Absent Boston's critical mass, Maine is innovating by being inventive with limited resources

To some, the bang of the auctioneer's gavel at Great Northern Paper Co. in mid-June will sound like the door finally slamming shut on the Millinocket plant of the troubled company, once one of the state's biggest employers. But to others, the sale will hearken back to a time when Maine was known for world-class innovations, and if the right ingredients come together, might be again.

“It's sad to see the paper machine [the No. 11] coming out of Millinocket,” says Jake Ward, vice president for innovation and economic development at the University of Maine in Orono. “In 1906, the mill was highly innovative and unique.” He's referring not only to the paper-making technologies the mill used, but also to the company's development of water power on the Penobscot River. The mighty mill once churned out 240 tons of newsprint daily, but as energy costs rose and market demand shifted, Great Northern failed to adjust adequately to changing times.

“You have to do continuous innovation,” says Ward. “You can't rely on your competitive advantage.” And that's key, along with start-up companies and an educated workforce, to creating and driving the innovation economy that Maine policymakers and businesses have touted as the cornerstone to the state's future growth.

Ward and other experts are all too aware, however, that the road to an innovation-driven economy in Maine will be long and arduous. Maine lacks the critical mass where innovation is seen as necessary, Ward says. The state must develop skilled workers from a sparse population of 1.3 million spread over 31,000 square miles. It must graduate more students versed in science, technology and engineering in the face of one of its premier research institutions, the University of Maine System, planning to cut 157 workers to close a budget deficit. The state is still smarting from a Forbes magazine article ranking it last for business-friendliness. Its R&D funding is inconsistent, budget to budget.

Add to that the long shadow cast by neighboring Massachusetts, an innovation powerhouse where venture capitalists line up outside renowned universities like the Massachusetts Institute of Technology, whose 6,900 alumni companies have amassed $164 billion in global sales and alone account for 26% of the sales of all Massachusetts companies, according to the Kauffman Foundation.

Despite what might seem like insurmountable odds, true to their roots, Mainers are taking more of a bootstrap approach to innovation, redefining the term in a way that makes sense for the limitations they face. Doing so is an economic imperative, experts say.

“Why try to attract business to Maine when we don't have enough people to fill the jobs and are cutting back on education?” asks Kent Peterson, CEO of Fluid Imaging Technologies Inc., a Scarborough company that in 1999 was spun out of Bigelow Laboratory for Ocean Sciences in East Boothbay. “The innovation economy can be achieved and should be strived for. It's the future.”

Rather than focusing on the big ideas typically associated with innovation, the ones that radically change people's lives, Mainers still can innovate and create by making more incremental improvements in products or processes that lead to cost-savings, consumer demand and jobs for residents, he adds.

Working smart

According to Peterson, Fluid Imaging is an example of that type of innovation. The company's main product, the FlowCAM, was devised at Bigelow to study plankton in ocean water. Co-developer Chris Sieracki took existing technological inventions — flow cytometry, microscopy and digital imaging — and combined them into one novel instrument, Peterson says. Sieracki later co-founded Fluid Imaging to sell the FlowCAM to other researchers.

“If that's not innovation, I don't know what is,” says Peterson. The $5 million company now has 35 employees working in 18,000 square feet, and sells its products in 40 countries. Almost none of its revenue is from Maine.

“But an innovative company like Fluid Imaging is an economic high value-added company. We take money from outside the state and spend it on people and raw materials in the state,” he says. The number of jobs created is a metric of innovation, as is the market value and acceptance of an idea or product.

“Innovation accelerates geometrically with additional people. Within this company, nary a day goes by when we don't have a new product or application idea. This is my vitamin pill,” Peterson says.

And that type of innovation isn't so different from the way creative companies like Apple Inc. come up with new ideas and products, adds Ward. He points to Apple co-founder Steve Jobs, who took other people's inventions and put them together into an innovation, the iPhone.

“Each subsequent iPhone had innovations, like the touch ID button. That technology has been around in other applications for 30 years,” says Ward. “So the innovation economy is not so much game-changing innovation as having to do with consistent and regular innovation.”

In the DNA?

Maine has a lot of hidden assets for starting businesses, says Richard Hale, president and CEO of Wentworth Technology Inc., a Saco-based maker of an improved noise-canceling headset system for drive-through restaurants.

“Mainers are very independent people, they're very proud people and they're practical. These are all wonderful attributes for innovators,” says Hale, who twice has come out of retirement to head companies and who has worked at startup and established companies in California's Silicon Valley and the Route 128 corridor in Massachusetts before settling in Maine.

“I still marvel at how people find a better way of doing things than is done now and has been for decades. Is that innovation? I think it is,” he says. “If it brings money and jobs to the state, who cares [if you are challenging quantum mechanics]? It just takes one person capable of thinking outside the box.” His four-year-old company, with revenue of $1.2 million, employs 20 people.

Hale says he has put a substantial piece of money into the company, and he's had investments from angels, institutional funding, the Maine Venture Fund, CDI, the Maine Technology Institute and Spinnaker Trust. But what helped him attract other investors was the Maine Seed Capital Tax Credit Program, under which the Finance Authority of Maine may authorize state income tax credits to investors for up to 50% of the cash equity they provide to eligible Maine businesses. Fluid Imaging's Peterson agrees. “That is perhaps the No. 1 economic development tool. It attracted other investors [to us],” he says.

“Investors look at the credit as a way to mitigate risk. It's enough to tilt the balance for an investor,” says Rob Baldacci, principal of the Baldacci Group in Portland, who has served as chairman of FAME.

The seed capital program was essentially suspended the past two years, but after July 2014, $675,000 in tax credits will be available, followed by $4 million in 2015 and $5 million in 2016 and beyond. “The tax credit substantially helps to start a company,” Hale says.

But above all, he says a strong engineering school like UMaine is critical to breeding the types of people looking to do something differently. He cites that school's Advanced Structures and Composites Center in Orono as one example of innovative thought.

Private companies like Portland's Tex Tech Industries Inc., which among other things is the biggest maker of tennis ball felt in the world, are tapping that UMaine center's technological prowess. Jeff Laniewski, executive director of research and product development at Tex Tech, says his company is collaborating on ballistic tent panels to make lighter weight and safer tenting materials for soldiers in the field.

“The key is to build upon what you learned in the past,” says Laniewski, whose company also is developing its own lighter and flame-retardant covers for airline containers and better blankets to keep firefighters safer in the field.

UMaine's Ward says the school has between 300 and 400 such collaborations with private-sector companies each year in all stages of development. That work brings in about $4 million in revenue a year. The school also signs seven or eight agreements a year to license its technology to companies like Advanced Infrastructure Technologies of Orono, which is developing the university's “Bridge-in-a-Backpack” technology.

The university also spins out two to three companies a year, totaling 25-30 so far, Ward says.

The university factor

To many in both private industry and the public sector, innovation is all about education.

“UMaine is cutting 157 positions, so it has one hand tied behind its back. But it still has one hand to play,” says Peterson of Fluid Imaging.

He says areas like Silicon Valley, the Massachusetts Route 128 corridor and North Carolina's Research Triangle Park not only have clusters of innovation, but also educational institutions with sophisticated programs that can attract key talent. “So what is produced there is at a different level. But that leaves plenty of bandwidth for Maine,” he says. “We don't have an innovation problem. We have an education/workforce problem.” He says it's tough to hire workers in Maine, and his company tries to lure them with a better quality of life.

“Innovation doesn't have to do with tax policy or government regulations,” adds Corky Ellis, chairman and founder of Kepware Technologies, a Portland-based company that makes software that lets disparate industrial machinery communicate. With more than $30 million in revenues and 85 employees worldwide, one of the company's toughest jobs is hiring engineers.

Ellis says Kepware hires two-thirds of its engineers from UMaine's computer engineering and electrical engineering programs, which only graduate about 55 students a year.

“The more smart students you have in a school, the more lively the technology ecosystem gets,” he says. But with the dearth of graduates, getting that excitement going in schools is tough, and getting companies to come to Maine is a hard sell as well.

Adds Ellis, “The state doesn't realize education is the key to an innovative economy.” He says taxpayers aren't willing to pay for computers for labs nor willing to come to the plate to deal with education. “Why can't Maine focus [on education] in a Manhattan Project-like way. If [Maine] did this it would change innovation radically.”

While Maine has made considerable progress in higher education attainment and research and development investments relative to the nation since the late 1990s, it still has far to go to stimulate those and other drivers of innovation and personal income, according to the Maine Policy Review.

“A state's per capita income is strongly associated with the educational attainment level of its population and with R&D expenditures by businesses, universities and colleges, and research institutions,” writes Evan Richert, the town planner for Orono who was the former director of the Maine State Planning Office under Gov. Angus King.

In his article for the review, Richert notes that Maine businesses need to boost R&D spending and government needs to make an annual financial commitment to R&D.

Richert also writes that the State Planning Office 13 years ago projected that the state's low per capita income would reach the national average if 30% of the state's adults had at least four-year degrees and if businesses, academia and government spent $1,000 per employed worker on R&D. The 30% and $1,000 numbers come from the Maine State Planning Office's 2001 report that culminated a three-year ramp-up of the state's contributions to R&D. Those included a $20 million bond approved by voters in November 1998, an expanded Seed Capital Tax Credit Program to stimulate angel investing in early-stage businesses, establishment of the Maine Technology Institute in 1999 and other measures.

Today, however, to get Maine's per capita income on par with or exceeding that of other states, more investment is needed. While Richert notes that 30% of adults still will need to have four-year degrees, R&D spending must be increased to $1,600 per employed worker. Industry needs to provide about 70% of those R&D expenditures, he writes.

That $1,600 per employee translates into about $1 billion spent annually on R&D by businesses, academia and government in Maine. According to Richert, businesses need to nearly double efforts to reach their share of the contribution. He also recommends that state government commit 5% to 7% annually of the total R&D financial requirement.

Innovation, Maine-style

While Baldacci says he is seeing a renewed focus on entrepreneurship and innovation in Maine, he points to Northern Ireland as an example for the state.

“Northern Ireland invested in one or two industries to allow them to compete globally and become centers of excellence,” he says, noting that he was critical of the late-1990s efforts in Maine to put money into seven technology clusters throughout the state.

“It was more about money than politics. They put money into parts of the state so everyone had a piece of the pie,” he says. “Does it make sense to put millions into a biotech facility in Fairfield?” He says the state should focus on one or two areas where it excels, like composites and biotechnology.

Catherine Renault, principal and owner of Innovation Policyworks LLC, a Brunswick consultancy, who also was the former director of Maine's Office of Innovation, agrees. To her, the nanocellulose research at UMaine, along with some paper companies switching to high-end specialty papers, could be transformative technologies.

“We have a high level of self-employed people in Maine. People aren't afraid to start, but their aspirations may not be as high,” she says.

But that's not necessarily a problem. “I think everyone can be innovative,” she says. “It's not just all the white-coat guys,” she says, adding, “Every company should continually improve what they have. The local food movement is innovative. It changed the face of agriculture in Maine.”

What's needed, she says, is for reserved Mainers to tell success stories. “The more we tell these stories the more people feel they can move their family here and have another job,” she says.

UMaine's Ward agrees that innovation isn't always about high tech. “If you look at the most successful companies and think of the top companies, they embraced innovation as part of their market development culture,” he says. Also, at a large company like IDEXX Laboratories in Westbrook, innovation may result in cost savings buried into overall company operations.

It takes time for innovation to gather steam, says Renault, who calls herself an optimist and suspects the state may already be at a meaningful level of entrepreneurship. After all, she says it took 12 years before the first company moved into Research Triangle Park. “There are lots of groups talking in Maine,” she says. “That means ideas are diffusing and have a broader base.”