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Notes from Innovation Policyworks
Recently, I was emailing with a friend of mine who lives in Cheyenne, WY. We've been following an initiative of the Governor of Wyoming for economic development in the state. In December, the recommendations came out. "Rick," I wrote. "This is great! They included some entrepreneurship strategies." "I don't agree," he wrote back. "There's nothing on innovation." 

At first, I was taken aback. After all, the recommendations were pretty standard stuff. But then, I realized that Rick was 100% completely right.  

We tend to focus on entrepreneurship, and sometimes R&D, but rarely on innovation in our public policy recommendations. And, innovation is actually the critical step. It's the link between ideas and the market. It's the key piece that allows companies, big and small, old or new, to produce something meaningful for their customers. Without innovation, there'd be no entrepreneurs! So innovation has to come first. Read MORE


Five Trends for 2018
TrendWatching, one of the best sites for watching big, mega trends, reports on the top five trends for 2018:

1. A-Commerce
Automated commerce is what comes after e-commerce and m-commerce. Consumers have more important things to do than shop and they are embracing the outsourcing of certain retail experiences to algorithms and smart devices. That means the automation of hunting, negotiating, purchasing, delivery arrangements and more.

2. Assisted Development
Post-demographic consumers are crafting new narratives of adulthood. In 2018, they'll look to brands to help. Examples are companies assisting with tasks as varied as learning to cook, getting a mortgage and moving.

3. Virtual Companions
Virtual entities are making the leap from assistants to companions. Consumers are starting to feel it is possible to have a meaningful conversation (a relationship, even) with virtual entities that entertain, educate, heal and even befriend.

4. Forgiving by Design
Post-purchase forgiveness is 2018's must-have feature. Many consumers have very high expectations for customer service, so companies need to design forgiving offerings that adapt to changing needs before their customer switches to a competitor.

5. Glass Box Wrecking Balls
A revolution in transparency is just getting started. Connectivity has not only turned every business into a glass box. It has also vastly magnified the power of those who have been wronged, or who wish to malign individuals or organizations.
Learn MORE about these trends.

Large-scale Changes in Employment Bad for Rural Places
New household employment data show that Americans with college degrees can account for all of the net new jobs created over the last decade. At the same time, the number of Americans with high school degrees or less who are employed continues to fall. This is because almost 40 percent of new job opportunities require a college-education, while opportunities for non-college educated people have narrowed.
At the same time, large metro areas have accounted for over 93% of population growth since the mid-2000s, and 73 percent of employment gains. Small communities and rural areas, often with older and less-educated populations, are losing workers and are contributing a smaller and smaller share of employment gains. See the data HERE and HERE.
One solution for smaller places is an emphasis on creating career pathways for individuals to gain certifications or on-the-job training such as apprenticeships, and improve overall educational attainment. Many middle-skill jobs exist within the skilled trades, requiring some technical education or other certifications. Training in entrepreneurship and small business management can help advance the careers in the skilled trades, and increase income. Read a piece about this by the Federal Reserve Bank of St. Louis HERE.

Balancing Innovation and Consistency

Top restaurants have a big challenge: maintaining flawless consistency, while simultaneously being innovative and cutting-edge. Chefs are supposed to be creating new dishes, but to be profitable; they also need to maintain a consistently high quality experience for their guests. The type of repetition required might prevent innovation, so this HBR article suggests strategies to manage the balance, including having a separate R&D lab, test kitchen, and/or enabling all employees to contribute to new conceptual dishes on a regular basis. Learn MORE.

Giving Entrepreneurs a Voice in State Policy
The Kauffman Foundation, acknowledging that many entrepreneurs are too busy to make their voices heard in public policy, has committed $1.9 million in grants to an initiative to bring the voices of entrepreneurs to policy debates at the state level. The grant recipients are:
  • Bunker Labs, Detroit
  • Chicagoland Entrepreneurial Center dba 1871, Chicago
  • Enterprise Center of Johnson County, Kansas City
  • LaunchTN, Nashville
  • Metropolitan Economic Development Association, Minneapolis
  • Venture Hall, Portland, ME. (cancelled this week due to a #MeToo moment involving one of the Venture Hall founders)
For more information, go HERE.
New Idea: Unleash Stranded Tax Credits
Starting this year, CT's Department of Economic and Community Development is accepting applications from companies that want to use their stranded tax credits (earned, but not able to be used) in exchange for making major investments in buildings, infrastructure or CT-based venture funds. A study of the program by the CT Center for Economic Analysis calculated that every $1 billion in stranded credits that were used could create up to 45,000 jobs. The CT legislature capped the program at $50 million. MORE

What's the Definition of a Good Job?
It used to be that a good job was with a large manufacturer, promising a long-term position with benefits, a pension, and a future. However, as manufacturing employment has declined, now less than 10% of today's workforce, a good job most often means being an owner of a company, whether as an entrepreneur or through an employee stock ownership plan. A recent HBR article suggests that "companies with employee stock ownership plans report significantly higher sales growth and higher revenue per employee than do conventionally owned companies in the same industry. However... the gains go those who help employees learn to think and act like owners." Read the article HERE.

Seven Ways to be More than a One-Hit Wonder
The pace of adoption of new technologies is accelerating incredibly fast. As a result, many companies struggle to find new sources of revenue after having initial success. The authors of this HBR article suggest there are seven mistakes that companies make:
  1. The company is too lean.
  2. The capital structure is built to fail.
  3. The company has lost its founder.
  4. The company is over-serving its investors.
  5. It "won the lottery" by getting lucky with a big-bang disrupter.
  6. It is held captive by regulators.
  7. It anticipates customers who don't exist.
Read MORE.

In This Issue - January 2018

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Quote of the Month 
"If you are not embarrassed by the first version of your product, you've launched too late."
Reid Hoffman, founder of LinkedIn

Innovation Spark of the Month
On January 1, Iceland became the first country to make it illegal to pay women less than men. The law requires firms with more than 25 people to obtain a government certificate demonstrating pay equality.

This is part of a larger trend - Trendwatching calls it GLASS BOX BRANDS - meaning it's becoming easier and easier for people to see a company's internal culture, and act on it.

What would happen to your organization if your customers knew everything about you?

2017 Numbers for Venture Capital
2017 was a record year for venture capital. According to Pitchbook, fund sizes grew, with $143 billion in capital raised by venture funds in the past four years. As a result, the median fund size is now $60M and deals have gotten huge. $84 billion was invested last year and the average late stage deal was $31 million. One consequence, companies are waiting longer for exits, and this is raising prices for M&A deals. There were 769 venture exits in 2017, and IPOs also came back after a long absence. 

Industry Funding of University Research: Lagging States
Industry funding of university research is an important component to US innovation, especially as federal funding for universities is on the decline. All states would benefit from policies to attract more industry research funding, as it generates technology-based economic activity at the state level. The five leading states are NC, GA, KS, OH and Missouri. These states have strong research universities and an advanced industry economy. And, they tend to also have robust state-supported technology commercialization programs. The states where industry contributes less than 2 percent of all research funding are NV, RI, NE, HI, SSD, NM and MT. See ITIF for more information.

Metrics for Entrepreneurship Programs
Have you been wondering how to convince your stakeholders that your program is performing well? My book on evaluating entrepreneurial programs, written for the International Business Innovation Association (iNBIA), is available on its website. The basics apply to any economic development program. Check it out HERE.

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135 Maine Street, Suite A-183 · Brunswick, ME 04011 · 207.522.9028

Innovation Policyworks enables economic development officials at state, regional and local levels make better, data-driven decisions by providing expert research, analysis and recommendations. Our clients see innovation and entrepreneurship as critical elements of their economic development strategy, and are developing new programs or policies, and/or evaluating existing ones. 

Dr. Catherine S. Renault has been delivering innovation-based economic development results in rural states for more than 25 years, most recently as science advisor and Director of the Office of Innovation for the State of Maine. Cathy is currently working on cluster projects for life sciences and clean technology.
   For a list of selected projects, see www.innovationpolicyworks.com/projects.