Can you create a high-tech environment?

Many devise strategies—luck plays a role

David Fettig | Managing Editor

Published October 1, 1991  | October 1991 issue

Was there something special about Minneapolis/St. Paul in the 1940s and '50s that allowed it to nurture one of the most successful high technology centers in the country?

Was there some sort of Minnesota magic at work that led companies like Control Data and Medtronic, not to mention numerous spinoffs, to become major players in world markets?

Or was it just dumb luck?

"In large part, it was sheer happenstance," says Herbert Johnson, president of the Minnesota Technology Corridor Corp., and himself an executive veteran of Minnesota's high-tech history. Johnson is referring to the circumstances that brought William Norris, the eventual founder of Control Data and one of the founders of Engineering Research Associates, to Minnesota following World War II.

If Norris and associates hadn't teamed up with an East Coast financier who just happened to own a St. Paul business that was in need of an overhaul following the war, the Twin Cities technological boom—and the economic repercussions that followed—would have probably occurred in another location.

As Norris bluntly states: "If I had had my druthers, I would have had the company in Nebraska [his home state]. ... It was the availability of financing that brought us here. And that was kind of a quirk."

But even while acknowledging the effects of good fortune in the development of Minnesota's high-tech environment, Norris says that the eventual rise of the state as a high-tech power is also owed to the presence of the University of Minnesota and a willing network of venture capitalists. Without the supply of engineers and without the necessary capital, the state's high-tech industry would have fizzled in its early stages, he says.

Today, those elements of a successful high-tech environment—entrepreneurs, research, trained labor and capital—are coming under increasing scrutiny as government and industry officials try to determine the best way to encourage high-tech industrial growth.

Everybody wants a slice of the pie ...

High tech is, perhaps inarguably, seen as a bright spot in the future of the world economy, at least for some countries. The tiny computer chip—which has spawned technical revolutions in most industries and created a subset of skilled workers—has overpowered the mighty smokestack as the symbol of economic health. When economic planners in the Ninth District devise their master plans these days, there is likely a call for increased technical support. In North Dakota, for example, a major economic development plan lists 10 major points that are meant to shape the state's economic future; point 4: "Develop a science and technology corporation to tap the resources of higher education and link it to the state economic development delivery system."

In Montana, the state Legislature has funded a special department with the mission of capitalizing small, high-tech businesses that aren't necessarily "bankable" in the private sector.

In the Upper Peninsula of Michigan, a technological university has created a unique method of enhancing the area's high-tech environment—it has funded its own venture capital group.

And, earlier this year, a special governor's task force determined that Minnesota needs "a concerted commitment by government, education and industry" in order to ensure that Minnesota is part of the new high-tech order.

States first became largely involved in technology funding in 1982 when Pennsylvania developed a program for applied-research grants, with industry and the state sharing the costs for university studies. By 1988, 44 states had technology programs that spent $550 million a year, most of which went to applied research and small business incubators.

Fundamental to these activities is the idea that government, industry and schools can work together to create and nurture an environment conducive to high-tech industry. David Desch, senior investments manager of Montana's Science and Technology Alliance, says that is the purpose behind the Alliance's mission to fund new high-tech businesses. "The idea is that if we can make good investments in the state, and if these companies are successful, then we can create an environment for further growth," he says.

Although he acknowledges the possibility of creating a high-tech environment—namely when a high-powered entrepreneur decides to open a business in a particular city—Gil Young, research manager of Minnesota Technology Inc. (MTI), says it is "almost impossible" to do. He says a successful high-tech environment is usually a synergistic result of factors that are already in place, which is why the Twin Cities succeeded.

... But the pie may be getting smaller

Johnson, of the Minnesota Technology Corridor Corp., says that the good news for states that are trying to encourage high-tech growth is that there are basically two resources that technological companies need: an educated workforce and capital, and neither are natural limitations. Through his years in high-tech industry, including his leadership of MTS Systems Corp. and DataMyte Corp., as well as his recent work at the Technology Corridor Corp., Johnson has closely monitored the evolution of high-tech industry in the Twin Cities. He lists the following factors as crucial to the area's technological success:

  • The fortuitous existence of several pioneer firms.
  • The University of Minnesota (although the school has largely been on the sidelines of applied research in the computer field, a recent study revealed the effect of the school's graduating engineers: 271 state companies—413 worldwide—have been started by graduates of the university's Institute of Technology).
  • Good educational infrastructure.
  • A relatively large number of "Fortune 500" companies.
  • Active venture capitalists.
  • Good work ethic among laborers.
  • A "quality of life" that enticed and retained skilled workers, professionals and entrepreneurs.
  • And perhaps most importantly, the above factors led to the creation of a critical mass of technology and information that fostered further growth.

As for the future of Minnesota high tech, the industry will have to rely on those inherent factors, for it will not receive much direct state aid in coming years. The current budget for MTI, which is Minnesota's restructured Greater Minnesota Corp., has been gutted during the state's current fiscal crisis, leaving the agency with no money for research grants and a proposed capital seed fund. Instead, Young says MTI will focus its energy on encouraging efficient changes for the state's current manufacturers in an effort to keep them competitive in world markets.

"The Japanese and Germans are going to swallow us up if we don't," Young says.

Minnesota hasn't had a leading technological edge in the computer field since the advent of Cray and its supercomputers about 10 years ago, Young says, and "if you're not constantly on the leading edge, you're falling behind."

But a downturn in the computer field doesn't mean that Minnesota's high-tech environment hasn't yielded gains in other markets. Medical technology, for example, mainly from the influence of Medtronic's success, has been a bright spot in Minnesota's economy in recent years.

As for the computer field, one leading-edge market that remains essentially untapped and, Young says, will eventually evolve to be the next major technological revolution, is the integration of computing and communications. In the future, he says, all businesses and homes will be linked by a network of fiber-optic cables that will allow simple computers and telephones to tap into a vast array of video, audio and verbal sources. The companies that get in at the beginning of that technological explosion will be leaders throughout the world, he says, and he wants Minnesota companies to lead the way.

The Governor's Task Force on the Future of the Minnesota Computer Industry, of which Young was a part, had this suggestion: "We strongly recommend that our state government support the creation and rapid deployment of a state-of-the-art information highway, including the installation of a fiber optic trunk linking key facilities around the state into one network."

But Young says the Task Force's recommendation ultimately brings the topic back full circle to the question: Can you create and encourage high-tech growth? Many government, education and industry officials from throughout the Ninth District hope the answer is yes, as they plan to continue their efforts along that line. As William Norris warns: "If we can't [increase research and encourage product development] we will continue to go down. Our standard of living is eroding, that's obvious, and it's going to continue."