Competing in the Next Economy: Innovating in the Age of Disruption and Discontinuity

Session Overview

Since the National Commission on Innovation and Competitiveness Frontiers released Competing in the Next Economy in 2020, the competitive landscape has shifted radically. Change is accelerating, and the United States now faces its most formidable competitiveness challenger. The country has entered uncharted territory, also driven by major technological discontinuity, which is creating both great uncertainty and unimaginable opportunity.

The Council’s leadership gathered on this panel to discuss the Commission’s new report, Competing in the Next Economy: Innovating in the Age of Disruption and Discontinuity, which offers a strategic set of recommendations for U.S. productivity growth, national security, and prosperity.

Key Session Insights:

As the first panel of the 2024 National Competitiveness Forum kicked off, Council on Competitiveness President and CEO Deborah L. Wince-Smith invited her fellow Council leaders to share how they thought the new Competing in the Next Economy: Innovating in the Age of Disruption and Discontinuity report could influence U.S. innovation.

University of Pittsburgh Chancellor and Council Academic Vice-Chair Joan Gabel highlighted the importance of the report as a framework for innovators coming from disparate contexts. The report provides a framework for different perspectives from across the innovation economy to harmonize into a single vision for modernizing the innovation ecosystem — one that is more expansive, collaborative, and productive. By providing this roadmap, the report’s pillars and recommendations can guide the – at times – unwieldy U.S. innovation ecosystem toward a more prosperous future.

When asked about the challenges of strategic planning, Ms. Gabel noted leadership changes in the United States occur as frequently as every two years in Congress and every four years in the White House. This turnover of committee leaders, department heads, and agency administrators can complicate efforts to anticipate and plan for the future. While this may seem like a disadvantage when compared to more centrally planned economies with more stable leadership, it also represents a significant strength for the United States. This dynamic allows for regular opportunities to revise and update strategies to reflect better current realities.

When asked about the importance of the National Laboratories to the country’s competitiveness, Los Alamos National Laboratory Director Thomas Mason described in detail how partnerships between the national laboratories and industry have shaped the history of fields like computing. Nearly eighty years ago, the national laboratories initiated the shift from human "computers" to computing machines. And soon thereafter, the national laboratories realized the advantages of partnering with private firms for machine development. While the national laboratories focused on research and development, industry took on construction and implementation. This model proved so fruitful that, by the 1980s, private companies and their customers – often still in deep collaboration with the national laboratories – became the world’s computational leaders.

As their role shifted, national laboratories have had to redefine their position within the computing ecosystem. Although they still excel in basic research and development, today, the national laboratories' investment in computing power pales in comparison to the billions being poured into the ecosystem by the private sector, particularly in AI.

Nevertheless, national laboratories can still play a pivotal role in deploying new technologies for public benefit. Much of American AI investment is directed toward commercial applications, often neglecting fundamental research and defense projects with no clear business model. This gap presents an opportunity for national laboratories to leverage commercial AI for public science and defense initiatives. Successful collaboration with industry, which has already shown interest, could herald a new era of leadership for national laboratories.

When asked to give the perspective of someone with a background in business, Chair Emeritus of the Council on Competitiveness and Chair of Global Federation of Competitiveness Councils (GFCC) Charles O. Holliday, Jr., performed a thought experiment. He put himself in the mind of first President Joseph Biden, and then in-coming President Donald Trump, to look at the recommendations in the report, finding that leaders from either end of the political spectrum had something to like in it. It is hardly a secret that right now is a time of political change in the United States, but according to Mr. Holliday, that may well present an opportunity. The discontinuity and disruption we are currently experiencing, and that the report’s title implies, can be harnessed to press for the changes we need to see today. This process is already beginning to happen overseas in places like the United Kingdom and France, and soon, it will be our turn to use a radical political shakeup to push for bold new policies.

One of the most pressing areas that change is needed is in the energy sector. Today, the United States produces enough energy to supply itself, but due to a mismatch of supply and demand, we are both importers and exporters of energy in different forms. Due to this inefficiency but also the U.S. position of energy abundance, the national can explore new energy technologies without risking its broader energy system. However, he cautioned that, when building new technologies that are more sustainable and energy efficient, he had been told to keep two rules in mind: never assume the government would provide assistance, and never assume that consumers would pay a penny more for a more “green” product.

Energy is not the only area in which we need to be prepared for a transition. Mr. Holliday likened the coming of AI to the advent of the printing press; while in the short term, it may lead to friction in employment, in the long term, it promises to open a vast new frontier of capabilities and productivity for the average person, just as printed books widened education unimaginably.

Finally, as climate change becomes a greater concern, he suggested sticking to topics that everyone can understand, like the weather getting hotter and natural disasters becoming visibly more destructive would be the best way to make progress on the issues without triggering backlash.

Running a company who advises businesses across sectors and industries, Chair and CEO of Deloitte Consulting LLP and Business Vice-Chair of the Council on Competitiveness Dan Helfrich recognized that one of the most important steps American businesses can take to enhance their competitiveness is to reinvent their models of collaboration. Mr. Helfrich sees the competitive advantages of the U.S. innovation ecosystem clearly, with businesses and CEOs worldwide acknowledging its strength. However, to foster the next generation of the innovation economy, U.S. industry leaders need to improve their coordination within this broader ecosystem. Mr. Helfrich noted that discussions are underway in boardrooms across the country regarding the purpose of their businesses and their responsibilities to the community. Reflected in these conversations is a willingness among companies to engage in and contribute to the nation’s innovation progress.

Yet, he pointed out that while this willingness exists, there remains a need to enhance understanding of what effective partnerships can look like. Echoing a point made by Mr. Moynihan, Mr. Helfrich admitted that when he became CEO of Deloitte, he had limited awareness of the valuable work being done in U.S. Department of Energy National Laboratories and universities that could impact his company. He suggested that better educating corporate leaders about these efforts and highlighting opportunities for collaboration could yield significant benefits. Moreover, fostering collaboration should not be limited to executives; he proposed that personnel exchanges between innovative institutions could facilitate the cross-pollination of ideas and strengthen partnerships.

Speaking on the effect of regulations on innovation progress, Mr. Helfrich was quick to dispel the notion that the private sector is reflexively opposed to regulation. On the contrary, the myriad businesses that he advises believe that a smart regulatory framework is crucial for success. What is a drag on innovation and business success are regulatory frameworks that significantly, and unjustifiably, slow projects and initiatives to what he described as a “plodding” pace. In one frustrating example, Mr. Holliday relayed how a wind turbine project, despite an attempt by Congress to put a limit on the amount of time regulators could review it, was stalled for more than five years as different agencies began their reviews at different times, leading to intense uncertainty and frustration. Improving times for permitting and approvals, rather than simply tearing down regulatory structures, would catalyze significant acceleration of the pace of innovation, something Mr. Helfrich praised the report for strongly raising.

Dr. Mason has encountered similar slowdowns in his work at national laboratories, primarily due to regulatory requirements. As a key designer and manufacturer of American nuclear capabilities, he acknowledges the need for caution. However, he points out that while labs invest significant time and resources evaluating the costs and risks associated with taking new actions, they pay far less attention to the costs and risks of inaction. Although there are ways to manage the former, the latter is often undervalued. This situation is particularly alarming given the current geopolitical climate, where countries like China are taking decisive actions, making U.S. inaction increasingly costly. Dr. Mason clarified that he is not advocating for a regulatory approach similar to China's; however, the United States needs to adapt its business practices. The existing systems were designed for the relatively stable post-Cold War era, but recent events—ranging from a land war in Europe to escalating crises in the Middle East—demonstrate that geopolitical dynamics are evolving at a rapid pace. These "system shocks" should serve as a wake-up call for meaningful change.

One crucial area for global cooperation is the protection of intellectual property rights. Mr. Helfrich noted that multinationals are increasingly concerned about international IP protection and that stronger collaboration between the United States and its allies could lead to a more effective global IP system. Ms. Wince-Smith added that IP issues are also gaining prominence domestically. She expressed concern over the proposed expansion of march-in rights under the Bayh-Dole Act to control pharmaceutical prices, arguing that such measures could stifle innovation by overreaching.

With the last few minutes, Ms. Wince-Smith turned the conversation to the place-making innovation efforts and experiences of each of the panelist. Dr.Mason relayed a unique challenge that Los Alamos National Laboratory faced: its intense isolation. When created to serve the Manhattan Project, the laboratory’s isolation was a security benefit, but seventy years later, it has become a hurdle to growth and innovation. The lab is two hours from the nearest major city, Albuquerque, and only has 250,000 people within a one hour’s drive. While the laboratory’s important work and prestige makes it easier to attract high-level scientific talent form across the country, getting the accountants, communicators, and electricians required to keep a huge national laboratory running is far more difficult. This has required the laboratory to “grow its own” workforce, partnering with local universities and community colleges to develop workers with the skills the lab needs. This approach has proven effective, with the laboratory adding five thousand staff in the past five years and creating opportunities for local residents. This talent creation effort will be one of the features of the Competitiveness Conversation being hosted in Santa Fe, New Mexico in May, which Dr. Mason will co-host.

The University of Pittsburgh, Ms. Gabel said, is almost two hundred and forty years old, and in that time has seen the whole history of the city. Pittsburgh rose to prominence as “the city that built America,” struggled as its premier steel industry largely left the region, and now it is rising again with a new focus on an economic model built on education, cutting-edge medicine, and technological innovation. Collaboration with local partners like Carnegie Mellon, who leads in AI and cybersecurity, and with partners across the Great Lakes region in places like Cleveland and Buffalo, have enhanced the University’s ability to innovate, deploy new technologies and processes globally, and in doing so lift its local economy. This collaboration will be discussed during the Pittsburgh Competitiveness Conversation from October 19-21.

Mr. Holliday pointed to the way that the Delaware innovation ecosystem, in which he has long been involved, has evolved since before place-based innovation was a concept. The two major universities that served Wilmington, DE, having two different primary areas of focus, used to see little reason for collaboration, instead engaging in competition that left local innovators frustrated. That is changing as regional innovation has gained recognition as to its importance. In his view, finding out what the local barriers are to cooperation is one of the most important first steps to building a vibrant innovation ecosystem.

Mr. Helfrich has observed a significant shift in attitudes toward locating new ventures over the past decade. Previously, clients focused solely on finding locations in established cities like New York or Boston. Today, the landscape is much broader; companies are more interested in identifying vibrant and complementary ecosystems for their operations than establishing themselves in a few prominent business hubs. This change has greatly democratized the innovation landscape. Similarly, Deloitte has leveraged remote work to become one of the largest employers in the United States. Before the rise of telecommuting, rural residents had limited opportunities to work for a company like Deloitte. The shift toward remote work has opened doors for individuals to engage with these large, innovative employers.

To conclude, Wince-Smith highlighted a thread that ran through each of the panelists’ remarks: optimism for the future. By advancing the recommendations in the report, a high-speed, high-powered, innovative ecosystem could be built across the United States, enhancing the work of businesses, national laboratories, and universities nationwide.