In November Washington State was ranked second on the 2008 State New Economy Index, which measures each state’s capacity for innovation and entrepreneurship.
The index is measured by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation, and Washington was the only state in the top five outside New England.
Some call the New Economy the Innovation Economy, but whatever it’s called, experts agree its development means capitalizing on new ideas.
“What you’re really looking for is how can companies or entrepreneurs make new ideas into commercial success,” said R. Lee Cheatham, executive director of the Seattle-based Washington Technology Center.
That’s because many money-makers of the past, such as manufacturing or call centers, are heading off-shore, and industries that remain here, such as health care, require increasing efficiency, said Hal Dengerink, chancellor of Washington State University Vancouver.
In both cases, new money depends on new ideas.
“The salad we eat these days is packaged in a fashion that keeps it from going rotten on us right away,” Dengerink said. “The packaging is the idea that will suddenly make a bunch of money.”
Washington was second on the index after Massachusetts, which is closer to major population centers and research institutions such as the Massachusetts Institute of Technology, and a strong community of investors to back it all up, Cheatham said.
But that isn’t stopping the Washington Economic Development Commission from setting its sites high for the state’s innovation reputation.
Director Egils Milbergs said a plan will roll out in January to put Washington on track to become the most innovative region in the world by 2020.
The commission hopes to get there through community-generated innovation, and has held meetings for that purpose throughout the state, including in Vancouver in October.
“We’re looking at having the state be a partner in those local initiatives that emerge,” Milbergs said. “Over the next 10 years, other states will pursue similar objectives, other countries certainly. It’s just a question of us being more creative and clever and smarter.”
He expects part of that to come from collaborating with innovators in areas such as California’s Silicon Valley, building innovation hubs nationwide.
It’s clear from the index that giants such as Microsoft and Boeing had plenty to do with Washington’s high ranking, but Cheatham said they were pieces of a larger picture that includes smaller companies like Vancouver-based nLight, RS Medical and Map With Us, and Bingen, Wash.-based Insitu.
“There are some really big problems in the world that companies in this state are well positioned to deal with,” Cheatham said, mentioning global health, energy, personal security and defense.
Knowledge jobs
Transitioning into the New Economy means preparing a workforce to generate and implement new ideas or improvements on existing products and processes.
For many such jobs, the preparation requires college degrees, particularly in the areas of science, technology, engineering and math.
“We need people with enough knowledge about the area they’re hopefully innovating in, and we need people with the intellectual skills to think beyond where current products are,” Dengerink said.
In Southwest Washington, the demand for such workers has been greater than the supply, leading WSUV to bolster its STEM programs with a new electrical engineering program.
“The traded sector of the economy here is really dominated by that silicon cluster. The number of jobs in that industry is one of the pieces that documents the demand,” Dengerink said. “The feedback we get from local companies is that there’s no place to hire them from in Southwest Washington.”
In the last year, total enrollment for the university’s STEM programs rose 23 percent.
Globalization
Part of developing the New Economy means finding ways to take concepts and products to the world, or to develop products and services with global demand.
Part of Washington’s advantage is in its export-focused industries, such as telecommunications, software and semiconductors, Cheatham said.
A local leader in that is Vancouver-based nLight, a high-power semiconductor laser supplier that has manufacturing facilities in the U.S., Europe and China and acquired Germany-based Optotools GmbH in September.
One of nLight’s current efforts is collaboration with WSUV researchers to determine how to remove excess heat from semiconductor devices, Cheatham said.
“If this (problem) can be solved, (the idea will be used) in new semiconductors and diode lasers all over the world,” Cheatham said. “That’s the obvious commercialization process we’re looking for. nLight ought to be on the front poster for the New Economy.”
Northbrook, Ill.-based Underwriters Laboratories Inc., which has a Camas facility with 300 employees, has fared well in today’s recession because of its global presence. More than half its 6,000 employees work outside the U.S., serving 70,000 clients globally.
“We assist manufacturers in assuring that any products they take to market will be safe,” such as appliances and alarm systems, said Doug Anderson, general manager in Camas. “We should have felt this recession last spring or summer but we didn’t and it could be because we’re so much more of a global company than we were before.”
Economic dynamism
Economic dynamism in businesses is a key piece of the New Economy, but is a challenge in today’s economic climate.
Economic dynamic companies are defined by the index as fast-growing with the ability to innovate and get products to market faster.
Underwriters Laboratories is pushing through that challenge, ending the year profitably, Anderson said. The company has grown globally by single digits in the last two years.
“I’ve been with the company almost 40 years, so this is the seventh downturn I’ve been through,” he said. “We seem to go into them later than the general economy and come out sooner.”
The company is 115 years old and has been in Camas about 13 years, and continues to reinvent itself. Most recently, the company is rolling out services to verify companies’ claims of sustainability.
Such developments are the reason that Milbergs hopes the state will emerge from the recession with strength and creativity.
“We have innovative companies here. We’re strong in a variety of industries, we have a talented workforce and we have a public private partnership evolving to focus on innovation challenges,” he said.
Transition to the digital economy
Helping others with economic dynamism and globalization are companies that embrace the digital economy, particularly those that bring digital tools to the masses.
“What we are seeing is an overall increase in people doing business online,” said David Steinberg, a spokesman for Vancouver-based web registrar Dotster Inc.
And instead of doing that tech work on their own, more companies are turning to IT companies to “be their digital backbone,” he said.
Steinberg also sees a continuing trend in Washington and the Northwest of people going online first for their information.
“In my previous work in Yellow Pages advertising…if people were in the Northwest they were going online for the information,” he said. “In the Southeast people are using the book and are still attached to that hard copy.”
Northwesterners are also using more wireless devices than other parts of the nation, with some consumers and small businesses abandoning landlines altogether, he said.
Technological innovation capacity
Local leaders hope WSUV will be an even greater part of the New Economy as they submit funding requests for an Applied Technology Center, which could break ground in 2009 next to a WTC semiconductor user facility at the university campus.
Leaders of both organizations called the two projects top priorities.
“Providing support for companies to build (semiconductors) is a long-term benefit,” Cheatham said. “It’s a priority identified by the community, and any time you get a community behind an idea you know something good’s going to happen.”
There is need to have a facility loaded with equipment so companies can diagnose and test products, Dengerink said.
“We’ll have increased opportunities to train students and it increases opportunities for faculty to work with the local industry.”
Milbergs said such efforts could be just what Southwest Washington needs to continue on the New Economy track.
“If we have the right habitat and support innovation then I think all kinds of things can start popping.” Milbergs said. “I think Southwest Washington has all kinds of potential. You’ve got employment and an industry base that can go to the next level, and with the right set of investments…the possibilities are tremendous.”
Charity Thompson can be reached cthompson@vbjusa.com
