The main campus of the Hudson Valley Community College is in Troy, near Rensselaer. The college boasts a state-of-the-art $35 million science center, a faculty of 650 and over 13,000 students, half of whom work part-time. The college offers seventy different two-year associate degree and vocational tracks, as well as worker retraining programs and long-distance learning for those who work full-time. Many companies pay tuition for their employees’ educational activities.
David Larkin is an instructor at Hudson Valley, where he has taught a course in advanced manufacturing for more than twenty years. He holds advanced degrees in mechanical engineering and had a successful career in manufacturing before turning to teaching. He told us that for many years, students were not interested in learning the skills of toolmakers and machinists because they knew that these kinds of workers were being laid off and saw no future there. In Hudson Tech Valley, as in other brainbelts, that situation has changed, with the result that Larkin’s course is now in high demand. He says there are probably a hundred programs like his in the United States. “That is totally insufficient,” he told us. “The biggest problem for companies these days is to find people who can run their machines. It is no longer enough to be able to do three jobs; now you have to be able to do three hundred and be good at all of them.”13
Larkin’s program is rigorous. A typical lab course runs twelve hours per week, in contrast to the three hours in other disciplines. Students learn STEM theory, metallurgy, and practical skills such as how to shape parts, build fixtures, and inspect and test equipment. That requires regular access to $1 million worth of machinery and tools, including CAD-CAM equipment.
The problem for community colleges like Hudson Valley is coming up with the funding to equip their labs and workshops, and government support is not always available. “We needed a different approach,” said Larkin. The solution was brainsharing. The college formed partnerships with companies that donate equipment, update it, and pay for their workers or new hires to take courses. One of the biggest donors of much-needed machinery to the course is California-based Haas Automation, one of the world’s leading and most automated machine-tool makers. In return, the college tailors its programs to the needs of the companies. In the year we visited, every one of the thirty-three participants in Larkin’s course found jobs, starting at $18–25 per hour, well before graduation. Previous graduates are earning over $100,000 on average after five years on the job.
GlobalFoundries works with several other community colleges, including Schenectady, Fulton Montgomery, and SUNY Adirondack in what is becoming one of the largest professional training initiatives in the country. Mike Russo, government relations head of GlobalFoundries, says it is a model that could be scaled up nationally to give people a better understanding of how jobs will evolve in the future.
The Work-Study Model
We need much more of the kind of on-the-job education we saw in the Hudson Valley, and this is an area where Europe has much to teach the United States. Michael Brown, senior director for talent acquisition at Siemens USA, believes that the US skills gap can better be described as a training gap. Siemens, the global manufacturer based in Germany, operates one hundred manufacturing sites in the United States, where the company builds complex, high-quality products that include electronic hospital equipment and state-of-the-art locomotives. “We were surprised by what we found in the United States,” Brown told us. There were very few work-study programs, and what training programs there were had suffered from cost cutting. “I found it shocking that colleges did not reach out to us,” he said.14
In Germany, by contrast, Siemens has a robust apprenticeship program, with 10,000 enrollees. In an effort to train more people for work in its facilities in the United States, Siemens is focusing on work-study programs. When Siemens wanted to double its plant capacity in Charlotte, North Carolina, the company worked closely with the local community college to develop a program. Now twenty-five apprentices work alongside the 1,000 regular employees of the plant. “We are just getting started,” Brown said. “But there is a sea change now.”
Germany, Siemens’s home country, has the most developed vocational training model of any country. Its dual-track, work-study education system is known as “duale Ausbildung,” and it is considered one of the “secrets of Germany’s success in manufacturing,” according to Jan Stefan Roell, CEO of Zwick Roell.15 The company, based in southern Germany, is a midsized family-owned enterprise that is one of the world’s leading manufacturers of sophisticated testing equipment. Roell told us that their three-year work-study apprentice program is a dream come true. Zwick Roell works with the local technical school to recruit students. In 2013, 585 people applied for the twenty available jobs, so the company could be very selective. Although the apprentices are paid less than the standard wage, Zwick Roell invests about €50,000 to train one apprentice over the three-year period, during which the students spend about 30 percent of their time in the classroom and the rest on the job.
Roell, who is the grandson of one of the company’s founders, says that work-study programs have to be considered within the larger context of the entire employer-employee relationship. It’s important to develop a “sense of family” in the workplace to ensure that workers want to stay with the company and that they value productivity as much as longevity. An important element of that family atmosphere is mutual respect between workers and unions and management. When we visited the company’s facility in the town of Ulm, not far from Stuttgart, the sense of family and mutual trust was evident throughout the plant—in the clean and well-organized factory space, the appealing food served at lunch, and in the way Roell listened attentively to questions from factory workers and chatted with them as he went through the cafeteria line.
Engelbert Westkämper, former director of the Fraunhofer Institute for Manufacturing Methods and Automation in Stuttgart and professor at the University of Stuttgart, emphasizes the important role of technical schools (there are twelve in the Stuttgart region alone) in working closely with companies to develop and support apprentice programs. When manufacturing was hit hard by the 2008 crisis, companies survived because decisions were made jointly with the unions, which felt they had a stake in the outcome. Westkämper is aware that the relationship between a corporate board of directors and unions is very different in the United States than it is in Germany. He believes that, over the years, the cooperation “has built a trust that paid off.”16
More evidence of the success of the work-study program is that young people like to train in manufacturing skills because they are so highly regarded. As a result, Germany may be facing a skills surplus that will intensify in the next few years. In the state of Baden-Württemberg, of which Stuttgart is the capital, there are about 225,000 apprentices in the three-year work-study system, including 50,000–60,000 in manufacturing. Only 10 percent drop out, and about 5 percent do not successfully complete the program, which means that the system is turning out a large quantity of skilled and qualified manufacturing workers.
In all of Germany, 1.6 million are enrolled in work-study programs (60 percent of those in the eligible age group), while 35 percent go to university. In the United States, 40 percent of people ages sixteen to twenty-four attend college. Of this total, 60 percent are in four-year colleges and 40 percent in community colleges. Of this last group, only 41 percent had the money to attend full time. In sharp contrast with Germany, only 500,000, or less than 2 percent, find their way into post-secondary, non-degree vocational training.17 And, unlike students in the United States, German students and their families do not have to take on debt to pay for their dual-track education. The average annual cost per trainee in a work-study program is $27,000, of which the national government contributes 90 percent and the state picks up the remaining 10 percent. Companies put in $20,000 per year per student, plus some additional costs for workshops. The training is completely free to students, and they earn a wage that may start at $800–$1,000 per month and rise
to as much as $3,000 monthly.
The German work-study system is a particular boon for midsized companies, which are the ones that take the lion’s share of apprentices, because they have found that the training prepares students for their tasks so they can be productive more quickly when they start working full-time. This training also reduces job disappointment and creates a bond between students and their companies.
In other Northern European countries, over the years, many companies shut down their in-house training programs because of low enrollment and to cut costs. But in the past decade, a number of national programs have been initiated and enrollment is on the rise. At the same time, manufacturing companies without their own programs have begun to collaborate with regional technical schools to offer new forms of vocational training. They look to Germany as a model, but then they discover that the German system was created within its own distinct tradition and that the system is not easily copied. Martin Frädrich, director of the Chamber of Commerce in Stuttgart, agreed. “When we explain the system, it is so complicated that many wonder how it can work so well. Even we do.” To make such programs successful, you need a true public-private partnership, an institution like the Chamber of Commerce that is close to the business community but not part of the government, and you also need close cooperation with unions. And, very important, the program should not be compulsory—otherwise, in Frädrich’s opinion, “Enthusiasm goes away.”18
In Eindhoven, Brainport Industries is developing just such programs. The company devotes significant attention to training middle management in technical skills, in programs very similar to those we saw at TEC-SMART in the Hudson Tech Valley, such as internships and work-study courses. There is a shortage of internships, however, so thirty companies in the Eindhoven region are working to establish the Brainport Industries College. Its founders—including DAF, Philips, and their suppliers—hope to create a steady stream of skilled welders, metalworkers, and machine makers. We have seen that a physical facility is important to making the brainsharing activity tangible and highly visible. To that end, Brainport Industries plans to construct Brainport Industries Campus on a parcel of land reserved for the purpose by the city. With this campus, Brainport Industries aspires to create an environment where employees from different companies work together seamlessly and utilize shared high-tech facilities.
Their enthusiasm has not gone away; it has only grown.
Funding
Innovation is often associated with small, vibrant start-ups, financed by optimistic venture capitalists and managed by inventor-entrepreneurs, but this is only part of a much larger picture. Innovation is a marathon rather than a sprint, and often the road to developing an exciting, innovative product begins with a government grant issued years (or even decades) before a start-up commercializes the knowledge or technology gained during that basic research and extends long after the start-up phase.
Sharing brainpower, therefore, only works when a whole series of funders smoothly “pass the baton” along the entire course of an idea’s development. Even the best ideas will not reach the marketplace without an often massive amount of money invested all along the route. Discontinuity in funding at any stage can doom innovation, and as a result, a range of financing sources—each uniquely suited to the task at hand—must be available to equip researchers with the tools they need to create products that can change the world. National governments currently provide most of the funding for basic advanced research, and private companies are the major funders of applied research, with start-ups usually relying on personal connections (angels, family, friends) for small contributions until they develop their ideas enough to attract capital from larger funds and investors.
Although there are many funding sources, and huge quantities of capital available to be invested, the process is not perfect and needs improvement. Millions of dollars in research are wasted because funders or investors ignore worthy projects, invest too much in unworthy ones, lose interest in projects they have funded, steer them in the wrong direction (through poor board-level decisions about strategy or hiring), or decide to cut their losses before a technology or product is fully developed.
Most important, from our point of view, is that funders and investors need to have a better understanding of the importance of brainsharing. In the United States in particular, investors are so enamored of the lonely hero model—the genius entrepreneur and the go-it-alone company, located in iconic hotspots of innovation—that they can easily overlook promising initiatives that involve complex, multidisciplinary collaborations and that take place in out-of-the-way areas such as the brainbelts we visited on our journey.
Basic and Applied Research
In 1994, the National Science Foundation (NSF) provided a $4.5 million research grant to Stanford University as part of its Digital Libraries Initiative, which sought to develop the tools to find and sort information on the nascent World Wide Web. The grant enabled Sergey Brin and Larry Page, two young graduate students and the eventual cofounders of Google, to develop the search engine that became the basis of the tech giant’s incredible success.19 Early government funding has yielded many other breakthroughs, including the Internet, jet engines, nuclear power, the semiconductor, and GPS.20 These examples illustrate the enormous potential of funding for basic research, the first stage of R&D and one of its most essential—if less discussed—components.
According to the NSF, “Basic research fuels technological innovations and is critical in fostering the vitality of the US science and technology enterprise and the growth of highly skilled jobs.”21 Basic research aims to investigate and answer broad scientific questions rather than produce a specific end result like a new drug or material. But because its returns are not immediately apparent or directly calculable, basic research is unpopular with private-sector investors, and as a result, governments provide the majority of funding, for which universities and research institutes are the primary recipients. This is also why it’s so important that we develop new metrics for the evaluation of innovation performance, including assessments that help us gauge the value of efforts in the earliest stages of research.
In the United States, fundamental research dollars come from not only the NSF and the National Institutes of Health but also the Department of Defense (which alone accounts for over half of total funding for basic research), the National Aeronautics and Space Administration (NASA), and the Department of Energy. The United States spends far more of its R&D budget on basic research than any other country—its $75 billion in fundamental research spending nearly matches the rest of the world’s combined $90 billion and far outstrips the European Union’s $40 billion and Japan’s $18 billion. Interestingly, South Korea spends more money on fundamental research ($11 billion) than China ($10 billion).22
In Europe, there is no military industrial complex comparable to that of the United States, the European Union is fragmented, and innovation policies are nationally driven. The European Commission is, however, working to bridge the gaps between the national efforts. The Horizon 2020 initiative, begun in 2013, seeks to stimulate economic growth and employment through innovation. And for the first time, projects will be selected for funding on the basis of their scientific quality rather than to achieve equal distribution of research funds over the member countries of the European Union, as they have been in the past.
Although the innovation scene in Europe has been fragmented, it also has some powerful assets that are unmatched in the United States. Most important is the extensive network of public-private entities—including Fraunhofer in Germany, TNO in the Netherlands, and EMPA in Switzerland—that were founded in the late nineteenth and early twentieth centuries. They are key building blocks in the creation of the smart manufacturing world in which sharing brainpower is so essential.
Another positive trend we saw in Europe is that more state funding and subsidies are linked with requirements that projects be multidisciplinary. In Switzerland, for example, there is the
SystemsX.ch initiative aimed at supporting research in systems biology.23 The research must be carried out by people in a wide range of disciplines, such as biology, physics, chemistry, engineering, mathematics, computer science, and medicine. This unique, federally organized network enables an efficient, interdisciplinary collaboration of more than 1,000 scientists, in almost four hundred research groups, working on approximately two hundred projects.
Unlike basic research, applied research—the second stage of R&D that focuses on specific products, materials, or drugs—receives most of its funding from corporations, particularly those in science-intensive industries such as chemicals, pharmaceuticals, and aerospace. The United States spent $82 billion on applied research in 2011, with businesses providing just over half the funding.24 Universities, hospitals, corporate research labs, and start-ups conduct the majority of applied research, and their reliance on private-sector financing makes corporate funding and venture capital essential to this stage of R&D, although governments still provide over one-third of funding.
Of the total R&D dollar expenditure in the United States, about 20 percent goes to basic research, 20 percent to applied research, and 60 percent to development. There has been a lot of hand-wringing about growing global competition in R&D spending, but the “old” economies remain preeminent,25 with a 60 percent share in 2014—31 percent for the United States (nearly double its 16 percent share of the global economy), 19 percent for the European Union, and 10 percent for Japan, compared to China’s 18 percent.26
This leadership in research has stimulated the rustbelts to reawaken in both the United States and Europe, but obviously the two regions have taken very different approaches to funding. The strongest attributes of research funding in the United States are entrepreneurship, strong support from the military and government agencies, the freewheeling ways of Silicon Valley, investments by university endowments, philanthropy, and the abundance of venture capital. Start-ups in the United States receive over two-thirds of all global venture capital, compared to only 14 percent in Europe, giving the former a distinct advantage over the rest of the world.27
The Smartest Places on Earth Page 20