Saying Utah’s technology sector is “out of balance,” Lt. Gov. Spencer Cox last week called for the state to work toward greater diversity in the industry.
Speaking at the SSTI Annual Conference in Salt Lake City, Cox said the state’s future as an innovation center depends on bolstering the industry beyond its hallmark Silicon Slopes.
“In Utah, we have seen massive growth in our IT and software sector, which we call Silicon Slopes, over the past few years. This, of course, is something we should celebrate, and we do celebrate,” he said. “However, Utah’s ability to weather the next economic downturn will be compromised unless we see corresponding growth in our other deep tech sectors like aerospace, life sciences, automation and robotics, as well as clean tech.”
Cox cited a Milken Institute ranking of states focused on technology concentration. Utah held the top spot on the list for nearly a decade but slipped to 13th among states in the most recent ranking, he said.
“This dramatic drop is mostly attributable to the rapid growth in Silicon Slopes compared to more-modest growth in other deep tech sectors in the state, meaning Utah’s tech sector is getting out of balance,” he told the crowd, a group focused on boosting technology-based economic development.
One challenge in the development of breakthrough technology in those “deep” tech sectors is that they often require more time, research, capital investment and regulatory scrutiny than do those in IT and software, he said.
“We must not allow these challenges to dissuade us from doing what is necessary to maintain a healthy and diverse innovation ecosystem,” Cox said, adding that government may need to intervene to address market gaps.
“In Utah, as elsewhere, there is a perception that private capital is readily available to any technology entrepreneur. However, nearly all of the private capital invested in Utah in the past five years has gone to IT and services. Only a fraction — less than 10 percent — has gone to the deep tech sectors in our state. In the face of such a market gap, many promising technologies will wither on the vine and the innovation pipeline becomes sparse,” he said.
That government intervention could be in the form of technology-based economic development programs that can keep the innovation ecosystem healthy and ensure startups have the support they need to get private follow-on funding and enter the market, he said.
If changes are not made, Utah could face the same fate as states, nations and empires that once towered over their counterparts because of technology and innovation bu ultimately failed.
“When we look at Utah’s history of innovation and Utah’s current economy, it is easy to become overconfident,” Cox said after reciting a long list of tech developments that took place in Utah. He noted that Utah’s economy is strong, the state has been repeatedly listed at the top of rankings for business and entrepreneurship, and Utah is enjoying low unemployment and growing exports.
“History is replete, however, with examples of once-dominant states, nations and empires failing and falling. More often than not, failure comes as a result of a state’s inability to embrace technology and innovation,” Cox said.
The 700-year reign of the Ottoman Empire was based on innovation and technology but ended when the Ottomans began to prefer isolationism and reject technology.
Cox noted that industries and individual companies likewise can face shorter periods of dominance if they do not foster innovation. Only 12 companies remain from the first Fortune 500 list in 1955. In the 1950s, the average lifespan of a company on the Standard & Poor’s 500 index was 60 years but has shrunk to 20 years.
“History teaches us that top-performing industries of today are likely not to be top-performing industries of tomorrow. Therefore, we must be vigilant in seeing new industries,” he said. “We must build an innovation pipeline that will deliver new ideas, new technologies, new industries 10, 15 and 20 years down the road. Long-term growth can only be assured through continuous innovation.”
Today’s disruptive technologies will ultimately be disrupted in the future, he added, and states with only a few tech industries will be vulnerable during economic downturns.
“Therefore, it is critical that states continue to diversify and expand their technology base,” Cox said. “A diverse base of industries within the technology sector is key to a state’s ability to sustain its economy in good times and bad.”