Navy 2011 Opportunity Forum. The Missing Middle

Transcription

1 Navy 2011 Opportunity Forum The Missing Middle Philip E. Coyle Associate Director National Security and International Affairs Office of Science and Technology Policy June 7, 2011

2 Innovation for National Security is a Presidential Priority Reaffirming America s role as the global engine of scientific discovery and technological innovation has never been more critical Our renewed commitment to science and technology will help us protect our citizens and advance U.S. national security priorities. National Security Strategy, May

3 Small Businesses are Vital to the Nation s Success President Obama during his tour of American Cord & Webbing Co. in Rhode Island (Oct 2010) small businesses produce most of the new jobs in this country. They are the anchors of our Main Streets. They are part of the promise of America the idea that if you ve got a dream and you re willing to work hard, you can succeed. That s what leads a worker to leave a job to become her own boss. That s what propels a basement inventor to sell a new product or an amateur chef to open a restaurant. It s this promise that has drawn millions to our shores and made our economy the envy of the world. President Obama Sept

4 White House Office of Science and Technology Policy Science and technology for policy Policy for science and technology 4

5 President s Strategy for American Innovation Innovation for Sustainable Growth and Quality Jobs Encourage high-growth and innovation-based entrepreneurship Promote innovative, open, and competitive markets Catalyze Breakthroughs for National Priorities Spur Productive Entrepreneurship and Promote Efficiency Unleash a clean energy revolution Accelerate biotechnology, nanotechnology, and advanced manufacturing Educate Americans with 21st century skills and create a world-class workforce Strengthen and broaden American leadership in fundamental research Invest in the Building Blocks of American Innovation 5

6 Elements of Innovation How then is America to maintain, or preferably enhance, the future standard of living of its citizenry? The answer (and seemingly the only answer) is through innovation. Innovation commonly consists of being first to acquire new knowledge through leading edge research; being first to apply that knowledge to create sought-after products and services, often through world-class engineering; and being first to introduce those products and services into the marketplace through extraordinary entrepreneurship. Rising Above the Gathering Storm, Revisited Rapidly Approaching Category 5 (2010) 6

7 Science and Technology for National Security 40s 50s 60s 70s 80s 90s 00s Nuclear weapons Radar Proximity fuse Sonar Jet engine LORAN Digital computer ICBM Transistor Laser technology Nuclear propulsion Digital comm. Satellite comm. Integrated circuits Phased-array radar Defense networks Airborne surv. MIRV Airborne GMTI/SAR Stealth Strategic CMs IR search and track Space track network C2 networks GPS UAVs Night vision Personal computing Counterstealth BMD hit-tokill Wideband networks Web protocols Precision munitions Solid state radar Advanced robotics Speech recognition GIG Armed UAVs Optical SATCOM Data mining Advanced seekers Decision support 7

8 Why Amazon s Kindle 2 Can t Be Made in the U.S. The Kindle 2 e-reader was designed by Amazon s Lab126 unit in California. The vast majority of its components are made in China, Taiwan, and South Korea, and it is assembled in China, a center for such work. Flex circuit connector MADE IN CHINA REASON U.S. supplier base eroded as the manufacture of consumer electronics and computers migrated to Asia. Highly polished Injectionmolded case MADE IN CHINA REASON U.S. supplier base eroded as the manufacture of toys, consumer electronics, and computers migrated to Asia. Electrophoretic display MADE IN TAIWAN REASON Its manufacture requires expertise developed from producing flat-panel LCDs, which migrated to Asia with semiconductor manufacturing. Offshoring Controller board MADE IN CHINA REASON U.S. companies long ago outsourced the manufacture of printed circuit boards to Asia, where there is now a huge supplier base. Lithium polymer battery MADE IN CHINA REASON Battery development and manufacturing migrated from the U.S. to Asia along with the development and manufacture of consumer electronics and notebook computers. Wireless card MADE IN SOUTH KOREA REASON South Korea used its infrastructure for designing and manufacturing consumer electronics to become a center for making mobile phone components and handsets, especially products using CDMA technology, which is widely used in South Korea. For national security: is innovation enough? if any particular manufacture was necessary, indeed, for the defense of the society it might not always be prudent to depend upon our neighbors for the supply. - Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776 Taken from Gary Pisano and Willy Shih, Restoring American Competitiveness, Harvard Business Review, July-August

9 Taken from Gary Pisano and Willy Shih, Restoring American Competitiveness, Harvard Business Review, July-August

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11 The Missing Middle The Missing Middle A gap in access to capital or other key resources at a crucial step in the development of new businesses or new technology. The gap often occurs at the stage of development where opportunity and uncertainty are both high. 11

12 Adapted from Dr. Deborah Jackson,

13 Federal R&D Portfolio ~$100B Annual Federal Investment Billions $ Federal R&D Funding FY11 Request DoD NIST NSF NASA DOE NIH ~$80B Annual High Tech Trade Deficit* Basic Research Applied Research Development Prototype & Systems Development * SOURCE: NSF Science & Engineering Indicators,

14 Early-stage funding for startups is drying up as venture capital seeks later-stage investments 14

15 Net Job Creation within Startups vs. without Startups 3,500,000 2,500,000 1,500, , ,000-1,500,000-2,500,000-3,500,000-4,500,000-5,500, Source: U.S. Census Bureau, Business Dynamics Statistics High-growth firms or gazelles account for a disproportionate share of job creation in any given year, generating roughly 40 percent of new jobs in any given year. The fastest-growing young firms (between the ages of three and five) account for less than 1 percent of all companies in the economy, yet generate 10 percent of new jobs each year. Source: Kauffman Foundation Research Series: Firm Formation and Economic Growth High-Growth Firms and the Future of the American Economy, March Job Creation in Startups Net Job Creation Absent Startups 15

16 The Role of Young, High-Growth Firms Shares of annualized net job creation in Young Firms Account for Largest Share of Job Creation Older Firm Age What to Do? focus on creating new firms remove barriers to emergence of high-growth companies target areas that are resources for high-growth firms: immigrants and universities Source: Kauffman Foundation 16

17 Roles in the Missing Middle Government Private Sector, VCsFunders Resources Academia Small Businesses High Growth Entrepreneurs Large Businesses Govt. Labs Performers Basic Research Applied Research Tech Development Prototype and Systems Development Technology Readiness Level 17

18 Navy Commercialization Total FY10 Navy Phase III funding was $565M, crossing $500M threshold for first time In Millions Other DoD FY10 not available at present FY10 Navy Phase III funding came from 136 separate contracts to 97 unique firms FY10 Navy inventory of open Phase IIs: 819 separate contracts to 490 unique firms DoD-funded Phase III Contracts FY99-FY10 (FPDS Report Data) 18

19 Navy Gated Phase II.5 Structure ACTIVITY - Feasibility Technology Development and Prototype Demo. Prototype Testing & Evaluation Technology Demonstration & Validation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Opt. ~ 9 mo. Phase 1 6 mo. Option 6 mo. $80K $70k Phase mo. Between $500K to $750K Some Require TTP $ 250K Enhancement* ~ 12 mo. $ 750k SBIR Cont. Dev mo. $ 750k SBIR TTA Required Phase III Non-SBIR $ variable AT (Accelerated Transition)* 2 yr. SBIR FUNDS - CONTRACT TYPE - FFP Contract CPFF or FFP Contract $ 1.50M SBIR TTA Required NTE $150K NTE $1M NTE $1.5M NTE $2.65M CPFF or FFP Contract TRL TTA Technology Transition Agreement -3-5 yr technical/funding strategy * Requires Non-SBIR Funding Commitment 19 Any

20 SBIR 2.0 Initiatives Clarify data rights for small businesses in SBIR Decreasing timelines to award Expansion of bridge financing programs Intramural technology transfer topics to help small businesses access the capacity of federal labs Joint solicitations between agencies Build unified web portal to support improved management Performance management metrics 20

21 Expanding the Defense Industrial Base 21

22 Startup America Expands access to capital for high-growth startups throughout the country Expands entrepreneurship education and mentorship programs to create jobs Strengthens commercialization of federally-funded research and development Identifies and removes unnecessary barriers to highgrowth startups Expands collaborations between large companies and startups 22

23 Rapid Innovation Program Originates from the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (NDAA 2011), Section 1073 (Public Law ) $499.2M (Department of Defense and Full-Year Continuing Appropriations Act, 2011, Public Law ) Competitive, merit-based program to accelerate the fielding of technologies developed via: Small Business Innovation Research Program projects Technologies developed by the defense laboratories Other innovative technologies Stimulate innovative technologies Reduce acquisition or lifecycle costs Address technical risks Improve timeliness and thoroughness of test and evaluation outcomes Rapidly insert technology 23

24 Revitalizing American Manufacturing FY12 Request strongly supports advanced manufacturing DOD: $2 billion in advanced manufacturing over five years in DARPA and Mantech DOE: $500 million R&D for advanced manufacturing technologies in energy NSF: increase of $87 million in basic and applied research funding to support advanced manufacturing NIST: $75 million for Technology Innovation Program (TIP), $12 million to establish public private consortia, $763 million for NIST laboratories When new technologies are developed and new industries are formed, I want them made right here in America. That's what we're fighting for." - President Obama, August 16,

25 PCAST Advanced Manufacturing Study REPORT TO THE PRESIDENT Ensuring American Leadership In Advanced Manufacturing Executive Office of the President President s Council of Advisors on Science and Technology 25

26 Shrinking the Missing Middle through Innovation Resources Small Business Programs Existing Research Resources Champions Early Procurement Startup America Manufacturing Initiatives Existing Commercialization Resources Inventing Research at Universities Adapted from Dr. Deborah Jackson, 2011 Level of Development Commercializing New Products Sold by Companies 26

27 SBIR Reauthorization Status Public Law No (signed June 1) extends SBIR/STTR authorization through FY11 OSTP supports a longer term reauthorization of the SBIR/STTR program OSTP looks forward to working with all stakeholders (Congress, executive agencies, SBA, small businesses) to support longer term reauthorization 27

28 Missing Middle: Performers Universities German Fraunhofer Institutes Taiwan s Industrial Tech Research Inst. Industry Technology and Manufacturing Readiness Levels Fraunhofer-Gesellschaft: Undertakes applied research of direct utility to private industry. Clustered approach with pilot production centers to close the gap between research and products Taiwan s ITRI ITRI is the Winner Wall Street Journal Technology Award Sept How can SMALL BUSINESSES help fill this void? 28

29 Government Procurement as a Catalyst US Semiconductor Market Price and Military Use, Early military use helped drive semiconductor market development Helped to push prices lower Lower prices spurred commercial applications Average market price ($) Today s market is dominated by commercial applications Share of production designated for military use (%) Global market over $200 billion DoD share only 1-2% Source: 1 Morris, Peter Robin. A history of the world semiconductor industry. 1990, pg 75; 2 Defense Science Board, "High Performance Microchip Supply,

30 Biofuels Early Adoption Opportunities Electric Vehicles Solid State Lighting Prosthetics Photovoltaics 30

31 How You Can Participate 31

32 What Are Your Ideas? For example: Expanding small business opportunities in Intelligence Homeland Security Nuclear Weapons Security Innovation in contracting Rotational assignments in government Targeted programs for veterans Other 32

33 Many Challenges Remain 33

34 We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, outeducate, and out-build the rest of the world. President Obama January 25,

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