Kentucky Office for the New Economy outlines ambitious initiatives for State

Bill Brundage has a bold vision for Kentucky.

As commissioner of the Office for the New Economy, his plan for development within the state during the next year is long enough to keep even the hardest-working economic development official busy.

By:
Jennifer Gordon
Business First of Louisville

But, he maintains, reaching these goals is necessary to develop much-needed infrastructure, such as programs, business incubators and collaborative arrangements among government, private and academic institutions.

The Office for the New Economy was created by the Kentucky Innovation Act of 2000 to develop a statewide strategic plan to create a technology-centered economy within Kentucky.

"We will be creating a lot of new companies, and we will be attracting a lot of technology-based companies to the state because we have all this research and development going on," Brundage said. "That’s absolutely essential if you’re going to be participating in this economy."

So far, the Office for the New Economy has invested in 28 programs across the state.

And several new initiatives are in the works.

A top priority is Seeding Innovation, a new outreach program to interest children in kindergarten through 12th grade in science and engineering professions, Brundage said.

The Office for the New Economy also is establishing two funds that will help create venture-capital investments in early-stage companies.

Other efforts include filling Kentucky business incubators in which the office has invested and having the state’s Innovation and Commercialization Centers "fully staffed, funded and working with a minimum of 100 new-start companies," Brundage said.

Brundage’s office formed the Innovation and Commercialization Centers, or ICCs, to provide assistance and resources to small businesses. The program has six centers across the state, including at The Enterprise Corp., a division of Greater Louisville Inc., the metro chamber of commerce, which assists early-stage companies. It also has 15 satellite offices.

Healthy budget

Brundage said that after a contentious round of budget negotiations in the Kentucky General Assembly, his office walked away with everything he wanted in the new state budget— $120 million from a bond issue for the Research Challenge Trust Fund, better known as the Bucks for Brains program, and $20 million for the Office for the New Economy’s initiatives.

And he has high hopes for the use of that money — some of which already has been committed to programs such as the Cardiovascular Innovation Institute. (For more information, see article on page 53.)

To date, the state has invested $50 million in Office for New Economy programs. That money has been leveraged with private donations to bring the total invested to $200 million, Brundage said.

Any efforts in the future are going to require a collaboration of academia, businesses and government, Brundage said.

"It’s a triangle. The states that are best at blurring the lines from the three are going to be the most successful."

One of his main goals is to encourage commercialization of technology by developing research and development capacity at the University of Louisville and the University of Kentucky.

"The new economy is really: science, which is the fuel, technology is the engine and then innovation is what drives it all," Brundage said.

Business First’s conversation with Brundage delved more specifically into the wide-ranging initiatives in which his office is involved.

Excerpts of his responses follow in a question-and-answer format.

How do you address concerns that your programs have been funded fully during tight budget times?

"In Kentucky, I, as others, (was) concerned in the session that things are tight."

Fully funding Bucks for Brains and the Office for the New Economy "was a hard decision, a very difficult decision for the state to make, but that means they’re not slowing down. … Kentucky is not going to slow down one iota … We’ve got the leadership in our state, and we’re moving pretty fast — not foolishly …"

But, he said, "there’s no such thing as overnight success. It takes a long time for the payoff of the education reform and starting new economy programs."

What do you see as the process needed to make new economy initiatives succeed?

"Once we have enough high-quality, investment-grade deals, there’ll be venture capital all over. Our investment is really at the very early stages. As we build R&D capacity and build up our commercialization capacity and then bring in that intellectual pool and work force, we build deal flow. It’s a 10-year process. A lot will happen over that 10 years, but it’s still a good decade before we can get to where we want to go.

"If you’ll recall, our goal on the R&D side is to work with UK and U of L, whereby they can become themselves a research powerhouse by the year 2010. That will give us the critical mass — the science, engineers, research, the development of new technology — that we need."

The Office for the New Economy is focusing on five technology clusters: human and health development, biosciences, information technology and communications, environmental and energy technologies, and materials science and advanced manufacturing.

Are there any states that you consider as models?

"We can take some of the best practices from different states, but we’re all different.

"I’ve laughed over the years at people saying they’re creating another Silicon Valley or Research Triangle. That’s foolish. There’s only one of them. You’re not going to recreate them. …

"And that brings up a good point. If you forget about Massachusetts and California, for example, a lot of states have been in the business of technology economic development since the early ’80s, and those states have put in billions of dollars in building infrastructure.

"Kentucky only got into this a few years ago, although we’re in it and in it in a big way right now. … The competition is pretty rough.

"We’ve made a bold statement and have a bold vision, and we’re going to modify those rules so we can be a player. Other states are about to do this, as well.

"What worked 20 years ago, 30 years ago, 10 years ago, isn’t necessarily what’s going to work today. We in Kentucky are on the cutting edge. We’re changing the rules, so we’re going to be a significant player in this new economy."

How are you changing the rules?

"It’s the way we’re establishing our infrastructure. The Bucks for Brains (program) was a big start in changing those rules, making us competitive because everybody is after this limited number, or dearth, of top scientists, world-class scientists, that we need.

# "I believe what we have developed in the state of Kentucky is the most advanced innovation commercialization system and network in the country. It’s going to make us very competitive.

"If you think about a business, a business today in the technology world is not going to stay in business unless they’re innovative. They’re going to have to improve their products and services every year.

"It’s no different for a state. If you’re going to be in technology economic development, which is basically what we’re doing, you’ve got to be innovative, you’ve got to be the one that sets the pace — literally be the architect of how we’re going to do it tomorrow and how we’re doing it today.

"I know Kentucky is on the cutting edge, and we’re one of the leading architects in the country. … I was in Washington two weeks ago with (representatives of) a number of states, and these states, including Puerto Rico, informed me that they’re watching us very closely. … Kentucky is looked upon by the rest of the country as someone that may be on that cutting edge that they better watch and pay attention to what we’re doing."

Are you looking at working beyond the Kentucky borders?

"Economies are not within a state’s boundaries. Yes, we need partners."

As an example, Brundage cited a regional life sciences conference March 10 and 11, at which participants from Kentucky and Ohio talked about working together to develop that industry.

In Ohio, "the governors and the legislature now are considering a $1.5 billion new economy initiative over the next 10 years on top of the hundreds of millions they are investing currently. That will help us in Kentucky."

He added that although Kentucky’s investments are much smaller, "what we’re putting in is not insignificant."

Other states Kentucky is considering working with are Indiana, Tennessee, Illinois and Missouri, Brundage said.

"As this region of the country builds critical mass, R&D, commercialization and work force, we’re going to be very competitive as a region. We don’t compete with one another, we compete with the East Coast and the West Coast.

"As each and every one of us develops in this bold new world of economic development, we are as a region going to become extremely competitive."

Do you also expect to unite regions across Kentucky?

"The state’s almost like a multistate consortium. All our regions are different. What we’re doing in Northern Kentucky is a little bit different than what we’re doing in Louisville, and both are a little different than what we’re doing in Lexington.

"But then as we look at this triangle, this all fits together pretty well. … But then we’ve got a lot going in the rural parts of the state. …

"We don’t want the rest of the state to play a passive role. We’re a family, and we all need to be in it together, and everyone needs to benefit."

What are some projects in other parts of the state?

As one example, Brundage cited an energy consortium in Paducah with resources contributed by UK, U of L and Murray State University.

The consortium focuses on coal energy and technology and could be expanded to include other types of energy and involve the eastern part of the state.

Another institute is focused on safety and security and based at Eastern Kentucky University "because of the work they do in safety," Brundage said.

EKU’s Department of Criminal Justice and Police Studies is one of the largest programs in the nation devoted to criminal justice education, according to the EKU Web site.

"As we got into our strategic planning process, we found (EKU researchers) were sitting over there and had $30 million in grants from the federal government to involve themselves in this field," he added. The institute has pulled together U of L, UK, Fort Knox and EKU, as well as the private sector.

"We put that together before 9/11," Brundage said. "Now with homeland security, that’s going to be even much bigger than we had planned."

What other new programs are in the works?

"We’re getting ready to kick off this summer, provided everything happens as it should happen, something called Seeding Innovation.

"(During) my last visit to Washington, we were agonizing at the White House and in Congress and our federal agencies (about) the fact that over the last few decades, half the students in science and engineering are foreign. Our kids have not been going into science and engineering, not enough of them."

As restrictions are imposed on the H-1B visa program, "we’re not going to continue with all these foreign students in these programs. We have got to get our kids interested in them.

"Our Seeding Innovation will work with public school systems (from kindergarten to 12th grade), and what we’re going to do is introduce children and their parents at a very early age to the careers in science, engineering and business and introduce them to entrepreneurs."

Programs could include internships for high school students at Kentucky research institutions, summer camps for entrepreneurship and programs to bring role models in these industries into classrooms.

"My office is going to be putting up part of that money, but we’ve got to raise a lot of money from the private sector," Brundage said. He said he expects the program to cost "a couple million."

He said he hopes Seeding Innovation will have a program director and teachers will begin developing curriculum this summer.

He also said the state, UK and U of L are developing a Natural Products Center at UK "where we can produce human proteins or medicines in plants," Brundage said.

"Tobacco gives Kentucky a tremendous advantage. It’s the most studied plant in the world, and we’re finding that we can grow a lot of human medicines and human proteins, for example, in the tobacco plant. It’s going to be a major industry.

The center will "be getting into the cancer world, as well," Brundage said.

What would be the potential for developing a program for cancer similar to the planned Cardiovascular Innovation Institute?

"The cancer center at U of L and the one at UK are working together, and they will develop a plan, a multiyear plan, and my office will involve itself (this summer). … Both cancer centers are extremely active in research, and they have their own niches and they work well together."

Brundage said he was not sure whether Norton Healthcare Inc. would be involved in the final plan. (In January 2002, Norton and U of L announced they were forming a cancer hospital to seek National Cancer Institute designation as a Comprehensive Cancer Center.)

Will the Office for the New Economy contribute financially to a joint cancer program?

"We will want UK and U of L to come in with a plan, a joint plan, a collaborative plan, to convince us it would be a good investment on our part."

He said the center is important to his office’s mission "because if you look at the cardiovascular world and the cancer world, the opportunities for new technology and new business is considerable. … It will impact other areas, like bioengineering, that are going to be a big area … Everything is interrelated."

Like all investments by the Office for the New Economy, any investment in a cancer program would have to be approved by the Kentucky Economic Development Finance Authority, Brundage said.

What are the two venture-capital funds you are developing?

"We’re working with a couple of folks right here in Louisville in establishing a life-sciences fund, and we’re investing in it."

Brundage declined to identify those individuals.

Also in development is a natural products fund, which Brundage said he hopes will be established by this summer.

"We’re starting to look right now for a fund manager that could come in, and we’re involving our ICC program intimately with this because we need that professional help for finding and building the companies. And then we need the venture-capital firms with the very early-stage money to invest in them."

How do you plan to build public support for all of these initiatives?

"We have been building infrastructure, and it’s very difficult for people to look at all the pieces out there and relate it to the new economy. This is the nature of the beast when you build this.

# "Now it’s time to bring them all together so that people can wrap their arms around them and understand them — see them, touch them and feel them — and understand what we’ve done, why we’ve done it and what it’s going to do for our state.

"That’s got to be done over the next six months or so. If we’re to receive continued funding from the state, the state has to recognize what we’re doing, has to understand it and believe that there’s going to be a payback. And the private sector has to believe that, and the universities have to believe it to hang in there with us."

As part of this effort, Brundage said he expects to conduct a New Economy Summit in June. Specifics for the event have not been set, but he expects the event to be held in Louisville.

"By the end of the day, people will see all of our programs (and) how they fit into the new economy. The pieces of the puzzle will come together at that event."

He said he is working on the event with the Kentucky Chamber of Commerce.

What is the future of Louisville-specific initiatives?

"Louisville’s going to be an exciting city, I think, as far as the technology world goes. I think the city has its act together. Almost everybody’s on the same page. We’ve built a lot of infrastructure in the last few years, and now we’re ready to go to the next level.

"In Louisville, I’m working with Greater Louisville Inc., University of Louisville and others in the community, in the private sector, and we’re designing a pretty darn aggressive plan that we’ll be implementing in the not-very-distant future.

# "We’re not going to wait for anything to happen. We’re going to have to start making things happen. I can’t tell you any specifics about (the group) right now, but we’ve already drafted ideas, we’ve had many discussions, and we’re getting ready to formalize the process."

Brundage said he expects details to be announced this summer.

What is the future of the Office for the New Economy?

"I was brought here to build the infrastructure for the new economy for the state. I see my office as existing about a decade, maybe 10 years at the most.

# "The Office for the New Economy is to work with all the partners in the state to build this infrastructure, and then there’s no need for my office anymore.

# "The way we’re going and the way the state has supported what we’re doing, I’m pretty confident that by the time we’re 10 years old, our job will be complete."

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