Paul Shirley Chairman Next Generation Economy President & CEO Qynergy Corporation

1. It’s Not Your Grandparent’s Labor Market Anymore:The New Environment and New Roles for the 21st Century Marketplace NGA 2003 Workforce Policy Forum December 5, 2003 Paul Shirley Chairman Next Generation Economy President & CEO Qynergy Corporation

2. Session Questions Session Questions: • What do individuals, companies and government need to know to hold onto jobs or get new ones? • How does globalization affect business decisions and the labor market? My Answer: • That for US…individuals, companies and government, business leaders and members of the workforce…to succeed as part of a global economy, WE must understand and harness the dynamics of INNOVATION…manage them…for the good of America and, ultimately, the world. • The greatest opportunity for US to not only survive but flourish, is by Creating Opportunities and Hope through an Innovation Based Economy

3. SVS…The Vision Provide A High Technology Environment Where Everyone Can Have Fun, Make A Difference, And, Oh By The Way….Make A Profit

4. From SVS to Boeing SVSGrew…Survived…And Had Fun!!! People • From 3 @ Founding to Over 270 Today • …and Still Growing!!! • Skilled, Multi-disciplinary Staff • Ranked as Tops in Job Satisfaction Throughout The Boeing Company Since Merger History Founded: January 7, 1993 Boeing Merger: July 9, 2000 • Economics • 3 Founders Invested $1,000 each (1992) • ≥ $79,000 Gross Revenues (1993) • ≥ $50,000,000 Gross Revenues (2003 est.) • Average Salaries: ≥ $67,500 per year

5. My ExplorationSabbatical 2000-2001 • Have Fun, Make a Difference, and Oh by the Way…Make a Profit (It Can Work!) • To Create Opportunity (Hope…Jobs) It Takes: • People • Passion • Competence • Culture • Community • Trust • The Rise of the Creative Class (Richard Florida) • Talent, Technology & Tolerance • Transforming Work: The Five Keys to Achieving Trust, Commitment, & Passion in the Workplace (Patricia Boverie & Michael Kroft) • The Seeds of Innovation (Elaine Dundon) • Ripples from the Zambezi (Ernesto Sirolli) • Passion, Energy, Imagination & Resources of People • The Right Mix => Innovation

6. INNOVATIONOne Definition: The profitable implementation of strategic creativity • It’s a fascinating subject. How it happens, where it happens... and why. • Many people like to cite Edison’s famous prescription: 1% inspiration and 99% perspiration. And the 99% part is something we feel we can address, right? • But what about that 1%? We tend to treat that as if it were simply magical -- not subject to guidance or nurturing, much less planning. It’s just human genius, popping up whenever and wherever it will. • However, if we study history, we know that that’s simply not true. • There are times and places and certain conditions under which innovation absolutely flourishes. Sometimes, its appearance is explosive, with so much creativity packed into a short span of time that it changes global society and the course of history itself.

7. Benefits of Innovation • Spawns new industries • Fuels economic growth • Creates countless high-value, high-paying jobs • Raises the standard of living for people around the globe

8. What Has Made The U.S. An Engine Of Innovation? • Ready access to natural resources and labor. • The skills and work ethic of American workers. • Strong capital markets, a long tradition of the rule of law, a deep commitment to property rights. • And finally, the U.S. has benefited from a unique sort of cooperation and collaboration among the federal government, national and military labs, private-sector R&D efforts, research universities and entrepreneurs. • As well, historically we have encouraged and rewarded risk takers • America was created by people who decided to pack up, get on a boat and sail to a new world in search of something better. • ‘Go West Young Man’ • Our push to put Man on the Moon

9. We Are At A Critical Moment • What if the US falls out of step with the new realities of Innovation? • The innovators & risk takers would go elsewhere…because they can. • What New Realities? • New mood in the country that puts us at risk of creating a hostile environment for business investment and the creation of new businesses • Why innovate here when it may be easier to perform ‘offshore’?

10. The Innovation Challenge • Right now, the greatest challenge we face is that the very nature of innovation itself is changing. • Innovation is not the same as invention. Invention is the starting point -- important, to be sure. But true leadership requires a focus on the pull for innovation, not merely the push of invention. • We understand the importance of R&D, of raw invention. But we also know that today, invention alone is no longer sufficient to deliver value -- or to win. • Example: New Mexico is a leader in invention but lags significantly in the creation of wealth and high paying jobs. • Innovation occurs at the intersection of invention and insight. It’s about the application of invention -- the fusion of new developments and new approaches to solve problems.

11. The Transistor Example • The transistor was an invention -- an invention actually to amplify sound over long-distance phone lines. But then many people, companies and institutions took the transistor and applied it in many ways. • Texas Instruments and Fairchild Semiconductor applied transistor technology to put whole circuits on a chip of silicon... the first computer chip. • That made possible electronic mainframes, servers, PCs, the Internet. • Those advances, in turn, were applied to business, education, healthcare, national defense. • All of this was made possible -- not just by the invention of the transistor -- but by its application and exploitation across multiple industries, and by the intersections of invention and the needs of business and society.

12. Council on Competitiveness (CoC) StudyTopic: Global Employment • The study aggregated job data from national and international sources and made projections based on industry-specific and global economic trends. • The 42 industries represented on the CoC • Will create 12 million jobs worldwide over the next two years. • Will generate nearly 100 million jobs worldwide over the next decade. • CoC Belief: The preponderance of those jobs will be created as a result of innovations that are occurring, and will occur with increasing frequency, around the world. • One Industry Example -- Information Technology • Will create 1.5 million new jobs over the next two years. • Much of that job creation will occur in the industry’s most innovative segments -- high-value services, middleware, Linux and open standards-based systems. • IBM – major IT player-will need at least 10-thousand new positions in key skill areas next year alone. They arecommitting $200 million dollars to train and educate 100-thousand existing employees to compete for these new high-skill jobs. • So, by any measure, across all of these industries, we are talking about millions and millions of jobs.

13. To unleash the next wave of innovation, we need a definition of innovation for the 21st century. • How can we go beyond traditional notions of “R&D” , invention and intellectual property and identify and nurture the intersections that lead to innovation? • Are there ways to drive innovation at the intersection of services and manufacturing, such as the intersection of life sciences, healthcare delivery and IT? Or similar intersections of invention and insight in energy, telecommunications and the public sector? • How do we stimulate innovation across all services sectors -- an imperative in a services-driven global economy?

14. What about metrics? • How do we measure innovation? • How do we identify the technologies, applications, disciplines, investment and training strategies that are most supportive? • How do we measure success?

15. Education? • What does the changing nature of innovation mean for skills? • What skills are needed in life sciences, energy, new materials or nanotechnology? • Are U.S. universities adapting to the changing environment? • Can we stimulate them to be more proactive versus reactive? • Are they nurturing and creating the new disciplines that will likely emerge -- not from within an established field, but from collaboration across industries, professions and fields?

16. Role of Government? • Government has a unique role, but does it have sufficient focus on innovation, not just basic research? • What can governments do to nurture strategic partnerships among the private and public sectors, universities and labor? • Are we building the national infrastructure necessary to participate in the global innovation ecosystem -- so that developments created anywhere in the world can be capitalized on in the U.S.? • And what about government itself? What are the implications -- and opportunities -- of a new age of innovation for the ways we are governed?

17. Investment? • And finally, investment -- how do we finance innovation? • How do we make the best use of tax dollars earmarked for innovation? • Can we rekindle private sector R&D investment? • How can we strengthen our venture capital markets?

18. Summary & Conclusions • Innovation is the best way to spur job growth…it will be the engine • In the long term, our efforts will help preserve and extend America’s innovation and economic leadership, as well as this nation’s equally impressive record of creating high-paying, high-skill jobs for American workers, and providing them with rising standards of living and ever-improving quality of life. • Our tradition of opening up new possibilities and new frontiers offer hope. Hope not just to the residents of this portion of the New World, but to citizens of the whole world. • Support the Council On Competitiveness Innovation Initiative

19. My Thanks • General acknowledgement to the Council On Competitiveness for providing the supporting information for this briefing • My specific acknowledgement and appreciation goes to IBM Chairman and CEO Sam Palmisano…co-chair of the Council on Competitiveness Innovation Initiative…for his visionary leadership