The start of a new year is a good time to reflect on the past and look to the future. It has been 25 years since Bill Gates and Paul Allen moved their fledgling company to Puget...

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The start of a new year is a good time to reflect on the past and look to the future.



It has been 25 years since Bill Gates and Paul Allen moved their fledgling company to Puget Sound. And this year we are celebrating our 30th anniversary in business.



Today, 28,000 of Microsoft’s 57,000 worldwide employees are based here. Just this week, we filed a development agreement with the city of Redmond for future expansion of our current campus, reinforcing Microsoft’s long-term commitment to the Puget Sound region.



More broadly, Microsoft is just one part of the state’s innovation economy. As increasing numbers of successful companies and entrepreneurs have emerged, Washington state has become a leader in technology innovation.



This success is based in large measure on the ability of businesses, large and small, to attract the best and brightest talent in the world to work here in Washington state.



But the future raises important questions: How can Washington’s businesses and the state itself continue this success? What do we need to do to remain competitive?



On the positive side, we have impressive strengths on which to build.



Our economy has a wide variety of technology sectors, ranging from computing, communications and e-commerce to aerospace, medical devices and biotechnology. While we should focus on the individual needs of each sector, we should also build on the strengths that are common to this innovation economy as a whole.



At the same time, we need to address the innovation challenges confronting our state. In critical areas, other states and countries are aiming higher and achieving more than we are. If we are going to remain competitive, important priorities require attention.



Higher education: Higher education has become a competitive cornerstone for innovation economies around the world. By preparing our next generation of innovative workers and pushing the bounds of knowledge through basic research, it is an important engine for economic growth.



We are fortunate to have two of the world’s leading research universities — the University of Washington and Washington State University. UW attracts more than $800 million annually in federal research, and WSU is a leader in agricultural research. In fact, more than 100 local companies can trace their origins to basic research at UW alone.



At the same time, the enrollment capacity of our public universities has not kept pace with our changing economy. And we need to do more to move research results from our university campuses to new companies. These steps may require changes to the funding model to increase enrollment in high-demand fields and expand research for key science and technology priorities.



K-12 education: We must also improve our K-12 education system. Today, only 68 percent of our students graduate from high school, ranking Washington as the 32nd state in the country. Clearly, we can and must do better. We need to focus on how to improve our graduation rates and school quality, and how best to fund this critical need.



Infrastructure: We need continued investments in our state’s infrastructure, especially for transportation. Our continuing inability to address these issues is impeding the technology sector’s growth. We need to improve the Highway 520 corridor, the Alaskan Way Viaduct and mass transit in Puget Sound.



Efficient government: We also need to streamline decision-making in state government. We need to build on the recent Priorities of Government budget initiative and inject more cost-benefit analysis into regulatory decision-making.



As we consider these issues, it’s important to keep in mind that while off-shoring is moving some jobs to other countries, there continue to be important in-shoring trends as well. This is especially true for research-based jobs, which continue to migrate to this country from Europe and elsewhere.



States such as North Carolina, Massachusetts and Texas are maximizing job creation through close connections among their governmental, university and business communities.



Ultimately, our ability to remain competitive will turn on whether we can build a genuine spirit of partnership between the public and private sectors. We need to come together around a broader and longer-term vision for the innovation opportunities in our state.



This conviction led us to work with the city of Redmond on a 20-year plan for the growth of Microsoft’s campus. This approach enables us to plan better together. And we are sharing in the investment strategy; Microsoft itself is paying for up to $30 million in infrastructure improvements.



Our experience as a state with the Boeing 7E7 proved that when the loss of jobs is imminent, we can unite and do what it takes to secure economic growth. But can we unite when there is not a crisis? Can we rally around the type of broad and long-term vision that will determine the success of innovation economies in the 21st century?



Other states and countries are already doing so. That, more than anything else, means that we need to as well.







Brad Smith is senior vice president and general counsel for Microsoft. He speaks today at the Seattle Rotary Club meeting in the Westin Hotel.