By Jeffrey Phillips

One of my favorite strategic analogies is based on the concept of ships and castles. These two artifacts represent the extreme options for “offense” and “defense” in a war, but I think may also provide deeper insight into our focus for innovation in North Carolina.

Castles are defensive in nature, built to defend a specific piece of land – a harbor, or a crossing or a crossroads.  Castles are big, bulky places that project a threat over a specific area, and are meant to protect the people of the area in case of attack.  They are large, hard to build but easy to support and maintain, given enough water and food.  Attackers have to overcome immense obstacles to get what’s inside the castle, but can easily maneuver around the castle if there’s not much of value there.  Castles are fixed, permanent, immovable and anchored in a defensive strategy.  They are conservative in nature and rely on overwhelming power and the ability to resist attack and siege.  Basically the only way to make a castle stronger is to raise or thicken the walls.  The idea is to discourage those who you don’t want to interact with and to selectively choose those who you do want to interact with.

Ships, on the other hand, are aggressive in nature, meant to explore new places and conquer distant lands.  They project power over a far larger area than a castle, but can be defeated by a larger armada or a number of fixed positions.  Ships extend power from a base, and must return to a base periodically for refurbishment and refitting.  Ships require many more craftsmen to build and refit the ships and to sail the ships effectively.  Ships also encounter far more people and cultures than a castle does, so individuals who base their strategies on ships must be nimble and able to interact with a broad array of people.  Ships are by nature mercantile and provide numerous opportunities for interaction.

What’s this analogy got to do with innovation and with North Carolina?  Our historical innovation model is based on the “castle” concept.  We’ve had specific industrial policies (Research Triangle Park) and academic institutions (Duke, UNC, NC State, Wake Forest, etc) that traditionally have built and defended specific industries or intellectual property.  We’ve insisted that people come to us, and we’ve had too little exploration and interaction.  Our castle strategy is showing its age, and we need to shift rapidly to a “ships” strategy.  There are several reasons for this thinking.

First, a castle strategy works well if you have something to defend that others want and can’t get elsewhere.  Once, we had a lot of knowledge that was impossible or difficult to obtain elsewhere.  Whether that was a highly educated workforce, proprietary technologies or intellectual property, we could insist that defense was important and interact only when we wanted to.  Now, however, the sources of information and value have multiplied.  There are smart people with good ideas and intellectual property everywhere.  We can’t wait for them to come to us, and often they don’t need to.  We need to go to them.

Second, a castle strategy by definition reduces the interaction with other populations.  Ships, which are bent on exploring, have to interact with other cultures.  Those ships bring back new ideas and new insights to their home ports, while people in castles maintain a traditional perspective and have far less interaction with other people and cultures.  That’s fine if there’s not a lot of new insights “out there” but when the volume of good ideas is as high externally as it is internally, we’ll fall behind if we don’t interact.

Third, we’ve got to encourage people to come to us, as well as take on the responsibility to interact with others.  A castle strategy by definition discourages visitors, since they introduce new ideas and may take our best ideas from us.  In this market, moving at this pace, we should be doing everything we can to interact with others – going to interact in their locations and inviting them into our locations.  Both come away better for the experience.

What benefits would we receive in North Carolina from a shift from castles to ships strategy?

1. We’ll become more open to ideas and the flow of information and people who can create new value.
2. We’ll become or be forced to become more nimble and agile as we learn more.
3. Our ideas and reputation will grow as visitors interact with us and our ideas and return home with a better understanding of our capabilities
4. Both the visitors and the local residents will benefit.

What would it mean to shift to a “ships” strategy for North Carolina?

1. Idea generation and intellectual property centers become “ports” rather than castles.  People from outside the university settings have greater access to research.  Technology transfer becomes far easier.  Ideas permeate both out of, as well as into, academic settings with greater ease.  The level of interaction increases between universities and other universities, between universities and private industry and between universities and the government.
2. People and firms can find a stable “port” here in North Carolina for their ideas and businesses, and can use North Carolina as a launching point for new businesses.  We establish “trade routes” for ideas between universities, businesses and governments.
3. We recognize that speed to market is as important, if not more important, than protection of ideas.  We move faster in all phases of idea development and product commercialization.
4. We get much better at the interactions necessary to be ships captains.  Our crews are diverse and the “ports” we visit are diverse and far-flung.  We are the ones who create the maps, rather than waiting for others to visit and declare a place “safe”.  We learn and master new languages, learn to work with other cultures and welcome those people and cultures here.
5. Like the Portuguese and other maritime traders we establish beachheads and ports in many locations throughout the world, actively visiting and trading with those locations to bring home their ideas and skills and leave behind some of our good ideas as well.
6. We allow the best of the new ideas to help us change the way we work, the way we think and the way we govern, while retaining what’s best about our thinking and processes.

These ideas and recommendations pertain to our universities, governments and private enterprises.  We need innovation in all of these organizations.  We must be willing to become more open, more nimble, and more willing to exchange ideas to drive even more value, rather than defend and hoard ideas to protect value that increasingly is very fleeting.

And time for the ChangePapers.org  SUMMER WRITING ASSIGNMENT.

Don’t worry. This is a quick and painless one. And if you do it right you can supercharge someone else’s thinking too.

Our challenge: spend no more than five minutes thinking about the question below that most fits your passion/area of expertise (please choose just one). Then spend five minutes (nobody’s keeping time, of course) sharing your fill-in-the-blank answer to the question, along with a little bit of explanation for your blank-filling. Here are the questions: READY, SET, THINK!

1. If the North Carolina K-12/community college/university system (your choice) could do one thing to increase the number of graduates it produces that are creative-thinking, entrepreneurially-minded, synthesis-making, non-victim-mentality innovators who can rock the innovation economy, it would be to ……(DON’T LET THESE CUT INTO YOUR TIME, BUT IF YOU ARE STUMPED OR JUST NEED PRIMING, food for thought here and here)

2. If state/local government wanted to do one thing to develop more game-changing, difference-making, efficiency-producing, people-serving government workers or government programs, what we would need to change would be……(food for thought here, here and here)

3. If North Carolina wants to be acknowledged as having the world’s most innovative social/nonprofit community —  one that develops innovative solutions to social problems regularly; one that incubates, hatches and brings to scale new solutions as a habit, not as an accident; one that draws social innovators like moths to a virtuous flame of passion and vision —  the change that we need to make is…..(food for thought here)

4. If North Carolina wanted to be ground zero for game-changing innovative companies, the place breakthrough modern-day Wright Brothers come on a wing but with more than a prayer to grow and take advantage of an unfairly advantageous environment that grows young companies and innovation like kudzu on an empty parking lot, the most important change we should make is to….   (food for thought here and here)

You can of course respond to someone else’s answers as well. Then we’ll look for ways to get your ideas out to all those on the Governor’s Innovation Council and other concerned groups.

In the meantime, we’ll post your answers as they come in, but need them by July 1.

By David Boulay and Sara Nienow

While many blog posts have focused on making North Carolina a good environment for inducing innovation, it seems less time has been spent examining the spread and adoption of innovative technologies and processes within existing businesses. The diffusion of innovation is important and one area where North Carolina should lead the nation.

Organizations that focus on the adoption/diffusion of innovations enable business and industry to share knowledge and technology that lower costs, improve product quality, and reduce manufacturing times. Turning knowledge into economic value stimulates growth for companies, which in turn brings prosperity to communities and ultimately benefits all of North Carolina.

The work the North Carolina Industrial Extension Service (IES) has been doing with the aerospace industry is one example of the value that process innovation can add. This industry, with its high-wage, manufacturing jobs, has long been a juicy target for business recruiters. It is particularly attractive to North Carolina because aerospace manufacturing can provide jobs for many skilled workers who lost jobs in more traditional manufacturing industries.

So when newly-located major aerospace companies began requiring suppliers to be certified to a very strict standard to ensure product quality and safety, IES expanded its efforts to get North Carolina manufacturers certified at that level so they could continue to compete successfully. By reducing the cost and complexity of the certification process, IES created new market opportunities for local manufacturers. In addition to fulfilling local demand for aerospace parts, an internationally recognized certification provides companies with the opportunity to export products to Europe and Asia, further expanding their market potential.

Initiatives such as this one can be critical when economic developers recruit new companies to the state and try to “spread the wealth” by connecting them with local sources of labor, machinery, parts, supplies, and services. This approach lets businesses with traditionally lower levels of innovation to benefit from the growth and recruitment of highly innovative companies.

When small (or larger) businesses become certified at this top level, they can compete with companies anywhere. Some examples: In the western part of the state in Morganton, a small composite manufacturer leveraged their certification to add 12 employees and $11 million in new sales over the last three years.  Seventy miles east in Iredell County, a company traditionally tied to the auto racing industry achieved certification with the help of IES. Two months later, it secured its first government contract.  And in the eastern part of North Carolina in Goldsboro, certification enabled a metal fabrication and machining company to receive additional awards with existing clients as well as new bidding opportunities.

Other programs that spread innovations include Advanced Energy, the North Carolina Cooperative Extension Service and the Small Business Technology Development Center (SBTDC). The value these programs create is substantial. The average established business client has experienced double-digit percentage increases in sales and employees soon after working with the SBTDC.  Clients also credit the SBTDC with saving an average of 4,000 NC jobs each year. Projects led by IES specialists often result in savings of $15 for every dollar spent. That program’s cumulative impact in North Carolina since 2006 is estimated at $456,488,431.

Investing in organizations and activities that help spread new processes and innovative ideas to companies throughout the state is a critical component of a comprehensive innovation policy.

How has your company found new markets or new margins through process innovation? What are other ways the state might create an environment more supportive of diffusing innovation? Let us know through your comments.

In one of my favorite books, Ripples from the Zambezi, Italian consultant Ernesto Sirolli shares one of his key findings after 30 years of working with rural entrepreneurs: there are some people, he says, who are really good at developing new ideas; others are really good at selling those ideas; and still others are good at keeping up with money.  Most people, he says, are good at one or the other. A few people are good at two. But he has never found ANYONE who is good at all three.

But what do most “helpers” do when someone comes to them with an idea for a new company? The FIRST thing we do is to send the person home to write a business plan.  We take these people who are passionate about a new way of delivering information or gene therapies or pizzas—these idea people — and erect in front of them what for many is a showstopping barrier, by asking them to turn themselves into a marketer or accountant. When they don’t come back, we congratulate ourselves on having weeded out folks who lack passion, or we tell ourselves the idea probably wasn’t very good: after all, they didn’t come back.

But couldn’t it just be that we made them think if they couldn’t write a business plan their idea wasn’t any good?

We have a mythology in the United States that companies are started by lone geniuses—think Edison, Gates, Jobs—but whenever you look closely enough, you find that the person identified most closely with the idea in fact formed a team to pull it off.

A new report from the National Bureau of Economic Research makes a similar point with regard to scientific discoveries.  The report finds that on average, big discoveries are being made by people who are a) older and b) working in teams.  Some simple math explains part of what is going on. Each year there are nearly 1 million new academic journal articles published, 90% of them in science and engineering—more than any one person can keep up with. And those are just the formal sources: one estimate suggests that by year’s end, the amount of total information we will have to draw on through the Internet will double, and keep doubling—every 72 hours.

That’s too much information for any one person to keep up with. But older folks who have more connections and younger folks who have more collaborators have a much better chance of knowing what the dots are and how they connect. And all that means they have a better shot at translating more good ideas into breakthroughs.

Small wonder that nowadays, according to the NBER study, 60% of patents, and 80% of all science and engineering articles, are filed by teams.  And when you look at which discoveries rock the scientific world, and are cited by at least 100 other scientists as references for their work, those “home run” papers are four times as likely to be done by teams (for a different way of looking at this issue, see also our Paper 16: Forget Dolly the Sheep: Clone Desimone)

The world’s problems are getting more complicated than ever. There are social and public policy challenges on water, energy, disease, immigration, domestic and global security, farm and manufacturing strategy, how to afford government and what government we want to afford. There are business challenges in drug development, the news business, the declining length of product life cycles, the insecurity of the global supply chain, and a gazillion others. We can’t afford, in business or government or education or nonprofits, to pretend that lone geniuses can innovate us out of any of these boxes any more. If they ever could.

But if team innovation is the solution, what are the policies that could get us more of it? Here are three:

1) Universities Create Team Science:  Universities need to fully embrace the team approach on two levels. For the science itself, they need to create places where people from different disciplines can run into each other, learn who’s working on what, and determine which ideas can inform each other. People creating cool designs for nanoparticles need to have a chance to meet the people trying to turn off mutating cancer cells and then they need to meet the engineers or technologists who can figure out how to deliver a particle to a particular place in the body.

None of those groups has enough time to read all the journal articles in those different fields. But if they had regular forums where people from different disciplines could meet, easy mechanisms that help multidisciplinary innovators raise money to prove concepts, and policies that got them credit toward promotion for working together, you’d see teamwork take off, and the number of “home runs” would look like baseball games during the steroid era.  The university has part of the mechanism it needs already in cross-disciplinary institutes, but two big barriers remain: 1) disciplines still look askance if you’re a chemist publishing something in an engineering journal, making it harder to get promotion; and 2) the state of NC has spent the past couple of years downsizing institutes in public universities, making it harder for some of the places where sparks are flying to catch fire. Some work to do there.

2) Tech Transfer Offices Make Reese’s Cups: Chocolate. Peanut butter. Two great tastes that taste great together. Let’s just start assuming that every idea or discovery that has made it through proof of concept at a university is going to need some help before it turns into a product or service that has value — an innovation. It’s not that scientists aren’t smart; it’s that they are much more likely to be great at being scientists than turning discovery in a lab into innovation in the marketplace. Why not just admit that, and see the role of those helping them commercialize scientific innovation as connecting the scientists to teams (probably of nonscientists, or at least scientists with innovation skillsets) who will share the translation of the vision into reality? Scientists need business folks; business folks need scientists. Chocolate. Peanut butter. It’s a team!

3) Small Business Consultants Serve as Yentls: Let’s ask the professional groups who help innovative small businesses get off the ground, wherever they start, to take on one more function: as yentls, or matchmakers. And let’s ask them to arrange threesomes. When someone comes in with a great idea, rather than sending them off to do a business plan, consultants should see as a key job figuring out what the skills and the appetite of the entrepreneur are, then connecting them with others who have the skills the entrepreneur lacks. We need a master talent bank that has a treasure trove of North Carolinians with the ability to manage a company, market a company, do the financials for a company, and we need to be thinking from the start about taking a team approach to getting new companies going. Getting more people involved will require people who are flexible about compensation on the front end, but that’s part of the DNA of an entrepreneur. And getting more companies going with a real team in place will give them a better chance at going somewhere.

Innovation has to be a team sport. Innovation policy needs to recognize that and encourage that. If we in North Carolina can figure out how to make it easier to play together, we’ve got an unfair advantage. And an unfair advantage is just what we need to win.

1. Which racial/ethnic group is most likely to start a small business?

A.Whites

B. African Americans

C. Latinos/Hispanics

D. Asians

2. At what age is someone most likely to start a business?

A. 25-34

B. 35-44

C. 45-54

D. 55-64

3. If you had to pick, which of these four groups would be most likely to start a business?

A. Men

B. Women

C. Native born US citizens

D. Immigrants

4. Which education level of folks are most likely to start a business?

A. High school dropouts

B. High school graduates

C. Some college

D. College graduates

5. In what state is someone most likely to start a business?

A. Montana

B. Arizona

C. Georgia

D. North Carolina

6. In what year was entrepreneurial activity highest?

A. 1995

B. 2001

C. 2005

D. 2009

The answers, from the just-released Kauffman Index of Entrepeneurial Activity: 1: C, 2: B and D, 3. A and D, 4. A, 5. A and 6. D. Latino’s start businesses at a much higher rate than any other racial/ethnic group; people between 35-44 and 55-64 start businesses more frequently than any other age groups; men more than women; immigrants more than native-born folks; high school dropouts more than folks at other education levels; and folks in Montana, Arizona and Georgia a lot more frequently than folks in North Carolina. Put another way, if you were a 40-year-old high school dropout Latino immigrant male living in Missoula last year and you DIDN’T start a business, you’ve got some ‘splaining to do.

The Kauffman Foundation has been surveying to track this sort of information annually since 1996, and the annual index is always an interesting trove of data.

But as we look at North Carolina and innovation, it’s worth paying attention to two big picture takeaways from this year’s survey. Together they form good news, bad news and a challenge.

1. We’ve all heard over the past couple of years that our nation’s greatest businesses were started during recessions. And it’s true, whether you’re talking about manufacturers (GE, HP, Microsoft, FedEx) media (CNN, Sports Illustrated, MTV) or even food companies (IHOP, Burger King, Trader Joe’s). The good news is that Kauffman finds the rate of startups was off the charts nationally in 2009 – the highest since they started the survey. In all, 558,000 businesses got started per month nationally in 2009, 60,000 more businesses every month than in 2007. The Kauffman Index doesn’t distinguish between high growth companies and other startups, but we can reasonably guess that more high-growth, innovative small businesses are incubating, looking for just when and where they can really take off.
2. The bad news? Small business activity in North Carolina was well below the national average. Whereas in places like Montana, Arizona, Texas and Oklahoma, there were 450 or more businesses started for every 100,000 adults, in NC the number was about 250, well below the national average of 340.

You can take the exact findings with a grain of sorghum – the sample size wasn’t huge – but even with the most optimistic margin of error, NC is not one of the top states for small business startups.

So that’s where we start, and whenn you add it all up, the jumble of data as a whole seems to validate a lot of the things NC has been talking about addressing through its innovation initiatives.

• We need to create a better climate for innovation in the state, to encourage more people to believe they can start innovative businesses and get the support they need to help them succeed. How can we start doing that?
• We need to look to all age groups, especially looking to those just emerging from school and those a few years from retirement. One positive way of looking at our unemployed folks is that a lot of them fall into both the 35-44 and 55-64 age groups. We have a good number of unemployed people in just the right age groups to start a business, and are one of the few states with more people in both of these age groups moving in than are moving out. How do we take advantage of this advantage?
• We need to recognize that Latinos and others not born here have a much greater appetite to start businesses. If we find the right ways to encourage them, our state’s fast-growing Latino population and the large number of STEM-educated graduate students emerging from our universities could be a great source of new businesses. What’s the ticket for activating these potential assets?

Maybe what Kauffman is telling us is that it’s a better time than ever to explode entrepreneurially, and North Carolina has as good a set of demographic attributes as anyone to grow in the explosion. The question is: What are we going to do about it?

As a policy wonk, I try to set similarly high standards: to make me cry, data has to 1) tell me something I don’t know; 2) anticipate all the questions I will have about it, and 3) make it easy to figure out what to do with the data.

The recent UNC study of factors determining teacher success was one example. The new portal we’re developing making faculty research expertise searchable is another.

But for the sheer “why can’t we do that?” factor, it’s hard to beat the WOW level of the latest version of the “Index of the Massachusetts Innovation Economy” (this is their 12th version of the index).  And if we did something similar it might just be the trigger to put North Carolina’s innovation economy on amphetamines.

I know, I know: data sets don’t kill problems; people kill problems. But let me tell you why this one is so gasp-out loud cool.

In one 59-page-turner of a report (think “Harry Potter meets Innovation Geeks Gone Wild”), the John Adams Innovation Institute looks at where Massachusetts is, and how it compares to its top US competitors and foreign competitors, in such areas as R&D as a percentage of GDP;  academic research, industry-funded research, patents;  jobs created in key sectors; new business creation; people with advanced degrees, people with Science, Technology, Engineering and Math (STEM) degrees; how much venture capital money comes in and at what stages; where people are moving into the state from and out of the state to; and more.

The Institute does this all in easy-to-read charts and graphs and quick explanations of why the measures are “significant,” but (wisely) it doesn’t spend this report telling people what to do with the data, leaving that to others. In many ways, the data speak for themselves.

Back to NC. Let’s face it, there’s a lot more talk about remaking our economy around innovation than there is data making the case for the remaking, or action in remaking.

Sure, we’ve got organized efforts like the NC Innovation Council thinking about how to grow and retain and attract more innovative people and companies. All sixteen public university campuses are engaged in a serious effort to figure out how to create more innovative campus cultures and translate creative ideas into innovation, building off of a systemwide report developed between UNC and IBM.

Newer organizations like Innovate on Purpose and New Kind are doing innovation consulting with companies. The Center for Creative Leadership develops leaders better able to supercharge innovation in companies; the Institute for Emerging Issues has identified some of the public policy fixes needed to increase the creativity of the state.

But nobody’s been able to rally us to a collective sense of crisis or state of action.

How do we get unstuck? I vote for an “Index of the North Carolina Innovation Economy” (we could challenge an innovator to come up with a more innovative name).

One of the biggest challenges for us as we try to recover from our economic blues is that we aren’t ready to admit we are QUITE sick enough yet. Sure, half a million people are out of work, but we can find other states that have it worse. Sure we have a $1.1 billion budget hole, but, well there’s California. Sure the people who are finding new jobs are going back to work at 80% of what they were making before, but can’t they just work more hours?

Here’s what an Index would do for us:

• Force us to determine which industry sectors are most likely to carry us into the future. That helps us identify gaps and take immediate steps to strengthen our ability to compete in those sectors
• Take an in-depth look on which folks are moving into and out of North Carolina, and why. That sets us up to develop strategies to grow, retain and recruit the most innovative people.
• Develop a nuanced look at where our capital gaps are, rather than just asserting that we are “weak” in one area or another.
• Identify how well we are attracting federal and private research dollars, which set the stage for innovation, and how well we are doing in translating discovery into innovative companies. Then use data to determine how we can do better.

It wouldn’t be as if we were starting from scratch. The NC Board of Science and Technology made a good start of pulling together the data we need a couple of years ago with its important report, “Advancing Innovation in North Carolina,” and in the past did at least one “Innovation Index.” The NC Department of Commerce connected that data to our larger economic picture in its 2009 Economic Index, which takes a benchmarked look at our macro economy, but spends only limited time (about pp. 35-43) looking at activities most closely linked to innovation.

Could either of those be annual and increase focus on innovation? It’s time for Phase II.

With that data, conversations would get unstuck. We’d know where we stand nationally and internationally, and we’d be able to quantify why taking active steps to unleash innovation here matters.

We’d still need people with vision, energy and passion, but the passion would be focused on solving real, defined, visible problems.

So what’ll it take to get us going on an index? How about just a good old-fashioned snubbing? When Massachusetts tries to figure out who its competitors are in the innovation economy, it picks nine competitor states. North Carolina…. isn’t one of them.

What would you like to see in an NC Innovation Index? Who could lead in developing it? Would it work to goose innovation in the state? Let us know what you think. Send us your thoughts, comments, corrections, analysis as a comment below, or Email or twitter us.

Of course those same things are true most everywhere in the US, and it is hard to sympathize too much with the Valley as it slips from absolute “I-am-the-master-of-the-universe” innovation domination to a slightly-less-vaunted “I’ve-got-the-Milky-Way-but-you-can-have-Andromeda” position.

But it is interesting to hear WHAT people in the Valley say worries them.

Valley guys (and, like, Valley girls too) say they are worried about losing their immigrant talent.

It’s worth worrying about. Duke researcher Vivek Wadhwa’s research shows that in the past decade 52% of companies started in Silicon Valley have at least one foreign national as a co-founder — as more of those folks choose to leave, Silicon Valley loses a valuable edge.

So is this an opportunity for North Carolina or not? Maybe. Maybe not.

At the Governor’s Innovation Council’s March 25 meeting in Greensboro, our committee on growing, retaining and recruiting innovative people (see Paper 18 ) reported on our early ideas.

If our goal is to have more company-starting, job-creating, problem-solving stars in the state, we need to look in every nook, on every tree branch and under every rock for what Craig Mundie, Microsoft’s chief research and strategy officer calls in a recent column by Tom Friedman “high-IQ risk-takers” (let’s call them HIQRT’s).

We can grow more HIQRT’s in our schools if we offer training in how to think innovatively and take risks strategically — a recent study from the SBA (thanks to Bryan Toney for finding it) noted that “university graduates who have taken entrepreneurship courses are more likely to select careers in entrepreneurship, work in small businesses and develop patented inventions or innovative processes, services or products.” In areas with lower rates of entrepreneurship, another study shows that training in innovation and entrepreneurship results in a doubling of early-stage entrepreneurial activity.

We can also create a climate that demonstrates clearly that we value innovation — high profile contests for innovators at all educational levels.

But we also have to recognize that many of our highest IQ and most enthusiastic risk takers graduate each year from our colleges and universities.  At UNC more than 50% of those graduating with doctoral degrees in science, technology, math and engineering (73% of our engineering PhD’s) are foreign-born: If we don’t take intentional steps to hold on to these people post-graduation, we are trying to fight our innovation battle with half of our brain tied behind our backs.

But right now we have two different problems: 1) unlike Silicon Valley, NC doesn’t have a good history of holding on to highly-talented immigrants: the same Wadhwa study that found immigrants at the helm of 52% of Silicon Valley startups found foreign founders at only 18% of Research Triangle area companies; 2) talented immigrants leaving Silicon Valley are more often moving not to other states, but back to their home countries, India, China, and Singapore where, as Wadhwa notes, countries are “rolling out the red carpet” and treating them like returning “national heroes.”

Is there anything we can do? To change the national equation in a significant way would require national action, perhaps starting with politically palatable ideas like the Kerry-Lugar Startup Visa bill (raise venture capital for a company here and you get a visa), but in the meantime there may be a few things states like NC can do. Some preliminary research by Dr. Dianne Welsh, a member of the Innovation Council from UNCG, on organized efforts across the country, including Philadelphia, Minneapolis and Cleveland, suggests that the solutions aren’t too complicated—start “selling” your state well before graduation (showing folks early and often that you value them), work hard on quality of life (the kinds of strategies Richard Florida outlines in his book “Rise of the Creative Class”), get people connected to the job community through internships with startups.

Right now, though, North Carolina has no strategy at all. We simply thank the STEM discipline doctoral students from foreign lands for paying out-of-state tuition and learning from our top teachers and then wave goodbye. If we are ever going to compete with Silicon Valley and the rest of the world for these HIQRT’s, we will have to do better than that.

So what’s most important to do to get started in growing and retaining these people most likely to start new companies? What would you do? Let us know. Send us your thoughts, comments, corrections, analysis as a comment below, or Email or twitter us.

It’s been a career week for capital in NC, and the combination of announcements should make birthing, incubating and growing innovative companies in North Carolina a lot easier.

On Monday, State Treasurer Janet Cowell announced she was hiring Credit Suisse to make up to $230 million (by my calculations, about 0.34% of the state’s pension fund) in equity investments  in “high growth” companies with “significant operations in North Carolina.”*  She expects to make good money by banking on NC’s innovative companies.

On Tuesday, Plexus Capital announced it has raised $40 million, with the ability to draw down an additional $80 million in federal funds, for loans and some equity investments in small and mid-sized businesses in the Southeast.  Plexus partner Kel Landis says the partners will work “very hard to invest in North Carolina-based businesses, because that’s where we are.”

Later on Tuesday, UNC-Chapel Hill announced it had reached an agreement with Biopontis to commercialize university-created discoveries in pharmaceuticals and medical devices. Biopontis will work to raise $35 million to get rough ideas to the point that they can be turned into companies that are venture-investment-worthy, potentially solving, in Biopontis’ words, “the feasibility problem.”

As Dicky V would say (it is March Madness time, after all), “It’s a trifecta, baby!” $385 million is a big honking chunk-a-change, and the money would address some key gaps in the state.

The Treasurer’s announcement means proven companies will have a big new source of growth capital that can help them move from good to great.

Plexus will likely look at some of the same companies, but will offer loan options in addition to venture investments.

With the addition of these two funds to the mix, plus other NC-leaning funds such as Dogwood Equity, Aurora, Wakefield, Hatteras and more specifically-targeted funds like the NC Rural Center’s Rural Venture Fund, there may now be enough money in the state for our companies that have made it downstream and are ready to take off.  Still other funds, such as the state’s program to match grants to promising young technologies funded under the federal SBIR program, the NC Board of Science and Technology’s Green Business Fund, and others fill out the state’s offerings still further.

But Carolina’s announcement begins to address the biggest remaining hole in the state’s innovation capital infrastructure – what you could call “The Psalm 23 Problem. “

Remember our definition of innovation from Paper 01: the ability to translate new ideas and technologies into new systems, products and services? Too many new ideas and technologies die in what could be described as “the valley of the shadow of death” – the point between the creation of the idea and the translation of the idea into a viable product or company or new system.

What Carolina’s deal does, if Biopontis does what it’s promising,  is to bring a professional translator into the mix, a company that can look at all the inventions, figure out which ones can be developed further, then spend the money it takes to get them to where they are investment-worthy.

That deal is a great start, but it can’t be the last step. We need more money in more funds in more places if we are really going to get more startups started and put innovation on steroids here in North Carolina. If we could find that, we could walk through the valley of the shadow of death AND fear no evil. Who’s willing to step forward?

*On March 22, Treasurer Cowell amended the description of companies the fund would focus on, describing them as companies with a “significant nexus” in North Carolina.

By Ted Vaden

Since I came to the NC Department of Transportation a year ago, I’ve been observing engineers.

With a few exceptions, they are the leaders here. Division engineers are the generals of small armies. They answer to the chief engineer, who answers to another engineer, who answers to the chief operating officer, who happens to be both an engineer and a general. The designation, P.E., after your name is an honorific important enough to place on the nameplate on your door. I have P.E. envy.

It makes sense that engineers are so esteemed. They get transportation done.

Transportation is about how to get from Point A to Point B in the fastest time, at the least cost. Engineers are uniquely qualified—by education but also, I would argue, by mindset—to make transportation happen. They think in straight lines, about how to get you from here to there, about how to overcome the obstacles in between (think rock slide). Transportation is about problem-solving; engineers thrive on solving puzzles. Whatever the problem is, they figure it out.

And it’s not just transportation. For the last half-century, engineers have been the drivers of our economy, our society, our culture. The great advances that define the age—the television, the computer, the cell phone, the iPod—came from engineers. Engineers rule.

Or at least, they did.

Last month’s Emerging Issues Forum in Raleigh, “Creativity, Inc.,” suggested that the era of the engineer has, if not ended, at least changed. The Forum offered the proposition that our future economic well-being depends on moving away from an engineering-based economy to one based on creativity. (Interesting it was that the forum was hosted by N.C. State University, training ground for some of the nation’s best engineers. If not basketball players.)

One of the speakers was Daniel Pink, author of the best-selling  A Whole New Mind, Why Right-Brainers will Rule the Future. Pink argues that America needs to shift from a society dominated by the left brain—the logical, sequential, analytical type of thinking characteristic of engineers and scientists—to a right-brain orientation characterized by artistic, empathic, inventive “big-picture” thinking.

Why? Because only that creative orientation will enable America to compete in a global economy in which the left brain odds are against us. Simply put, compared to India and China, we can’t produce enough engineers and scientists.

Pink said:

“There’s this notion out there that if we only train armies of scientists and engineers, we’re going to be fine. I don’t agree with that. We’re not going to be fine if we have armies of scientists and engineers who are purely technicians. We are going to get our butts kicked by India and China who are going to be able to create a lot more technicians who are going to be able to work a lot cheaper in a lot larger numbers. That’s not a game we can win.”

Pink cited a National Science Board survey that asked employers what they look for when they hire engineers:

“In addition to analytical skills, which are well provided by the current education system, companies want engineers with passion, with lifelong learning skills, systemic thinking, an ability to innovate, an ability to work in a multi-cultural environment, an ability to understand the business concepts of engineering, inter-disciplinary skills, communications skills, leadership skills and an ability to change. These are not routine engineering abilities. These are big-picture capabilities.”

Another speaker was Roger Martin, author of The Design of Business, Why Design Thinking is the Next Competitive Advantage. Martin presented research showing that creative-oriented jobs make up an increasing share of the American job market, pay better and experience virtually no unemployment. By “creative-oriented jobs,” he means work that requires decision-making and autonomy on the part of the employee. Those kinds of jobs have gone from one in ten jobs 100 years ago to three in ten today. People in creative-oriented jobs earn substantially more than workers in the rest of our service-based economy, including engineers.

Martin, business school dean at University of Toronto, worries that our higher education system focuses too much on training scientists and engineers. American colleges already produce more engineers, on a per-capita basis, than do China and India, he said:

“What worries me is that we’re headed towards a world where we are increasingly exalting analytical thinking to the exclusion of creativity. If anybody here thinks we are going to fend off the economic challenges of India and China by getting more analytical, I’ve got news for you. Good luck. It ain’t happening.”

As solutions, Pink and Martin both urge a shift to a more liberal arts curriculum in schools and more employer support for creativity-oriented work. Martin is an advocate of “design thinking”—a way of looking at the world based not so much on analytical and deduction skills, but on intuition and “the logic of what might be, a logical leap of the mind.”

Pink is a proponent of “open source” innovation—using technology to build online communities and bring the power of lots of minds to work on solving problems. NC DOT is sticking a toe into the open source world by exploring how, for instance, we might involve users of the highway system to report on traffic flow or potholes, or how DMV customers might help us shorten lines in drivers license offices.

I should say here that my experience at DOT has shown that, while we may be engineer-dominated, the most successful are those who think outside the box, encourage innovation, and while problem-solving, look for unexpected solutions.

And, don’t forget, we’re led by a secretary who was trained as an anthropologist. That’s a person who studies people.

So, are engineers an endangered species at DOT? No. They just need to embrace their creative selves. As Pink said, “We need engineers and scientists who think like artists. And we need artists who think like scientists and engineers. But if we have engineers who only think like technicians, we’re going to be in a world of hurt.”

The Regional Challenge

Here, the Council needs to come up with “micro” oriented answers: how can innovation work in the vastly-different eco-systems the various people of our state live in? At the Williamston meeting, the Council heard how leaders in northeastern NC are thinking about the “innovation imperative.”

The region is well below the state average in per capita income and education levels, and in some ways is more oriented toward Norfolk/Virginia Beach than to North Carolina. Leaders there say they have three big assets – proximity to the huge Norfolk market, available land (including lots of coastline) and a hard working people.

Some good politicking and strategic investment have helped northeastern NC strengthen its backbone of high speed fiber and improve its road systems, so it is more connected than ever to the rest of the world. The region’s rich cultural history has enabled it to improve its “heritage” tourism offerings.

But the big employment industries that have supported the Northeast for years – apparel, agriculture, timber, food processing – are all facing huge long-term challenges, and some other cyclical industries like tourism and boat building are facing gigantic short-term challenges. It adds up to high unemployment in some places (Halifax is sitting at 13.6% unemployment; ten other counties in the region are above 10%) and a real innovation imperative.

The Northeast’s approach is to make a few “big bets” – high profile efforts that build off assets and could yield fruit that supports the region for a long time to come.  The NC Center for Automotive Research along the I-95 corridor in Northampton County takes advantage of its space to create an automotive testing track. A bio-ag initiative aims to develop the region’s ability not just to grow crops, but to extract important chemicals from those crops. An aviation and aerospace initiative aims to make the Pasquotank County area a key source of aircraft overhaul.

Even if every initiative works, it’s hard to see how they will create enough jobs to replace those in the high-employment sectors the region is losing. An innovation strategy for North Carolina needs to offer hope and tangible ideas to regions like the Northeast, but also to challenge those regions to think bigger themselves.

The Council needs to create structures or encourage thinking that permits serious innovation, the kind that comes from asking big questions and questioning fundamental assumptions. This thinking shouldn’t be wholly dependent on large transfers of funds from one part of the state to another.

For example, is there a new breed of tree that is more profitable per acre than the existing stock?

What’s the full range of niche crops that farmers might turn to to increase profits per acre?

How could the Northeast become the go-to testing ground for new ideas and companies?

What policy changes could it make to effectively blow up the state line to become an even bigger part of the exploding Norfolk market? How could northeastern innovators “play bigger” by connecting to innovative activities in that huge metro region?

What radical approaches to K-12 education can school systems there make to raise up a complete generation of innovative entrepreneurs who want to grow and plant permanent roots in a vibrant new northeast?

How can the region draw on Outer and Inner Banks visitors and retirees to extract their ideas and commitment to rethinking the region?

Which programs or research projects from which colleges or universities could be brought in to experiment with new models and ideas?

Can local government leaders come up with a new finance model that brings them the income they need to create their visions of tomorrow?

How can companies take full advantage of the even-greater connectivity offered by broadband expansion coming to the region, and the cost savings that come through greater access to “cloud” computing, to take their innovation to a new level?

No innovation council is going to be as clever at developing solutions like that as the people of a region are, but an innovation council can look at how to give regions space to dream and dare and do.

The Statewide Challenge

The other kind of answers the Council needs to develop are “macro” ones: what policy tweaks and development strategies and big ideas should the Council recommend to the state as a whole? At its meeting Thursday, the Council organized into three committees:

1)      Talent Growth, Retention and Recruitment – How do we raise up more people whose instinct it is to innovate, not immolate or enervate? Once we graduate innovative people from our schools, how do we get them to stay and innovate instate. Is it by starting new companies or developing new models, by expanding existing product lines or services, or by rejiggering existing companies? And how do we convince innovative people that this is the best place in the world to move to or move back to?

2)      Growing Innovative Companies and Organizations – What tools and conditions are necessary to increase the birth and growth rate of our most innovative companies? What financial tools or policy conditions or technical assistance strategies do we need to create a state known for its relentless innovation?

3)      Attracting Innovative Companies and Organizations – In a state accustomed to recruiting “buffaloes” – the kind of high employment branch plants of old-style, mainline industries that “fed” us in the 20^th century — can we find a way to systematically identify and recruit “gazelles” – small, fast growing, innovative companies that will feed us in the 21^st century?

The three committees will likely evolve over time and may adjust their focus, but in the meantime they need to work quickly to determine if there are any recommendations that could meaningfully help the state while we are in the middle of this economic crisis. In the meantime, the Council will continue meeting monthly across the state – balancing macro and micro solutions that can help us begin to make progress in creating an innovation culture here.

What would your suggestions be for the work of these three committees? What ideas need to be on the table for them if we want to strengthen the culture of innovation in our state? And how does a region launch innovation? Send us your thoughts, comments, corrections, analysis as a comment below, or Email or twitter us.