We’re pleased to announce that Antonio Galindez, President & CEO of Dow AgroSciences, has joined the Board of Directors of our BioCrossroads life sciences initiative, after formally joining the Central Indiana Corporate Partnership board last month.  Galindez succeeds Jerome Peribere, who provided exemplary leadership in the life sciences sector and broader corporate community in Central Indiana during his tenure at Dow. 

We look forward to working with Antonio; here’s the press release from BioCrossroads:

INDIANAPOLIS, Ind., September 25, 2009 —  BioCrossroads announces that the organization added Dow AgroSciences President and CEO Antonio Galindez to its board of directors. 

“Dow AgroSciences is a vital member of Indiana’s life sciences community, and has always been an ardent supporter of BioCrossroads’ efforts and initiatives,”  says D. Craig Brater, MD, Dean of the Indiana University School of Medicine and Interim Chairman of the Board of BioCrossroads.  “Antonio’s experience and energy will be a great resource as we continue to advance Indiana’s reputation for national life sciences leadership.”

Warsaw, IN, September 23, 2009 – The future of Warsaw, Indiana, the orthopedics capital of the world, received a significant boost today: the single largest private foundation grant ever awarded in the region.

“Indiana is indeed fortunate to be home to this extraordinary cluster of orthopedic companies in the Warsaw community,” said N. Clay Robbins, president of the Endowment.  “We are pleased that a promising plan and framework have been developed, after many months of deliberation and good effort, to secure and enhance the region’s competitive appeal to the orthopedic industry now and in the future.

The OrthoWorx initiative was created out of a comprehensive Endowment-funded study conducted by BioCrossroads, Indiana’s public-private collaboration for investment, development and advancement of the state’s signature life sciences strengths.  Released Sept.10, the report, "Warsaw, Indiana: The Orthopedics Capital of the World  -- An overview, analysis and blueprint for future industry and community growth", explores the sector's current assets and challenges and sets forth a series of action-oriented recommendations designed to secure and advance the community's current position as home to nearly a third of the world's orthopedic device industry.

For example, within a talent and workforce development initiative, OrthoWorx will engage the Indiana Department of Workforce Development, Ivy Tech, Grace College and other higher education institutions, to help identify gaps in training and associate and baccalaureate degree programs. They will then work to develop new educational programs through state and federal grants and other sources of funding to fill such gaps. OrthoWorx also will explore ways to enrich and expand K-12 options in the region and develop further the research collaborations among orthopedic companies and Indiana’s research universities. It also will build relationships with the human resources, management and manufacturing departments of the various Warsaw-based orthopedics companies to ensure that companies can get the specifically trained workers they need.

“Much as BioCrossroads has become the supporting brand for Indiana's broad field of life sciences assets, OrthoWorx will become the voice that promotes the presence and potential of the Warsaw-based orthopedics industry and the community that supports it,” said David Johnson, president and CEO of BioCrossroads.  “As the epicenter of the orthopedics industry, Warsaw offers both a unique industry and a unique community. OrthoWorx will bridge the two to put the best strategic opportunities into action.”

“While many have contributed to the development of this plan, we are especially impressed by the leadership and dedication of the president of Grace College, Ron Manahan; the executive director of the Kosciusko County Community Foundation, Suzie Light; and the leaders of the orthopedic industry and BioCrossroads. Without their tireless efforts we would not be here today,” Robbins added.

Check out these columns by TechPoint President Jim Jay, which highlight different facets of the growing strength and diversity of Indiana’s technology community.  One describes an exciting new market where Indiana has an emerging strength – digital media and electronic marketing.  The other describes how Indiana’s manufacturing sector has become increasingly high-tech and innovative to continue to grow in the global economy.

Both pieces mention an important upcoming event – TechPoint’s annual Innovation Summit, which is being held on September 29^th at the Indiana Convention Center in Indianapolis.  This year’s Summit focuses on how we can encourage and capitalize on innovation as a state and within our own companies, focusing on high-growth industries like information technology, advanced manufacturing, the life sciences, energy and logistics.  Visit www.techpoint.org/summit for more details.

Central Indiana: New Media Marketing Mecca?

This month, we celebrate the 40^th anniversary of the Internet, and also recognize an Indiana social media milestone – it’s projected that the number of Hoosiers using the Facebook network will reach 1.5 million in early September, nearly a quarter of our total population.

The Facebook statistic is just one indicator of our near-universal adoption of digital media, at home and in the workplace.  It’s changed the way we live, and I’d argue that no discipline has felt the impact more than marketing:  Read more…

Advanced manufacturing: Center stage in the innovation economy

It’s obvious that we live in an innovation-driven economy.  In the past, economic success was often defined by access to physical advantages (raw materials, transportation infrastructure); today the most precious resources are educated workers and new ideas.  Most economic analysis shows that the educational attainment of the workforce and its level of innovation (often measured by patents-per-employee) have the most reliable connection to rising incomes, low employment and economic output.

Read more…

Clearly, entrepreneurial companies will play a tremendous role in pulling the U.S. out of the recession – these businesses create an estimated two of every three new jobs and are the major source of innovation and productivity growth in today’s economy. 

A recent study by the Kauffman Foundation may make us take another look at what the next generation of entrepreneurial pioneers who will forge a path out of the slump will look like.  The popular image of the entrepreneur is young – the Silicon Valley whiz kid, or the ‘creative class’ guru ready to strike out on his own.  But the Kauffman report – “The Coming Entrepreneurial Boom” – turns this picture on its head:  In every year over the last decade, the rate of entrepreneurial activity has been highest among Americans aged 55 to 64, far outpacing their younger (20-34 year old) counterparts.

Cementing this data, Kauffman conducted a survey of 5,000 young companies (launched in 2004) and found that two-thirds of their founders were between the ages of 35 and 54.

Kauffman attributes the rise of the older entrepreneur to a number of factors, including increasing job turnover among Americans of all ages and a desire for second or third careers within a workforce that’s staying healthier and living longer.

From my anecdotal perspective, this makes sense.  Working with our TechPoint initiative in particular, I’ve encountered any number of ‘serial entrepreneurs’ who are still starting and mentoring new firms at an age when our fathers and grandfathers would have been settling in for the stretch run towards retirement.  They bring invaluable experience to these new ventures from having been ‘around the block.’

For Indiana, attracting and retaining young college-educated workers must still be the top economic development priority – we desperately need to increase the educational attainment of our workforce, starting by catching those who are dropping out of high school or failing to pursue education beyond 12^th grade.   But we shouldn’t ignore the entrepreneurial ambitions of the 1.6 million Hoosiers between the ages of 45-64; according to Kauffman, they could represent a significant opportunity for new business growth.

Indianapolis, September 10, 2009 – Now generating more than $11 billion in annual revenues, the global orthopedics sector concentrated in Warsaw, Indiana, represents more than half the U. S. market share and more than one- third of the world’s market for developing orthopedic medical devices. 

How does an industry -- contained within a community -- continue to maintain its strong economic presence and position itself for future growth?  BioCrossroads, Indiana’s organization for investment, development and advancement of the state’s signature life sciences strengths, explores and outlines a series of action-oriented responses to this question in a new published report, Warsaw, Indiana: The Orthopedics Capital of the World  -- An overview, analysis and blueprint for future industry and community growth. 

The report represents one of the most comprehensive studies ever conducted of Indiana’s outsized share of this remarkable industry, and it suggests a range of broadly supported steps that the industry, the community and the State can pursue to ensure this sector continues to thrive on Hoosier soil.

Initiated through a planning grant funded by the Lilly Endowment, Inc., the BioCrossroads report reveals stunning statistics that highlight the growth of a sophisticated business sector and the community supporting it:

Kosciusko County has grown its Health & Biomedical employment base by 39 percent since 2001 compared with 15 percent for both Indiana and the U.S.

In 2007, the concentration of jobs in Kosciusko County in the medical devices and equipment category had a location quotient of 51.86, which is nearly 50 times that for the national average, [resulting in] a location quotient that is literally “off the charts.”*

When compared with the larger Metropolitan Statistical Areas analyzed nationally in the Battelle Technology Partnership Practice biennial state by state industry analysis for the Biotechnology Industry Organization (BIO), the Warsaw, IN Micropolitan Area (population 12,500) would rank as the 15th largest regional employer in medical devices and equipment in the U.S.

“The Warsaw orthopedics community is one of the most robust and concentrated medical equipment development sectors in the world, and a world-class economic asset that powers growth for all of Indiana,”  said David Johnson, President and CEO of  BioCrossroads.  “The integration of all this research has resulted in a picture of an industry cluster in Warsaw, that is currently robust, respected and globally competitive.  While this orthopedics device sector has been tremendously successful to date, our research and the truly global scale of this sector’s reach make it very clear that global pressures now confronting our whole economy, including all our life sciences sectors, have sparked a broadly perceived need for a community and industry engagement strategy focused on education, talent recruitment and retention, workforce and community development to ensure sustainability. 

“We’re now in the process of developing a Warsaw-based, regionally focused organizational initiative that can better define and prioritize the challenges and opportunities, and then seek funding to bring the best and most responsive ideas to life,” Johnson added.

The report details seven initial focus areas for such an initiative to explore:

•             Branding and Awareness – promote the Warsaw community as the orthopedics capital of the world

•             Community Enhancement – develop and add specific, cultural and recreational amenities

•             Education – enhance options and opportunities for K-16 education

•             Talent and Workforce Development – further and focus the necessary collaboration among industry, government and education to identify future needs for this industry’s highly skilled management and workforce

•             Transportation and Logistics – analyze regional transportation challenges and develop specific options for improvement

•             Industry/Technical Support Enterprises – research market opportunities and business cases for specific enterprises that could provide valuable “business infrastructure” for Warsaw’s diversified orthopedics industry

•             College and Research University Engagement – promote and establish specific mechanisms and programs for collaboration among Indiana’s academic and research institutions and between academia and industry to promote innovation and enhance processes for research and development.

“The medical innovation coming out of Warsaw is some of the best in the world, so it’s critical that we have a plan for sustainability and growth.  With true and widespread business and community participation, BioCrossroads has created a roadmap to move us forward, and we are fortunate to have such an action-oriented champion for our community,” said Cheryl R. Blanchard, Ph.D., Chief Scientific Officer and Senior Vice President, Zimmer, Inc.  “Community and industry leaders are eager to become engaged in this effort and find the best ways to make a positive impact on our community.”

 “Warsaw’s economic vitality is driven by our orthopedics companies, not only for the success of the largest industry leaders, but also for the entrepreneurs and service companies that support this sector,” said David Findlay, Chief Financial Officer and Executive Vice President of Administration, Lake City Bank.  “The work that BioCrossroads has done in developing this strategic framework will help our community progress, enhancing our assets and filling in our gaps.  I can readily report that there is a lot of energy surrounding this initiative.” 

The report is available on the BioCrossroads Web site:  www.biocrossroads.com

The BioCrossroads report draws heavily upon research by Battelle– both a 2001 study and an update to that work completed in 2009.  In addition, a community study, including a number of in-depth interviews and facilitated discussions with key business and community leaders in the Warsaw region, was conducted and facilitated by Mary Walshok, Ph.D., an international expert in community and economic growth, professor of Sociology at the University of California, San Diego, and a principal in Global CONNECT at UC-San Diego.  The report also includes specific recommendations for new types of enterprises and facilities developed by distinguished orthopedic surgeons.

A trade delegation led by Governor Daniels is scouring the Far East in search of new jobs and business opportunities this week, meeting with business and government leaders in China and Japan in hopes of adding to the historic influx of foreign investment Indiana has enjoyed over the last several years.   Today, the Hoosier State is home to more than 200 companies from Japan alone, employing as many – or more – workers than Detroit’s Big Three automakers here.

That’s the upside of the global economy: Manufacturing jobs, lured to Midwestern states like Indiana by the weak dollar, a ready workforce and proximity to the world’s biggest consumer market.  But we also have to be mindful of the threats posed by globalization, primary among them the erosion of the United States’ biggest competitive advantage, our capacity to innovate. 

It’s great that Indiana is attracting jobs based on our low business costs, the technical proficiencies of our workers and our geographic advantages.  But to create long-term prosperity in the high-tech economy, we also have to be a place where new technological advances and scientific breakthroughs are brought to life and commercialized. 

But as a nation, we’re falling behind in the race for innovation.

We aren’t encouraging innovation the way we should.  A new study by the Information Technology & Innovation Foundation shows that we now lag behind many industrialized and rapidly-developing countries in R&D tax incentives.  We were the first nation to reward innovation through the tax code, implementing the R&D credit in 1981.  But over the last decade, we’ve slipped to 17^th among OECD countries in R&D tax generosity, and developing nations like China, India, Singapore and Brazil are also employing more aggressive R&D strategies.  (China, for example, provides a 150% tax deduction on R&D expenses if companies increase investment by 10% or more over the previous year.)

Ultimately, though, tax credits don’t create innovation – people do.  But the U.S also lags in the human capital competition.  I’ve written previously about the massive investments China has made in higher education over the last decade, but a few numbers bear repeating:  More than 800 new colleges and universities built, the number of students in higher education more than tripled, and the number of graduates exploding from 8 million annually to more than 30 million.

Because of these trends, it’s widely recognized that there will be significantly more PhD engineers and scientists in China  than in the U.S. as early as next year.  A broader study by Rice University makes the startling projection that, again by 2010, 90% of all the world’s PhD-level engineers will live in Asia. 

We can’t surrender our numerical superiority in scientists, engineers, and other skilled workers without eventually seeing our innovation edge disappear.

And in fact, we’re already seeing the impact.  This thoughtful piece by TechPoint Chairman Mark Hill explores how the U.S. is slipping in our innovation-based economy relative to global competitors; for example, over the last decade, the $30 billion trade surplus that the U.S. used to enjoy in advanced technology products turned into a $53 billion deficit.

The overseas exploration that Governor Daniels and regional economic development groups like the Indy Partnership are engaged in is a critical part of succeeding in the global economy.  But it’s also essential to tend to our innovation infrastructure here at home – building an educated, creative workforce and incentivizing them to bring new ideas to market.

Back to school season has brought a flood of new students to Ivy Tech Community College campuses across Indiana; Ivy Tech is welcoming more than 110,000 students to classes this week, a nearly 30% increase from 2008’s fall semester.

The Ivy Tech enrollment boom has caused some strain on the system, with overflowing classrooms and rush to hire new teachers.  But we agree with Ivy Tech President Tom Snyder that the increase is a good sign for the state – last week, Steve Dwyer of CICP’s Conexus Indiana penned this thoughtful column on the need to reenergize the state’s technical education pipeline to prepare young people for ‘middle skill’ jobs in industries like advanced manufacturing and logistics.

Hopefully, the Ivy Tech experience shows that more and more Hoosiers are acknowledging the truth of Dwyer’s words, especially in the midst of economic turmoil: “In today’s knowledge-based economy, a high school diploma doesn’t cut it.”

Don’t forget about middle-skill job opportunities

Steve Dwyer – President & CEO, Conexus Indiana

It’s hard to believe that summer has slipped by so quickly, and ‘back to school’ season is just around the corner.  Unfortunately, too many Indiana college students are making the fateful decision to drop out of school rather than head back to class.

A  recent report from the American Enterprise Institute (AEI) shows that many Hoosier students are struggling once they enter college to pursue their bachelor’s degree – just over half (53%) eventually graduate within six years.

Dropping out of college puts these young people back at square one when it comes to their job search, far behind their peers with a diploma:  2008 data from the Bureau of Labor Statistics shows that unemployment is twice as high and average earnings just over half as much for high school graduates versus those with a bachelor’s degree.

But high school graduates who don’t choose the 4-year college path don’t have to resign themselves to a life of low wages and limited career choices.  There are a wealth of opportunities in today’s job market that demand advanced training but not a bachelor’s degree.

Let’s start with a dose of reality:  In today’s knowledge-based economy, a high school diploma doesn’t cut it.  Twenty years ago, high schoolers could look forward to making a good living at a local factory after graduation.  Manufacturing jobs are still out there – one of every five Hoosiers has one – but they’ve become high-tech, and demand more education and training beyond high school.

A 2007 report by The Urban Institute (“America’s Forgotten Middle-Skill Jobs”) defines ‘middle skill’ occupations as those that require a two-year associate’s degree or some sort of certificate training, in areas like manufacturing, logistics, computer support, sales, skilled construction trades, and some administrative/clerical work.

The report estimates that these occupations make up roughly one half (48%) of all American jobs, with 35% of the remaining positions requiring a bachelor’s or advanced degree and 15% falling to service and unskilled labor. 

It also asserts that “wage gains per year of schooling for those with associate’s degrees are comparable to those with bachelor’s degrees.”  Paychecks don’t lie – these degrees in high demand, a trend that  should continue:  The Bureau of Labor Statistics has projected that 45% of all job openings from 2004 to 2014 require middle-skill qualifications, as compared to 33% high skill and 22% low skill.

Let’s look at manufacturing, the industry where I’ve spent my career.  Everyone knows that basic assembly line jobs have been disappearing for years, made obsolete by new technologies or moved overseas.  But new middle-skill jobs are being created, as today’s manufacturing workers need computer skills; ‘soft skills’ like critical thinking and teamwork; and advanced technical expertise operating high-tech equipment.  These jobs pay an average of 40% higher than the Indiana median income.

In Central Indiana alone, it’s estimated that more than 5,000 manufacturing openings will be available over the next year as skilled Baby Boomer workers retire.  And new growth is expected in exciting fields like hybrid-electric vehicles, aerospace, nanotechnology and more.

In logistics, we’re seeing similar trends – Indiana ranks among the top ten states in logistics jobs per capita, and employment is projected to expand at a steady pace over the next several years.  With manufacturing output and exports growing and the ‘just in time’ nature of business today, demand for middle-skill occupations like supply chain managers is robust.

The problem for Indiana isn’t a lack of middle-skill jobs, but a lack of middle-skill workers.  Statistics from the Lumina Foundation show that just 7% of the state’s younger workers have an associate’s degree (46% have a high school diploma or less, 23% have a bachelor’s degree or more).  As Baby Boomers start leaving the workplace in greater numbers, we face a severe workforce shortage at the middle-skill level – and if businesses can’t find qualified workers, industry will begin to shun Indiana.

The fact that half of our incoming college freshmen don’t finish their degrees is a major problem.  Indiana is a perennial bottom-dweller among states in the educational attainment of our workers – more emphasis needs to be placed on education at all levels, and our colleges and universities have to work harder at keeping students on the right track.

But it’s clear that the opportunities of the ‘information economy’ don’t just apply to people with four-year degrees.  If the bachelor’s degree seems daunting, these students must explore the many other educational options that are open to them – associate’s degrees through Ivy Tech, Vincennes University and others, a host of technical/vocational training programs. 

Preparing yourself for middle-skill opportunities means a better chance at a rewarding, well-paying career that you can be proud of – and a stronger economy for Indiana.

Steve Dwyer is President & CEO of Conexus Indiana, an initiative focused on the workforce and other needs of the state’s manufacturing and logistics industries; he formerly served as Chief Operating Officer of Rolls-Royce Corporation.

Recent data released by the U.S. Bureau of Economic Analysis has sobering news for the Indianapolis region – the metropolitan area ranks 325^th out of 366 metros in per capita income growth over the last five years.  The performance of our region – the center of economic activity for the state – mirrors the widening income gap that Indiana has seen over the last few decades.  The average Hoosier worker makes less than 90 cents for every dollar earned by the typical American.

President Obama visited Northern Indiana on Wednesday, August 5, to announce $416 million in federal stimulus grants to Hoosier companies focused on vehicle electrification and advanced battery technologies.  In all, Indiana received the second-largest infusion of federal grants for green vehicles of any state, behind only Michigan (where most of the money flowed to automakers already being supported by bailout funds or companies receiving significant state incentives to boost the struggling economy there).

In Indiana, the grants will accelerate the momentum of the state’s clean technologies sector, already making great strides in developing critical components for the next generation of plug-in electric/hybrid vehicles (from passenger cars to heavy-duty trucks).  While government has often proven itself ill-suited to picking winners in the marketplace, the volume of grants to Indiana certainly recognizes our rich heritage of energy innovation and the fact that companies here are working together (through initiatives like the Energy Systems Network) to bring exciting new technologies to market.

Please take a moment to look over two editorials by Paul Mitchell, President & CEO of CICP’s Energy Systems Network, which offer key insights on how these grants can trigger even more growth and investment in our cleantech industry:

Jump start for green vehicles - Indianapolis Star, August 17, 2009

The New York Times had an interesting piece this morning about the demand for highly-skilled workers, which remains strong even in the depths of the recession – especially in technical professions like welder and electrician.  The article also notes that in certain fields, like engineering, mathematics, healthcare and computer science, the number of job openings online (through Monster.com and the like) are actually greater than the number of skilled applicants looking for work.

It just goes to show that education and experience bring opportunities, even in a troubled economy.

And it reinforces the challenge facing Indiana:  We have a population that’s slightly older than the national average, and which has failed to keep pace with national population growth over the last decade.  We rank in the cellar in most meaningful measures of educational attainment.  As Baby Boomer retirements transform our workforce – where will Indiana find the next wave of skilled workers? 

Some negative economic news today, as Indiana’s unemployment rate inches into double digits.  As Department of Workforce Development officials target losses from the automotive industry as a culprit, I wanted to refer you to this insightful piece by Conexus Indiana CEO Steve Dwyer in the Indianapolis Business Journal on the diversity and resilience of the state’s manufacturing sector – an industry that goes far beyond the Big Three.

Let’s end the week with some positive news for our state’s economy, as a new study from the Pew Charitable Trusts documents an 18% increase in Indiana clean technology jobs over the last decade.

Cleantech is a booming industry that’s seeing dramatic growth and attracting significant new investment, based in part on ambitious federal goals that include doubling renewable energy use within three years and putting a million new hybrid vehicles on U.S. highways.  The cleantech sector saw more than $7.7 billion in venture capital investment in 2008; especially impressive considering that cleantech venture capital made up just 1% of total VC financing in 2004 (the first year it was widely tracked).  The 2008 figures represent 20% of last year’s venture investment.

According to the U.S. Energy Information Administration, overall market demand for alternative energy and related products and technologies will continue to grow at a rapid pace for the foreseeable future.  The EIA projects 3.3% annual growth in renewable energy consumption through 2030, as well as a sharp increase in light-use hybrid vehicle sales from just 2% of the current market to 38% in 2030.  (Industry experts estimate that nearly 500,000 new hybrid vehicles will hit U.S. highways in 2009 alone.)

Other EIA analysis of cleantech sub-sectors like wind and solar power, plug-in/hybrid electric vehicles, second generation biofuels, distributed power generation, and systems integration project each to grow to more than $70 billion over the next ten years, collectively accounting for a more than $350B global market.

Look for more news on cleantech and Indiana’s emerging leadership position from CICP’s new Energy Systems Network initiative. 

Recent research by an IU Kelley School of Business professor is good news for Hoosier entrepreneurs who may still be concerned about the increasingly out-of-date image of Indiana as ‘flyover country’ for venture capitalists based on the coasts.

A study by Xuan Tian, an assistant professor of finance at Kelley, finds that the level of venture capital received by start-up companies doesn’t appear to be impacted by geographic distance from the investor – lending credence to the assertion that if an idea is good enough, the smart money will find it.  (The paper does note that the structure of funding is impacted, however, with companies further away receiving multiple smaller rounds of financing – portraying some level of caution on the part of investors about firms outside of their own backyards.)

The State Science & Technology Institute summarizes it this way:

“Companies located farther from their venture investors receive more frequent rounds of financing with lower cash amounts per round. According to the study, this difference is attributable to the higher cost of monitoring companies that are farther away.”

The lack of a location-based disparity is encouraging to Indiana as a Midwestern state without a strong heritage of VC involvement that has nonetheless made great strides in recent years.  We experienced 50% growth in venture investment from 2002-2006, and as I’ve noted elsewhere on this blog, Indiana VC totals grew from $82.5M in 2007 to $123.6M in 2008 as the national venture market contracted.

Like Avis, sometimes states like Indiana have to try harder to get the attention of the coastal venture firms.  Our BioCrossroads initiative raised more than $72 million for its Indiana Future Fund, a ‘fund of funds’ that invested in VC firms with the caveat that they more aggressively explore opportunities here in the state.  We’ve also worked hard to develop homegrown sources of early stage capital that can help get young firms going, such as the HALO angel investor network managed by TechPoint.

Indiana’s position as ‘Crossroads of America’ is certainly a boon to our logistics industry.  Fortunately, it doesn’t appear to be an impediment to our entrepreneurial sector, either.

(This topic was also recently noted in the Indiana Chamber’s excellent blog.)

The most recent edition of The Economist features an interesting profile on Indiana during the downturn.  Notably for CICP, the piece mentions our BioCrossroads initiative as one catalyst accelerating the state’s transition to an innovation-based economy.

The article takes a fairly balanced look at our struggles and successes navigating the current economic turmoil, noting our failings in educational attainment but agreeing that although “every state wants to be a hub for life sciences, Indiana really is one.”  It also talks about diversity and growth in our advanced manufacturing sector, including record levels of foreign investment, putting us in a much better position than Michigan and other manufacturing centers.

Hope you have a moment to check it out before heading out to enjoy your weekend.

The U.S. auto industry has obviously seen better days, with Chrysler becoming the first major automaker to enter bankruptcy since the Great Depression and General Motors pursuing a similar path (though facing legal challenges from Indiana’s pension funds).  Sales have plummeted and the future is cloudy.

The automotive industry represents around 16% of Indiana’s total manufacturing jobs.  Our manufacturing industry is immense (employing one of every five Hoosiers and accounting for more than a third of our Gross State Product), but clearly companies like GM have a huge presence.

One thing is certain – manufacturing will continue to be the foundation of Indiana’s economy for the foreseeable future.  But like every sector of our economy, manufacturing continues to evolve…

That’s why it was interesting to note a new Milken Institute report on high-tech metropolitan areas ranked the Indianapolis region #5 nationally in pharmaceutical manufacturing and #10 in medical instrument manufacturing.  This comes on the heels of an IU study that showed that the life sciences sector increased its share of the state’s total manufacturing output from 11% in 1997 to 20% in 2007.

Clearly this is good news at the intersection of two of our largest and most dynamic industry clusters, advanced manufacturing and the life sciences.  And while we all hope for a robust economic recovery that includes the auto sector, it also tells us that we have other emerging manufacturing opportunities that we need to pursue, in the life sciences, ‘clean technologies,’ nanotechnology, aerospace, and more.  The automotive industry is hugely important, but diversity is strength in this economy.

What we make and how we make it is changing and will continue to change.  We have to be agile in adapting our economic development, business climate and workforce policies to welcome these new opportunities in addition to playing to our traditional strengths. 

Indianapolis homeowners got some good news this week, as the Indianapolis Star reported that the second installment of Marion County’s 2008 property tax bills should be slightly less than the first – and significantly lower than 2007.  We can thank the property tax caps proposed by Governor Daniels and passed by the legislature last year for this relief…

But for every action, there’s an equal and opposite reaction – this law of physics also applies to lawmaking.  As property taxes go down, so do revenues for local governments.  Already, communities like Muncie have announced fire station closings and firefighter layoffs as they struggle with growing budget gaps; Indianapolis stands to lose $21 million when the caps are fully phased in next year (that’s enough to pay for more than 220 new IMPD officers with vehicles and full equipment, to put it into perspective).

It didn’t have to come to this.  During the last legislative session, the General Assembly had an opportunity to enact sweeping local government reforms – eliminating outdated, inefficient township governments and consolidating administrative county offices under an elected county executive and council.  These moves would have helped local governments do more with less, and avoid budget meltdowns.  I’ve talked about these reforms ad nauseum here and elsewhere, but the topic is worthy of more commentary – we need reminding again and again about those legislators who turned their backs on reform, killed the Kernan-Shepard recommendations and abandoned cities and towns to struggle with growing deficits.

Here’s the math at the highest level.  The property tax caps are expected to cost local governments a collective $400 million in 2010.  An analysis conducted by the Ball State Bureau of Business and Economic Research estimates that $600 million could be saved by implementing all of the Kernan-Shepard reforms.

At the township level, it’s simple common sense.  There’s little accountability in this relic of Civil War-era bureaucracy:  Around 70% of township trustees and advisory board members run unopposed, and get elected by less than 15% of the population they serve.  More than half of Indiana’s township provide poor relief (their major responsibility) to 20 households or less.  There’s little question that county governments could absorb these duties more efficiently. 

Townships across the state are also currently hoarding more than $230 million in unused surplus funds – money that could help communities avoid tax increases or budget cuts as they adapt to the dire fiscal realities.

At the county level, accountability is also the issue.  County government is fragmented into a host of administrative offices, operating with little public oversight.  These aren’t policymaking roles – ask yourself if there’s really a Republican or Democratic way to file a marriage license or record a deed.  Consolidating these offices under a single county executive and an expanded county council would provide a simpler system with checks and balances – just like the President and Congress, or the Governor and the General Assembly.

These reforms would make local government more transparent and accountable, less costly and more efficient.  But the status quo is protected by entrenched interests, thousands of local politicians who get jobs and support from the current system.

During the last session, the status quo won.  But the problem isn’t going away – and the campaign for local government reform isn’t either.  We’ll be back, for the next legislative session and beyond, fighting for the taxpayers to overhaul a 19^th century system of government that’s given birth to 21^st century cronyism.

From this week’s State Science and Technology Institute newsletter, some heartening news about the level of industry engagement with Indiana’s research universities.  According to the National Science Foundation, Indiana ranked among the top ten states in total university research funding provided by private sector sources in 2007.  We’re 2^nd (behind only North Carolina) in our percentage of academic R&D funding provided by industry.

Collaboration between business and academia has been a strong driver of our innovation-based economy.  University-sponsored incubators like the Purdue Research Park and IU’s Emerging Technologies Center are filled with promising start-up companies, showing the real commercial potential and economic impact of university research.  The IU School of Medicine has been an important source of intellectual capital fueling our state’s life sciences growth, while Purdue’s Center for Advanced Manufacturing and Technical Assistance Program (TAP) have helped our high-tech manufacturing sector stay globally competitive.  The examples of fruitful university partnerships with Indiana companies that have helped develop new products and create new jobs could fill several volumes.

This data shows at the macro-level that private industry continues to take a strong interest in university research efforts – a trend that bodes well for future economic growth.

Yesterday marked the public launch of an initiative that CICP has been working on for nearly two years (along with the Governor’s Office, our Conexus initiative, and support from organizations like the Rocky Mountain Institute) – the Energy Systems Network, a bold effort to make Indiana a global hub for ‘clean technologies’ and energy innovation.

The energy industry today faces tremendous challenges – and the cleantech sector has the potential for explosive growth as it provides the solutions. Indeed, cleantech sub-sectors like wind and solar power, plug-in/hybrid electric vehicles, second generation biofuels, distributed power generation, and systems integration are each projected to grow to more than $70 billion over the next ten years, collectively accounting for a more than $350B global market.

And there’s certainly a sense of urgency: The Obama administration has pledged to double renewable energy use within three years and put a million hybrid electric vehicles on our highways by 2015.  A growing share of the public, concerned about the environment, dependence on foreign oil and other issues, is fueling market demand for clean energy products.  And the inevitability of federal climate change legislation means technological breakthroughs in energy will be critical to curb huge potential price increases for carbon-based power for businesses and families.

Indiana has a unique opportunity to seize a leadership position on the cutting edge of this green revolution.  More than twenty years ago, GM and others engineered the first electric vehicle (the EV1) here – today, we’re home to firms working on nearly every key component of hybrid and plug-in vehicles, from engines and transmissions to advanced batteries.  We’re leaders in biofuels, clean coal technology, and benefit from the presence of innovative utility partners (like Duke Energy) focused on the development of ‘smart grid’ technologies that will help consumers better control their power use and supply.

In short, all of the assets are in place – and now we have another competitive advantage: The collaborative spirit embodied by the ESN.  This initiative recognizes that no single company has the solutions to the energy challenges that we face – companies and research institutions must work together to bring these solutions to market.  And of course, it’s our preference that these partnerships begin in Indiana and that we capture as much of the economic benefit as possible for Hoosiers.

The ESN is led by an all-star Board of Directors and is being ably managed at the staff level by Paul Mitchell, former policy advisor to Governor Daniels.  The Network already has two exciting projects in its commercialization pipeline: The Hoosier Heavy Hybrid Partnership is focused on bringing more cost effective light, medium, and heavy duty  hybrid trucks to market.  Project Plug-IN will integrate plug-in electric vehicles and ‘smart grid’ technologies providing a green transportation solution for Central Indiana commuters in one of the nation’s first large-scale pilot projects.

I’d encourage you to visit the landing page we set up for the ESN launch to learn more about this new addition to the CICP family – you’ll be hearing much more from the ESN in the weeks and months to come.

Our Conexus Indiana initiative today released its annual Manufacturing & Logistics Report Card, which assesses how our state measures up in several areas related to these two important industries – which continue to employ more than one of every five Hoosiers and account for more than a third of our Gross State Product. 

There are really any shocking revelations in the Report Card for those of us who follow economic development trends – Indiana remains the most manufacturing-intensive state in the nation, with the greatest share of per capita employment in the sector.  (While manufacturing employment has taken a hit during the recession, the decline has been across the board – not more dramatic in Indiana or the Midwest than the rest of the nation.)  We’re also among the top ten states in logistics employment, befitting our geographic advantages as the ‘Crossroads of America.’

We’ve also established a strong global position in manufacturing, both in exporting manufactured goods and attracting foreign direct investment from across the globe (indeed, we’re the only state in the Midwest to attract manufacturing investment from every continent…except Antarctica, of course).  The recession will slow our export growth, but the last several years have seen sustained record levels of manufacturing goods flowing outside of our borders.

Our tax climate is also very competitive, and leaves us well-positioned for future growth.

Our most negative ‘grade’ in this report card was in human capital – the strength of our workforce. Indiana ranked 29^th among states in our percentage of the workforce with a high school diploma and 42^nd in college-educated workers; we were also a dismal 35^th in first-year retention rates in the community college system.  In today’s knowledge-based economy, workforce is a critical competitive advantage – and Indiana is falling behind, as has been detailed extensively in this blog and elsewhere.  Manufacturing and logistics are high-tech industries that demand post-high school education/training – as the economy picks up and mass Baby Boomer retirements begin, thousands of positions could go unfilled – leading to missed opportunities for growth.

You can view the entire report card, with good scores and bad, here.