1. Innovation 2.0 A Winning Strategy for Driving Growth A Policy Reset in Time of Fiscal Constraint Prepared for: Washington Economic Development Association Winter Legislative Conference February 15, 2011 Egils Milbergs Executive Director Washington Economic Development Commission www.wedc.wa.gov 1 1.1 WA Economic Development Commission

2. This generation’s “Sputnik moment.” New global and national economic realities challenge Washington State to start, nurture and transform industries driven by innovation. Innovation has been a focus of Washington’s high-tech industries. The focus needs to be broadened to all people, industries and geographies of the state to expand our overall ability to provide high value jobs. Washington possesses substantial assets and initiatives related to innovation, but the state is far from reaching its potential. A comprehensive economic growth strategy focused on innovation and catalyzing “bottom-up” collaboration among industries, universities, laboratories, regions, etc., can transform Washington into a model 21 st century innovation economy.

3. “one small ball in the air” 1957 1985 2011 Sputnik Moments “this is our generations’ Sputnik moment” President’s Commission on Industrial Competitiveness

4. The World is Changing “not your father’s economy” Washington Economic Development Commission 4 Innovation Our Goal: Make Washington the most attractive, creative and fertile environment for innovation in the world by 2020

5. 2010 New Economy Index Overall Scores 5 Source: ITIF 26 indicators in five categories: 1.Knowledge Jobs 2.Globalization 3.Economic Dynamism 4.Digital Economy 5.Innovation Capacity WA Economic Development Commission

6. Soaring R&D in China Knowledge-based Competition China is now the world’s second largest economy

7. Peak to trough job losses 1981-82: 2.9% of labor force This time: 5.5% of labor force We are in tough hole …….. 7WA Economic Development Commission

8. The Great Reset FROM Public Sector Jobs Shovel Ready Expand Safety Net Consumption Debt Competing Regions Top-down macro strategies TO Private Sector Jobs Innovation Upgrading Skills Investment Exports Collaborating Regions Bottom-up cluster strategies 8WA Economic Development Commission

9. WEDC Innovation Strategy World Greatest Innovation Ecosystem Business Performance Public Impact Talent & Workforce Investment & Entrepreneurship Infrastructure

10. Regional Innovation Clusters Education Research Start-ups Associations Non- Profits Defense Military Gov’t Capital Business Workforce Innovation Clusters Matter 10WA Economic Development Commission New industries and JOBS Grow faster Pay higher wages More spin-off and start-up opportunities Offset advantages of low wage competition Attract talent and investment Solve social, energy, environmental problems Maintain defense and homeland security

11. 11 Defense Technology Medical Devices Value-Add Food Freight Mobility Electric Car Environment Technology Nano Photonics Global Health Health Services Bio-Fuels Advanced Manufacturing Cloud Computing, Data Centers Smart Grid Clean Tech Advanced Materials Marine Technology Wine, Water WA Economic Development Commission

12. 12 Designated Innovation Partnership Zones  Bellingham Innovation Zone  Aerospace Convergence Zone  Sequim, North Olympic Innovation Partnership Zone  Tri-Cities Research District  South Lake Union Life Science Innovation Partnership Zone  Spokane University District Innovation Partnership Zone  Bothell Biomedical Manufacturing Corridor  Central Washington Resource Energy Collaborative  Grays Harbor Sustainable Industries  Pullman Innovation Partnership  Discovery Corridor Innovation Zone: Steinmueller Innovation Park  Walla Walla Innovation Partnership Zone WA Economic Development Commission

13. Whidbey Island Naval Air Whidbey Island Naval Air Puget Sound Naval Shipyard Joint Base Lewis McChord Madigan Medical Center Joint Base Lewis McChord Madigan Medical Center Naval Submarine Base Bangor Spokane Fairchild AFB US Coast Guard WA Nat’l Guard US Army, Yakima US Marine Corps Major WA Military Installations 191,000 jobs $12.2 billion in output $10.5 billion in labor income $5.2 billion in defense contracts 13  Intelligence, Surveillance, and Recon  Special forces and special operations  Network-centric operations  Cyber security  Composite materials  Unmanned systems – both air and sea  Energy efficiency and alternatives  Health care for veterans WA Economic Development Commission Naval Station Everett

14. 14 Washington Economic Development Commission

16. Key Policy Strategies 16 Washington Economic Development Commission

17. TALENT: New Pathways for Learning Protect training capacity for high demand occupations Increase production of science & engineering and innovation graduates Expand use of on-line education Reduce K-12 drop-out rate 17

18. INVESTMENT : Accelerate Commercialization Compete aggressively for Federal R&D funds Double recruitment of STARS and EIRs Double start-ups by access to expertise and entrepreneurial capital Make permanent R&D tax credit Clean Energy Public- Private Partnership 18

19. Infrastructure & Regulations Expand local infrastructure financing tools (e.g. TIF) Define infrastructure to include “intangible” capital Build-out broadband(wired & wireless) Create mechanism for self-financing of industry clusters Reduce regulatory barriers and uncertainty 19

20. Seize Global Markets 20 Washington Economic Development Commission Implement Governor’s export assistance initiative Invest in freight mobility & infrastructure Focus trade promotion on competitive clusters, not national markets Improve foreign market intelligence and on-line tools

21. World’s Greatest Innovation Park Collaboration across regional boundaries Provide operational funding for IPZs Strengthen links with defense and mfg. sectors Pursue Federal funding of regional innovation clusters Create mechanism for self- financing of industry clusters 21

22. Brand “Decade of Innovation” Utilize media to promote how WA innovates Leverage the 2012 World’s Fair Anniversary Define metrics to track trends, inputs & outcomes Launch innovation “X” Prize 22 The Next Fifty

23. PNWER Region (GDP/Pop.) State/Prov. GDP* Population Wash. 311,2706,468,424 Alberta 259,900 3,585,000 Oregon 158,2333,790,060 B.C. 150,4124,310,305 Idaho 51,1491,523,816 Sask. 40,3401,008,697 Alaska 44,517686,293 Montana 34,253967,440 Yukon 1,76732,714 Total 1,051,84122,372,731 *2007 population & GDP in $US Million Innovation ecosystem is even bigger…. If Pacific Northwest Economic Region were a separate country, it would rank 13th in total GDP

24. Setting Priorities….. 24 ReduceCreate EliminateInvest Tough Choices Economic Development Programs WA Economic Development Commission

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26. The risks inherent to starting a thriving enterprise in today’s troubled waters are immense, but the rewards have never been greater. 26 Washington Economic Development Commission

27. Thank You 27