has, in light of the Silicon Valley phenomenon, resurfaced strongly among industrial and regional economists over the last few decades. Economists and Industrial Engineers have noticed that Triple Helix collaboration leads to upgrading education: Companies help develop and fund customized degree programs. Academics get retrained, leading to curriculum development that begins to meet the needs of industry. A new emphasis on moving the workforce up the ladder rather than simply graduating more students begins to take hold. University to industry linkages are strengthened as education focuses on local needs. Regions that realize this and that have a capacity for renewal can radically develop their competitive advantages. However, this also requires that companies, researchers, and the public sector work actively towards realizing joint strategic ideas. The robotdalen in Sweden is an example of an EU investment in an industry cluster and strategic branding. Within the Central Swedish geographic valley, business, academies, municipalities and public players work together to lead robot development and have established the reputation of the region in robotic education, research and development. Participation in innovative projects and support for ideas leads to the commercialization of products and services, robotdalen has, in just a short time, become an globally recognized innovator in robotics, especially healthcare robotics. Bestic Giraff Bestic, the eating aid, a Swedish firm’s table top robotic arm with a spoon as the end effector. Giraff, a remote controlled robot with a camera and display that enables nursing staff and relatives to quickly and easily come in contact with a patient or family member. Like the robotdalen in Sweden, the Robotics Corridor in southwestern Pennsylvania, has the possibility of being shaped into a coherent and easily identifiable platform for a regional innovation system and a regional brand name. A regional innovation system extends the cohesive and systematic approach to Open Innovation from the shop floor production system to the institutional system of a territory. Welcome to Pittsburgh. A single regional innovation system is necessary for regional place strategy to work. A partnership between the territory and the local government, academic and entrepreneurial forces, is a must for any territorial branding strategy. Creating a culture for modern, effective and rational promotion of a territory as an industry attractor and investment destination begins with the requirements of communication, based on the identity and the existing values of the region. A regional innovation system generates a collective learning process, the rapid diffusion of knowledge and best practices. This leads to better communication. The first law of communication is, “You can not ‘Not ’ communicate!” But it helps to communicate with one voice! Pittsburgh is robot country. Growing out of its industry roots, Pittsburgh is now the Silicon Valley of droid design. National Robotics Engineering Consortium Wall Street Journal dubbed the city "Roboburgh." Agile Robotics Alliance Robot City Roboville Agile Robotics Industry Partnership An untapped goldmine of knowledge and innovation $48.8 billion is invested every year in U.S. university research with very few spinoffs and less than $2 billion in license revenue. European university investment is much lower than the U.S., but generates three times as many startups. Common Problems with Commercialization Academics have brilliant ideas, but often lack the business sense necessary to bring them to market. University technology is often half-baked, proof of concept is not funded. The institution of commercialization is an incomplete system, the legal and financial conditions for technology transfer may be in place, but industry links, corporate development, marketing, and sales are missing. Academics want to disseminate knowledge and publish papers rather than encourage its use. What comes first, graduating more students or commercialization? Solutions Foster entrepreneurship at its source, the workforce. Focus on moving the workforce up the ladder rather than graduating more students. Make our investments in research more effective and commercialize university research. Understand globalization and create new business models which leverage innovation. The Gates Center and Hillman Center for Future-Generation Technologies at CMU A university's contribution to regional strategy works best when the university understands what is happening in the regional economy and what they have to offer to change it. Even when robotics technologies were relatively primitive, their potential role in boosting the productivity and competitiveness of the United States was foreseen by CMU. The Robotics Institute at CMU was established in 1979 to conduct basic and applied research in robotics technologies relevant to industrial and societal tasks. In 1994, Red Whittaker and other CMU scientists agreed that mobile robotics technology had matured sufficiently to enable commercial applications in markets such as agriculture, construction, mining and electric/gas utilities. The National Robotics Engineering Consortium (NREC) opened on July 29, 1996. At NREC, theoretical concepts and laboratory technologies are converted into functional, reliable and costeffective robotics systems. Today, NREC thrives as home to more than 100 of the world’s leading robotics experts conducting applied research and development on more than two dozen innovative projects, many of which have been licensed for commercialization and are being deployed successfully in real-world applications. The Robotics Corridor Project involves two dozen industry partners who have joined with CMU and other Pittsburgh area universities and community colleges to create an associate degree program that will train technicians to build and maintain robots and other automated systems. CMU’s Collaborative Machining Center is a new type of student-oriented machine shop, a place for translating ideas into reality and connecting students to the global economy through collaborative projects with industry partners. The center is tailored toward student participation. The work space is equipped with manual and CNC machine tools, metrology tools, six-axis industrial robots and rapid prototype machines. Faculty, students and industry partners work together in the Collaborative Machining Center on real problems. Student teams work with engineer mentors, to solve problems posed by joint projects. The goal of the center is to foster in students the ability to solve systems engineering problems independently. Collaboration with industrial partners provides students with real-world experience and practical skills. The relationships formed in the process help retain students in the region after graduation. Industry Partnerships in Pennsylvania The Robotics Industry Partnership in southwestern Pennsylvania is a regional organizing effort initiated by the CMU Collaborative Machining Center and Pennsylvania Workforce Development. Its mission is to unify the diverse robotics efforts in southwestern Pennsylvania into one system and speak with one voice. Summary Establishing southwestern PA as a center of excellence in robotics requires a transition to an Open Innovation model of development. Strengthening the links between education and industry is key to making the transition to a sustainable model in the 21st century economy. In order to compete in the global economy, the region needs a globally recognized territorial brand name, like the Robotics Corridor. To do that, the players must work inside of one system and speak with one voice, hence the need for a Robotics Industry Partnership. We can compete on American strengths. In other words, let’s do what we do better.