In my work as a strategy consultant, I take my clients through a risk assessment to determine areas where we need to develop contingency plans once we have a strategy in place. I find my clients are quick to identify risks associated with various failures, but a client has never come forward with a set of risks associated with success without prodding. While this says volumes about the typical experience with strategy development and implementation, the point here is strategic success – and I mean real success, not “we did about as well as expected” success – presents a set of challenges sometimes even greater than the challenges associated with the initial strategy.

It was my great privilege this time last year to work with the team developing the strategic plan for the Utah Science, Technology, and Research Economic Development Initiative, commonly referred to as USTAR. The USTAR Initiative received overwhelming legislative support. The USTAR Authority was created with an initial budget allocation of $79 million and $100 million in bonding authority, and it has now started the process of implementing the USTAR plan. The economic development strategy is straightforward: make an investment in cutting edge research supported by an aggressive commercialization effort and support the formation of technology companies in Utah. The strategy is based on the proven success of Utah’s research universities, which brought in approximately $500 million in federal research funding last year, and the universities’ commitment to build centers of excellence in areas with strong commercialization potential. The two research universities, Utah State and the University of Utah, are successfully hiring researchers in key areas and a number of important commercialization opportunities are in the pipeline.

So, are we ready to succeed? Because I have a dual role at the University of Utah as both Vice President of Tech Ventures and Dean of the School of Business, I am in the unusual position of seeing two pipelines: the supply of technologies and the supply of human resources. On the VP side of my job, I have seen a lot of “what if” energy devoted to potential failures of faculty hires, budget shortfalls, and faculty retention challenges. A lot of effort has also gone into preparing for success:

(1) We now have an individual onboard devoted to helping USTAR and other faculty prepare for commercialization at the beginning of the research process rather than at the end of the research process, which was previously the case.

(2) We have a program of internal grants that provides funding specifically for commercialization, including proof of principle grants, grants to develop prototypes, and funding to underwrite the actual launch of companies.

(3) We are also national leaders in the development of educational programs that support commercialization and give students unique opportunities to participate in integrated learning environments that prepare them for the highest level jobs in their profession coming right out of school.

(4) We changed the focus of our technology commercialization operation over the last 18 months to encouraging the formation of Utah-based businesses, and as a result we launched 20 businesses last year (our historic average for the prior 10 years was 3.5 businesses per year). On the commercialization side, great strides are being made at Utah State and the University of Utah and we are getting prepared to succeed.

What about on the human capital side? The good news is Utah’s Legislature had the foresight to begin preparing for success several years ago when they launched the Utah Engineering Initiative. This has worked and now the state’s engineering schools are graduating more of these critical professionals. But what about the rest of the key human capital needed to grow a business and ensure it thrives as a complex enterprise?

When companies are first founded, they do not need much human capital beyond what the founders can supply. They are not yet successful, however. At the point companies become successful and need to grow, human capital is critical. All kinds of human capital, including accountants, marketing professionals, financial analysts, production managers, and technicians. Without highly trained professionals in these positions, the firm will not thrive and can easily go under; not because the technology is bad, but because the commercial execution flounders.

Utah can support an occasional company experiencing rapid growth, but we are not prepared to launch a new industry segment consisting of many rapidly growing firms. We do not have the capacity in our professional job markets to respond to a Silicon Valley like environment where multiple firms are going from 100 to 2,000 employees in a year, and then to 6,000 employees the next year. We can provide the bodies, but it is in the professional ranks where we simply do not have individuals to take positions critical to a growing firm’s success.

To give a sense of the issue, let’s take a look at the market for accountants. Every accounting student at the David Eccles School of Business who wants a job in accounting already has an offer, and they are only halfway through their program. About half the individuals in the Master’s of Accounting program (MAcc) had job offers before they started the program, i.e., yes, employers are so desperate for these critical skills that they are extending job offers to individuals who are just starting their graduate education. If a company wants to hire an accountant to start in May 2007, we have no one available. They can try to hire for May 2008, but this requires hiring an intern this coming summer and hoping the student will be interested in joining the firm in May 2008. This is not how growing companies hire, and it is especially not how they hire when they need to triple their workforce in 6 months. Yes, they can hire people away from existing jobs, but this does not really solve the overall human capital problem, it just moves it to another company.

Accounting is the area where there is currently the biggest shortage of graduates, but there are similar shortages across every professional area of business. Some of this has happened in ways that are not readily apparent. For instance, the big growth in graduate business programs is in programs that serve the fully employed. At the University of Utah, 80% of our MBA students currently have jobs and an employer is paying all of or a portion of their graduate training with an expectation they will stay with this employer. Of the students in school who are not employed, half will receive job offers based on the internship they do between their first and second years in the program. There are students who plan to graduate in May who are still seeking employment, but they are a small fraction of those who are graduating, somewhere around 10%.

The USTAR success story is expected to unfold over a couple of decades, so, of course, one answer to the human capital dilemma is the opportunities will create their own supply. There is great interest on the part of students in business, so it appears interest is ramping up. However, we are only able to accept two-thirds of interested undergraduates and about 60% of those interested in graduate degrees. Why? No faculty to teach the classes. There is a desperate shortage of business faculty worldwide, and it takes about five years to create a new business professor and another seven years for a rookie to get through the tenure process and become an established teacher. At the Western Business Dean’s meetings in November, the UC Davis dean announced, “I will sell my soul for a cost accounting professor.” If you passed around a sheet of paper, you could have gotten 20 other deans to sign up for the same deal that day. This bottleneck is not going away and it is preventing supply from adjusting to demand.

I had a conversation a few months ago with an executive from a medical company that sheds light on how critical the human capital issue is. The company was looking to relocate to Utah from Texas based on some key technologies we are developing at the University of Utah. We were talking about recruiting talent to Utah, and I was sharing some success stories recruiting faculty from other parts of the country. The executive’s response really cut to the heart of the matter: “Yeah, that’s all great. With two years of effort, you can get someone to relocate to Utah. What am I supposed to do when I need to scale up with 300 more employees, including hiring 40 managers plus a team of regulatory compliance specialists, who probably do not even exist in Utah?” His point was that he could not work two years to hire one person. He further pointed out an advertisement in the newspaper will generate 1000 applicants for 300 positions if the firm were located in pharmaceutical corridor outside Philadelphia. In the end, despite the compelling reasons to be close to the University of Utah to develop emerging technologies, the company chose to locate outside Philadelphia because they had a plan for success. Will the future USTAR companies’ plan for success include Utah, or will they reluctantly relocate to Silicon Valley, Texas, Arizona, Illinois, Research Triangle, Boston, or Philadelphia?

We are very early in the USTAR implementation process, and so far the results are good. But every aspect of USTAR can succeed and we will still not achieve our goals of quality companies providing quality jobs in Utah if the human capital is not available to support company success. Technologies are portable and easily transported from Utah to anywhere in the world. We can hold them through the initial stages of development by building our research infrastructure. Holding them in the presence of success is another challenge.

Developing the human capital resources necessary to support success is not going to be easy. It is going to require an investment in education that starts with early childhood and extends to Master’s and doctoral programs. There are a number of bottleneck and pipeline challenges that make this a difficult problem, and from where I sit the single biggest problem is we do not have the faculty in place in our business schools to teach the future professionals our companies will need just as surely as they need adequate transportation, electricity, and water. We are also looking at the demographic realities of a retiring baby-boom generation and the time bomb of falling participation in higher education by individuals in the 18-30 age group, i.e., demand is going to skyrocket and supply is not being developed to meet the demand created by retirements. Addressing this demographic issue is going to require solutions that stretch back to early childhood development programs, and this is a 30 year time horizon if we are going to have the sophisticated work force we need to support technology-based companies.

One response is that labor is mobile, California is increasingly becoming a difficult place to live (my “home” and family are in California, and it looks unlivable to me), and they have a lot of smart and well education people who can come to Utah and fill all the high-tech jobs that will open up in the future. Not exactly the “jobs for our kids” solution we envisioned from USTAR, but this becomes our best option for retaining USTAR businesses if we do nothing to prepare right now for USTAR’s success in the next two decades. As I pointed out in the beginning of this essay, successes challenges can be more daunting than the original strategy that produced the success. There are many challenges for the education community in conjunction with the USTAR implementation, and I hope to highlight them in this blog over the next few months. We can meet these challenges, but the solutions have to start now if we are going to be prepared to succeed in the coming decades.

Later.