Former mayor sets tone for statewide tech agenda

March 21, 2003

By hammersmith

In 1974, a 19-year-old Harvard dropout started a small company in the outskirts of Seattle. His goal was simple: develop a more effective operating system for the personal computer, a technological development that was just starting to edge its way into the public sector. Today, those same computers have revolutionized our world, Bill Gates is the world’s most famous billionaire, and Microsoft is a driving economic force in the Pacific Northwest.

The same potential for economic transformation still exists — though the arena has changed. While information technology will continue to play an important role in successful economic development, recent advances in the life sciences have laid the foundation for the paradigm of the future: biotechnology.

This emerging field promises the punch of the dot-com era, but with generations of staying power. For regions that successfully create a concentrated biotech base, it entails high quality jobs, a solid tax base, and a diversified economy. Boston, the San Francisco Bay area, and Maryland are all examples of locales that have successfully adapted to a biotechnology-driven economy.

Arizona has the ingredients to join this list, according to a recent study by the Battelle Memorial Institute Technology Partnership Practice. The rapid growth of its comparatively small biosciences base plus excellence in select disciplines are encouraging. But without a long-term, focused effort to build its infrastructure, Arizona will lose a substantial opportunity for economic development.

That’s where Paul Johnson comes in. As chair of the newly formed, nonprofit Arizona Technology Council, Johnson is directly connected to its mission statement: To be one voice for technology and [create] a unified agenda for supporting the state’s economic growth through a strong technology industry. The Council is at the center of efforts to mobilize the range of individuals and organizations, both public and private, necessary to create lasting economic change.

The Politics of Business

While he has worked in real estate, construction, and telecommunications (as the current president of Americom), Johnson does not believe he was asked to chair the Arizona Technology Council because of his business experience. “The Council saw that, to be successful as a technology enterprise, they needed to become much more astute politically,” Johnson says. “That was really my role.”

Having served as both a councilman and mayor for the City of Phoenix (at the time the youngest sitting mayor in the United States), Johnson possesses skills that go far beyond business acumen. This makes him ideally suited to help bridge the gap between Arizona’s present and its future. After all, a successful technology development enterprise will require more than just the business community. Arizona must utilize and coordinate such diverse entities as state government, universities, private industry, philanthropic and nonprofit groups, the venture capital community, and the general public.

The Council’s first major collaborative event, the Governor’s Technology Summit, debuted successfully in December, drawing from the efforts of the Southern Arizona Technology Council and the Arizona Department of Commerce. The Council was organized long before the gubernatorial election in November, so this achievement truly represents a step away from the crippling effects of partisanship. In Johnson’s words: “The goal was to put together a summit to work with whomever became governor, so we got both candidates to agree to participate should they win. Clearly, if Arizona is going to be successful, we need the governor’s office as a central point.”

More than 200 statewide technology leaders met to identify issues of concern and develop recommendations. These plans have since been presented to the governor, the first step in an effort by the technology industry to offer a unified platform to the executive branch of the state government.

Johnson explains the reason for doing so: “There are a variety of different groups involved in the tech industry and they are oftentimes uncoordinated, with duplication between groups. I’m a believer that monopolies are inefficient. If you want a distributed network, take groups that are successful and join with them to create more distributive networks to have more than one group trying to express similar point of view, trying to get agendas lined up.”

These words took on new meaning as just weeks ago Governor Napolitano announced the creation of the Governor’s Council on Technology and Innovation. This council will continue the work of tying together the public and private sector in the interests of Arizona’s economic future. In her State of the State Address, Governor Napolitano stressed her commitment to developing the technology industry: “To achieve the economic renaissance I envision, our economy must be powered by innovation, and be driven by the entrepreneurs and tech-based businesses that will create the high-wage jobs and clean industries we seek.”

Keeping Business in Arizona

Both technology councils have specific goals in mind to achieve this end. First, as Johnson explains, to sustain a fledging technology base, Arizona must focus on supply-chain development. Recent market analysis has shown that in Pima County, nearly 90 percent of high-tech, business-to-business purchasing was taking place with a partner outside of the state. Much like a stable ecosystem needs integrative interaction from top to bottom, a stable economy requires interaction that is regional thus benefiting the economy as a whole.

In this regard, the Southern Arizona Technology Council is taking the lead through a successful program called the Tucson BusinessLINC. This organization aims to reduce supply-chain dependency outside of Arizona and keep Tucson business money within the state. “We defer to them on this one,” says Johnson, speaking of the Southern Arizona Technology Council. Such cooperation between Phoenix and Tucson organizations will be needed to ensure the survival of an economic development plan.

From Lab to Marketplace

The second major goal identified by the councils is to enhance technology transfer. A particularly thorny problem for Arizona, this refers to the process whereby technology developed in an academic setting is moved into the commercial sector for application. According to the Arizona State Constitution, state agencies, including universities, are not allowed to profit financially from government revenues. This effectively prevents Arizona’s universities from starting companies, owning companies, or taking equity in companies that come from the scientific developments of faculty members. Unlike Stanford or the University of Illinois, home of Hewlett-Packard and Netscape Navigator, respectively, Arizona universities cannot financially back the technology endeavors of their professors by trading start-up funds for company equity — even when the scientific foundation is there.

Dr. Seth Marder, a University of Arizona chemistry professor, is familiar with these constraints. His lab group focuses on two distinct types of chemistry — two-photon absorption and organoelectronics — both of which have already generated spin-off companies in the technology sector, with significant potential to generate more in the future. While he feels that, “œconceptually the university is supportive, especially at the upper level, of wanting to help and wanting to see spin-off companies,” he also knows that improvements can be made. In his words, “The amount of money spent [by the university] may not be congruent with its goals.”

Governor Napolitano has pledged a ballot initiative that would change the Arizona Constitution in regard to university-commercial ventures. However, as both Marder and Johnson point out, that in itself will not be enough. Johnson says: “Universities need to compensate better people to attract and keep people in the system. They need to make certain there’s an incentive for professors to get ideas into private sector.”

Marder takes the thought one step further. “The issue is not an infusion of money,” he says. “The state needs to provide consistent and long-term support for a period of 10-20 years, but this needs to be maintained in a culture that values the highest quality education, the highest quality students, the highest quality staff, the highest quality faculty, and the highest quality administrators coming and staying at a university.”

Clearly, technology transfer is but the tip of the iceberg in the larger problem of effectively developing the tremendous potential of higher education.

Wanted: Venture Capital

The issue of funding has ramifications beyond the realm of education alone. Venture capital formation is the third area of focus for the Arizona Technology Council and the one about which Paul Johnson is perhaps most passionate. He is quick to quote the numbers: “Eighty percent of venture capital funds are invested less than 80 miles away from the home office. Look at the small amount of venture capital in Arizona and then look at where the money is — San Francisco, Dallas, Los Angeles –it doesn’t take long to figure out that if you’re here [Tucson], you’re going to have to move to get into the major markets.”

Using Silicon Valley as a successful template, he rattles off a condensed list of what makes that region successful: a great university system, major industrial users for technology development, a willingness to develop infrastructure, and access to the financial community. “And what is Arizona missing? Money.” Addressing Arizona tax codes and encouraging venture capital investment in the state will be a crucial effort to pave the way for future economic growth.

Yet despite these problem areas, Arizona does have much of the base in place for future success in developing a thriving technology and biotechnology industry. The key to success will be collaboration in pursuit of a common goal. One encouraging sign thus far is the extraordinary effort involving state and local government, the university system, and philanthropic sector to bring the International Genomics Consortium (IGC) and Translational Genomics Research Institute (TGen) to Arizona.

IGC is a private, non-profit research foundation dedicated to developing the potential of the Human Genome Project in the quest to more effectively translate the language of genetics into effective medical treatments. One of its primary goals is to create a genetic database of cancer cells, a tool that can be used by research groups around the world.

TGen is also a private, nonprofit research institute with similar goals. Its current president and founding member, Dr. Jeff Trent, is committed to translating the results of genetics research to “therapies and diagnostic tests that will have a real impact on the way doctors identify and treat diseases.” If the efforts of those like Paul Johnson are successful, TGen will be the first of a growing number of biological research institutes and companies springing up in Arizona.

A native Arizonan and the father of two sons who may help to shape Arizona’s future, Paul Johnson identifies what it will take for Arizona to reinvent itself: “A lot of it depends on how many people buy into a common vision. Our end goal is jobs and quality of life, isn’t it? With a focus on high-income jobs, higher quality of life – then we can begin to change the paradigm. The early building blocks are tech transfer, capital formation, and supply-chain development. In the long term we have to invest in education. The way you change isn’t just technical, it’s also political. We have to want something more.”