Arkansas's Needs for Economic Growth and Competitiveness

John W. Ahlen, Ph.D., President Arkansas Science & Technology Authority

before theTask Force on Higher Education Remediation,

Retention & Graduation RatesOctober 8, 2007

Seeing the Future

The future is already here. It’s just not evenly distributed yet.

William Gibson

1. The Knowledge-Based Economy is real and it is here.

2. Good News: Arkansas can compete in the KBE. Bad News: We need to be much more competitive.

3. The Knowledge-Based Economy is fundamentally different from the industrial economy it is overtaking.

Three Things to Know

January 24, 2005

The Quiet Crisis from The World Is Flat

“… we should be embarking on an all hands on deck, no holds barred, no budget too large crash program for science and engineering education immediately. The fact that we are not doing so is our quiet crisis. Scientists and engineers don’t grow on trees. They have to be educated through a long process, because, ladies and gentlemen, this really is rocket science.”

The Value Added Imperative from Trent Williams

• Export Goods and Services• Import Cash• Create Jobs; Pay Higher than Average

Wages • Create Wealth• Create a Primary Enterprise that Supports

a Cluster of Secondary Firms

Extract/Grow/Manufacture/Know

The Fundamental Rule

The System

Development Introductory Growth Maturity Decline

The Life Cycle

The Workforce

Less than9th grade

High schooldropout

High schoolgraduate

Somecollege, no

degree

Associate'sdegree

Bachelor'sdegree

Master'sdegree

Doctorate Professionaldegree

Ages: 25--34

35--44

45--54

55--64$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

Annual Earnings

Education Level

Age

Average Annual Earnings in 2003

Keys to the Old and New EconomiesISSUE OLD ECONOMY NEW ECONOMY

Economy-wide Characteristics:

Markets Stable Dynamic

Scope of Competition National Global

Organizational Form Hierarchical, Bureaucratic Networked, Entrepreneurial

Potential Geographic Mobility of Business Low High

Competition Between Regions Low High

Industry:

Organization of Production Mass Production Flexible Production

Key Factor of Production Capital/Labor Innovation/Knowledge

Key Technology Driver Mechanization Digitization

Source of Competitive Advantage Lowering Cost Through Economies of Scale Innovation, Quality, Time to Market, and Cost

Importance of Research/Innovation Moderate High

Relations with Other Firms Go it Alone Alliances and Collaboration

Workforce:

Principal Policy Goal Full Employment Higher Wages and Incomes

Skills Job-specific Skills Broad Skills, Cross-Training

Requisite Education A Skill Lifelong Learning

Labor-Management Relations Adversarial Collaborative

Nature of Employment Stable Marked by Risk and Opportunity

Government:

Business-Government Relations Impose Requirements Assist Firms’ Innovation and Growth

Regulation Command and Control Market Tools, Flexibility

Source: Atkinson, Robert D., Randolph H. Court, and Joseph M. Ward. THE STATE NEW ECONOMY INDEX: Benchmarking Economic Transformation in the States. Progressive Policy Institute, July 1999, p. 5.

Keys to the Old and New EconomiesISSUE OLD ECONOMY NEW ECONOMY

Economy-wide Characteristics:

Scope of Competition National Global – Dynamic, Digital

Industry:

Organization of Production Mass Production Flexible Production

Key Factor of Production Capital/Labor Innovation/Knowledge

Key Technology Driver Mechanization Digitization

Importance of Research/Innovation Moderate High

Workforce:

Principal Policy Goal Full Employment Higher Wages and Incomes

Requisite Education A SkillLifelong Learning[Career Ladders]

Government:

Regulation Command and Control Market Tools, Flexibility

1970 12 grades

1940 8 grades

1941 WWII 1957 Sputnik

2004 14 gradesThe Shifts

------------------------ ------------------------ ------------------------ ------------------------

1830 1930 2030

1800-1815 Regional Specialization NE – machine based manufacturing S – cotton, cheap labor

1836 Statehood1874 AR Constitution

1880 Census

2005 The World Is Flat

1955 AIDC1983 ASTA

1990 Who will do science in 2010?

1983 A Nation at Risk

The New Deal 1933 1964 The Great Society

1845Steam Power

Railroads Steel

1900Electricity ChemicalsInternal

Combustion

1950PetroleumElectronics

AviationAutomation

1990Digital

Content Software

New Media

1785Water Power

Textiles Iron

2030 PCs Biology

Materials

1989 The Flatteners

The Flattenersfrom The World Is Flat

Genesis: The Flat World Platform Emerges • Windows (11/9/89) • Netscape• Work Flow SoftwareThe Flatteners• Open-Sourcing• Outsourcing• Offshoring• Supply-Chaining• Insourcing• In-forming (search engines)

The Steroids: Digital, Mobile, Personal, and Virtual

African Proverbfrom The World Is Flat

Every morning in Africa, a gazelle wakes up.It knows it must run faster than the fastest lion or it will be

killed.Every morning a lion wakes up.It knows it must outrun the slowest gazelle or it will starve

to death.It doesn’t matter whether you are a lion or a gazelle. When the sun comes up, you better start running

In his earlier book, The Lexus and the Olive Tree (1999), Tom Friedman contrasts the globalized fast world and the slow world; he suggested that people choose the slow world because the fast world is too fast, too scary, too homogenizing, or just too demanding.

Can We Do It Here?

Case Study• $70,000 Applied Research Grant;

$70,000 matching funds from industry • $420,000 NSF Grants (2) – professor and

graduate students• $1.35 million in SBIR Grants (4) – PhDs, MSs,

entrepreneur • $1 million early-stage risk capital being sought –

PhDs, MSs, 2-year college technicians

Three faculty; four companies; 32 employees

The STEM CoalitionApril 24, 2007

• “This is urgent business that needs immediate attention.”

• “This is a competitive threat.” • “What we have here is a bunch of perfect storms.” • “We need to carry the realization of this threat to the

rural schoolhouse.” • “We simply must connect opportunities to minority

and disadvantaged students in our communities.”

Many communities and educators seem too comfortable with an Industrial Age model of mass production learning and an Agricultural Age calendar that bind educators and students in time, place, and purpose.

Embracing the Information Age (2001)

The Risk of InactionArkansas - Percent of National Income Per Capita

35.0%

45.0%

55.0%

65.0%

75.0%

85.0%

1929

1933

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

2017

Source: U.S. Bureau of Economic Analysis

Baseline

Alternative

Baseline

Insanity is when you keep doing the same thing over and over again, each time hoping for different results.

Edward Deming

“Many mainstream organizations could use additional resources to revitalize their current offerings. But when the objective is to get a system unstuck, it is time to go in search of catalytic innovations.”

Clayton M. Christensen, Heiner Baumann, Rudy Ruggles, and Thomas M. Sadtler, “Disruptive Innovation for Social Change,” Harvard Business Review, December 2006.

Alternative

Comments / Questions?

John W. Ahlen, Ph.D.Arkansas Science & Technology Authority

Little Rock, Arkansas 501.683.4400

john.ahlen@arkansas.gov

Thank You!

One Final Question: Do you see it now?