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HomeMy WebLinkAbout12- Imaging a Future for the Big Sky Optics Cluster by Regional Technology Strategies Prepared for MT Governor's Office of Economic Development 1 Imaging  a  Future  for  the     Big  Sky  Optics  Cluster       Prepared  for  the  Montana  Governor’s  Office  of   Economic  Development             October  2012                   Regional  Technology  Strategies   205  Lloyd  Street,  Suite  210   Carrboro,  North  Carolina  27510   919-­‐933-­‐6699   www.rtsinc.org   2 Table  of  Contents   Introduction  and  Purpose  .......................................................................................................  3   Defining  Terms  .......................................................................................................................  4   Industry  versus  Cluster  ...........................................................................................................................................................  4   Optics,  Photonics,  et  al…  .........................................................................................................................................................  5   The  Optics  Industry  ................................................................................................................  6   Description  ...................................................................................................................................................................................  6   Market  Size  ...................................................................................................................................................................................  6   National  And  Multinational  Optics  Industry  Development  Approaches  And  Strategies  ...........  7   An  Optics/Photonics  Cluster  Inventory  ...................................................................................  8   Defining  the  Optics  Industry  in  Montana  ..............................................................................  11   Does  Montana  Have  The  Ingredients  for  an  Optics  Cluster?  ..................................................  15   Infrastructure  .......................................................................................................................  17   The  Optical  Technology  Center  (OpTeC)  ......................................................................................................................  17   Spectrum  Lab  ............................................................................................................................................................................  18   Montana  Manufacturing  Extension  Center  ..................................................................................................................  18   TechLink  and  MilTech  ..........................................................................................................................................................  18   Cluster  Profile  and  Development  Assessment  .......................................................................  19   Optics  Company  Respondents  Group  Profile  .............................................................................................................  19   Company  Characteristics  ......................................................................................................................................................  19   Business  Needs  and  Issues  ....................................................................................................................................................  20   Networking  Interest  ................................................................................................................................................................  21   Competitiveness  Factor  Profile  ........................................................................................................................................  21   Findings  ................................................................................................................................  26   An  International  and  National  Context  .........................................................................................................................  26   Pinning  Down  the  Optics  Industry  in  Montana  .........................................................................................................  27   Infrastructure  .............................................................................................................................................................................  28   Optics  Company  Survey  Responses  ................................................................................................................................  29   Competitiveness  Assessment  Summary  .......................................................................................................................  29   Clearing  the  Development  Path:    The  Optics  Cluster  Strategy  ...............................................  31   Actions  .........................................................................................................................................................................................  32   Marketing  Considerations  For  the  Governor’s  Office  of  Economic  Development  And  The  Economic   Development  Community  ...................................................................................................................................................  35   Appendix  A:  MT  Optics  Company  Survey  Instrument  ............................................................  36   3 Imaging a Future for the Big Sky Optics Cluster Introduction and Purpose In  2002  RTS  analyzed  and  mapped  the  presence  of  IT  firms  and  their  support   infrastructure  as  part  of  its  cluster  development  strategy  for  the  Governor’s  Office  of   Economic  Development  (GOED).    During  the  course  of  this  analysis  we  discovered  11   companies  in  Montana  that  engaged  in  research  and  manufacturing  of  high-­‐technology   optical  products.    At  that  time  the  focus  was  on  laser  products  and  components,  but  also   included  thermoelectric  controls,  electro-­‐optic  sensors,  sensor  instrumentation  and  a   number  of  other  products.    Even  more  interesting,  ten  of  the  firms  were  located  in   Bozeman,  in  close  proximity  to  Montana  State  University  where  the  Optical  Technology   Center  (OpTeC)  and  the  Spectrum  Lab  conduct  research  in  electro-­‐optics  and  develop   multi-­‐spectral  optical  concepts  into  prototype  systems.    The  two  centers  worked  closely   with  each  other  and  the  Center  for  Computational  Biology  (CCB),  also  at  Montana  State   University.    The  local  companies  appeared  to  have  strong  ties  to  the  university  centers   and  often  collaborated  with  them  in  the  development  of  new  application  potentials  in   optical  fields.    The  optics-­‐related  companies  were  very  research-­‐intensive  and  accounted   for  a  total  of  approximately  250  mostly  high-­‐tech  jobs  in  Bozeman.   Although  this  group  of  companies  did  not  show  a  tight  fit  within  what  were  then   generally  accepted  IT  sector  or  cluster  definitions  we  decided  to  “wedge”  them  into  the   on-­‐going  IT  cluster  analysis  for  three  reasons.   1. A  huge  number  of  the  optics-­‐related  technology  domain  applications  were  in  IT,   telecommunications,  and  computing-­‐based  products,  services  and  companies.   2. Because  almost  all  the  firms  were  located  in  a  small  geographic  area  that  also   contained  a  research  university  with  two  R&D  centers  with  optics-­‐related   missions  and  that  often  support  these  companies,  in  our  opinion,  this  represented   the  kind  of  robust  concentration  of  knowledge-­‐based  companies  and  resources   that  could  grow  into  a  major  economic  development  opportunity  not  just  for  the   region,  but  for  the  state  as  a  whole.   3. We  wanted  to  make  sure  this  group  of  firms  was  noted  somewhere  as  an  asset.    At   the  time  this  concentration  of  potential  high  impact  firms  was  not  really  on   anyone’s  radar  outside  of  Bozeman  so  it  was  not  widely  regarded  as  a  potentially   significant  economic  development  asset.    We  wanted  to  make  sure  this  optics-­‐ related  existence  was  captured  and  noted  even  though  it  was  beyond  the  purview   of  our  IT  cluster  analysis  to  pursue  a  separate  development  strategy.    In  the   original  IT  cluster  analysis  we  devoted  a  short  section  to  this  group  of  firms  and   benchmarked  it  against  the  optics  cluster  in  Colorado  that  at  the  time  included   about  150  firms.   This  group  has  continued  to  follow  a  cluster  development  path  since  that  time.    At   present  the  Montana  Manufacturing  Extension  Center  (MMEC)  has  identified  27  optics   4 and  photonics  firms  in  the  state.    The  group  in  Bozeman  has  more  than  doubled  in  size   and  now  contains  at  least  28  companies.    Like  IT,  optics  and  photonics  technology  as  an   industry  –  as  a  technology  platform  –  as  a  product  –  as  a  service  –  is  now  ubiquitous.    In   addition  to  being  an  industry  in  and  of  itself,  it  has  become  an  enabler  for  all  the  others.   Building  on  the  insightful  MMEC  work,  this  report  supports  this  burgeoning  Montana   economic  development  opportunity  by  offering  an  assessment  of  this  optics  cluster  and  a   strategy  for  the  state  to  support  its  continued  development  based  on  an  understanding  of   the  competitiveness  needs  and  opportunities  for  its  companies  and  the  optics  cluster   innovation  infrastructure.   Defining Terms Industry versus Cluster The  terms  “industry”  and  “cluster”  are  not  used  interchangeably.    Although  there  are   many  versions,  “Industry”  is  typically  defined  as  some  form  of  organized  economic   activity  connected  with  the  production,  manufacture,  or  construction  of  a  particular   product  or  service  or  range  of  products  or  services.    This  analysis  employs  a  variation  of   the  “cluster”  definition  developed  and  used  by  RTS  in  numerous  publications  over  the  last   seventeen  years  including  two  publications  for  the  National  Governor’s  Association,  A   Governor’s  Guide  to  Cluster-­‐Based  Economic  Development  (2002)  and  Innovation  America:   Cluster-­‐Based  Strategies  for  Growing  State  Economies  (2007).    “Cluster””  herein  is  defined   as  a  “geographic  concentration  of  interrelated  competitive  firms  and  institutions  of   sufficient  scale  to  generate  external  economies…making  the  whole  greater  than  the  sum  of   its  parts.”       Clusters  exist  whether  or  not  states  and  regions  adopt  strategies  to  address  their  needs.     Industry  clusters  do  not  need  a  public  sector  strategy  in  order  to  exist,  but  the  right   strategies  can  help  the  businesses  in  them  become  more  successful  and  competitive.    A   cluster  occurs  where  a  group  of  businesses,  drawing  on  similar  resources,  exist  in   relationships  with  other  nearby  businesses  and  institutions  that  contribute  to  their   competitiveness.    This  is  why  such  a  wide  variety  of  clusters  occur,  ranging  from  the  “high   tech”  clusters  of  microelectronics,  semiconductor,  and  software  businesses  in  Silicon   Valley,  California,  to  the  Automotive  industry  in  Detroit,  Michigan,  to  the  Houseboat   Building  industry  in  Eastern  Kentucky  or  the  Ceramics  industry  in  western  New  York.     Any  concentration  of  similar  businesses  that  draw  on  a  common  pool  of  suppliers,   services,  educational  institutions,  workforce  skills,  natural  resources,  or  other  assets  that   can  be  found  in  a  region  may  be  a  cluster.    Nobody  engineered  them,  or  created  them  in   most  cases,  but  they  happened  anyway.   This  report  identifies  and  describes  the  Montana’s  optics  industry  sector.    It  also   examines  the  potential  of  an  optics  cluster  within  the  state  for  three  reasons.     1. A  region’s  clusters  tend  to  be  the  primary  wealth  generators  in  a  region’s   economy.   5 2. Clusters  often  generate  innovation  and  technological  dynamism  and  produce   higher  wage  jobs  in  the  economy.   3. Clusters  can  be  the  basis  for  intelligent  and  cost-­‐effective  public  strategies.   Optics, Photonics, et al… While  there  are  numerous  accepted  definitions  of  optics  and  photonics,  there  are  no   single  standard  definitions.    Although  the  scientific  and  engineering  literature  will  often   distinguish  between  optics  and  photonics,  within  the  current  industry,  economic   development  and  public  policy  literature  and  media,  the  terms  optics,  photonics,  and   optoelectronics  are  most  often  used  synonymously.    Certainly  optics  as  a  concept  has  a   long  history  beginning  in  the  early  18th  century  with  Isaac  Newton’s  text  on  the   fundamental  principles  of  reflection  and  refraction.    It  is  generally  viewed  as  being   ushered  into  the  modern  era  as  a  field  with  the  publications  of  Einstein  and  Planck  and   eventually  the  invention  of  the  first  laser  in  1960.    The  rest  is  history  with  a  development   path  including  fiber  optics,  laser  surgery,  optical  lithography,  laser  material  processing,   high-­‐resolution  microscopes,  new  lighting  technologies  and  so  on.   The  terms  photonics  and  optoelectronics  have  phased  into  common  usage  in  order  to   capture  the  modern  versions  of  science,  engineering  and  technology  domains  that  fuse   optics  with  electronics.  For  photonics,  the  definitions  are  all  over  the  map  and  vary  from   straightforward…   Photonics  Directory  (www.photonics.com)  “the  technology  of  generating  and  harnessing   light  and  other  radiant  energy  whose  quantum  unit  is  the  photon.”…   …to  precise…   U.S.  National  Research  Council  (1998)  –  “the  field  of  science  and  engineering   encompassing  the  physical  phenomena  and  technologies  associated  with  the  generation,   transmission,  manipulation,  detection,  and  utilization  of  light.”…   …to  broad…   UK  Department  of  Trade  and  Industry  2007  –  “those  organizations  for  which  the   manufacture  or  use  of  photonic  enabled  products  is  a  key  aspect  of  their  business.”     Photonic  enabled  products  are  defined  as  “products  that  would  not  be  possible  without   their  photonic  content.”   The  terms  in  use  for  these  kinds  of  endeavors  vary  from  state  to  state  and  cluster  to   cluster  –  for  instance,  “optics”  in  Arizona  and  New  Mexico  and  “photonics”  in  Colorado   and  New  York.    For  the  purposes  of  this  analysis  and  strategy  we  have  opted  to  use   “optics”  as  the  descriptor  for  the  cluster  and  the  associated  innovation  and  research   domains  unless  otherwise  noted  for  two  reasons.    First,  as  mentioned  above,  while   including  photonics  and  optoelectronics,  historically,  the  optics  field  connotes  a  longer   and  wider  science,  engineering  and  technology  perspective.    Second,  and  most   6 importantly,  that  is  the  term  the  private  sector  and  university  firms,  organizations  and   people  in  Montana  that  have  built  this  capacity  and  generated  this  activity  use  to  describe   themselves.   The Optics Industry As  a  ubiquitous  enabling  technology  domain,  optics  is  already  established  with  a  wide   and  deep  technology  platform  that  encompasses  a  group  of  technologies  with  a  multitude   of  existing  applications  as  well  as  the  promise  of  an  untold  number  of  future  technologies   and  applications.    However,  as  an  industry  optics  is  still  emerging.  While  its  significance  is   easily  understood,  attempts  to  define  it  as  industry  are  elusive  because  its  existing  base   of  technologies  and  applications  are  continuing  to  evolve  while  new  technologies  and   applications  are  constantly  and  rapidly  being  created.       Description Perhaps  the  most  rigorously  considered  and  most  structured  optics/photonics  industry   definitions  have  been  sponsored  by  the  European  Commission.    (Along  those  same  lines,   there  is  no  standard  or  generally  accepted  definition  currently  in  use  in  the  United   States.)    The  group  responsible  for  driving  the  European  optics  agenda  is  the  European   Technology  Platform  Photonics21.    Photonics21  devoted  considerable  effort  and   resources  to  crafting  a  definition  of  the  photonics  industry.    Note,  Europe  has  opted  to  use   “photonics”  as  opposed  to  “optics”  as  its  descriptor.   Photonics21’s  photonics  industry  description  is  contained  in  a  2007  report,  Photonics  in   Europe:  Economic  Impact  performed  by  Optech  Consulting.  That  report  divided  the   photonic  industry  into  ten  sectors  that  produce  photonics  technologies,  components  and   systems  that  are  then  used  in  end-­‐user  products,  processes  and  services.    Each  sector  has   a  series  of  segments  as  shown  below  in  Table  1.     Market Size As  cited  in  a  March  2011  Photonics21-­‐sponsored  analysis  prepared  for  the  European   Commission  et  al,  using  the  photonics  industry  definition  developed  by  Optech   Consulting  in  their  2007  report  (Table  1),  the  total  world  market  for  photonics  products   in  2008  was  estimated  at  €277bn  or  about  $370bn  in  2008  US  dollars  at  current   exchange  rates.  1  The  two  largest  sectors  –  flat  panel  displays  and  information  technology   comprised  about  44%  of  the  total  2008  market  at  $96bn  and  $65.4bn,  respectively  while   the  global  2008  defense  photonics  market  was  estimated  at  $28bn.2  The  authors   estimated  an  annual  real  global  photonic  market  growth  rate  of  10%  for  the  2005-­‐08   period.  By  way  of  comparison,  for  this  same  time  period,  worldwide  gross  national   income  grew  at  4.4%.3   1 Maurits Butter, Miriam Leis, John Lincoln, Mick McLean, Marjin Sandtke, Alastair Wilson, The Leverage Effect of Photonics Technologies: the European Perspective (European Commission, 2011. p 20.) 2 Ibid. 3 Ibid. 7 Table  1  Photonics  Sectors  and  Segments4   National And Multinational Optics Industry Development Approaches And Strategies At  the  international  level,  the  most  prominent  optics  industry  effort  is  the   aforementioned  Photonics21  initiative.    Photonics21  is  a  European  Technology  Platform   formed  in  2005  to  unite  Europe’s  photonics  industry  and  research  institutions.    The   group  has  over  1800  members.    Augmenting  its  2007  definition  of  the  photonics  industry   sectors  and  segments,  in  March  of  2011  the  European  Commission  published  a   Photonics21  sponsored  analysis  that  configured  a  series  of  six  value  chains  in  which photonics  is  the  core  technology.5     4 Arnold A. Mayer, Photonics in Europe: Economic Impact (Dusseldorph, Germany: European Technology Platform Photonics21, 2007. p.9.) 5 Maurits Butter, Miriam Leis, John Lincoln, Mick McLean, Marjin Sandtke, Alastair Wilson, The Leverage Effect of Photonics Technologies: the European Perspective (European Commission, 2011.) 8 The  organization  now  bases  its  overall  approach  on  addressing  these  value  chains.    They   are:   1. Scanning,  Sensing  and  Imaging   2. Information,  Communications  and  Networks   3. Screens  and  Displays   4. Advanced  Lighting   5. Photonic  Energy  Systems   6. Laser  Systems.   Subsequent  to  the  release  of  the  above  analysis  Photonics21  released  a  statement  of  its   vision  for  photonics  as  a  key  enabling  technology  of  Europe  (Photonics  –  Our  Vision  for  a   Key  Enabling  Technology  of  Europe,  European  Technology  Platform  Photonics21,  May   2011)  and  then  in  September  of  2011  issued  a  press  release  to  announce  its  commitment   to  a  proposed  public-­‐private  photonics  partnership  with  the  European  Commission.    One   of  the  major  goals  of  the  partnership  would  be  to  improve  Europe’s  photonics  innovation   potential  by  addressing  the  photonics  innovation  value  chain  gap  between  “successful   science  and  pilot  scale  industrial  deployments.”    According  to  Photonics21,  the  proposal   targets  a  7  billion  euros  investment  level  by  2020  with  5.6  billion  euros  contributed  by   the  photonics  industry  and  1.4  billion  euros  provided  by  the  European  Commission.   At  present  the  US  has  no  photonics  or  optics  industry  innovation  strategy  or  development   policy  at  the  national  level  nor  is  it  regarded  a  trackable  category  from  an  industrial   activity  standpoint.    As  mentioned  below  however,  there  are  a  number  of  photonics  or   optics  cluster  development  strategies  in  play  in  the  US  at  the  state  and  regional  level.   An Optics/Photonics Cluster Inventory Presented  below  is  a  domestic  and  international  inventory  of  optics/photonics  clusters   and/or  cluster  support  organizations.    The  various  entities  are  gathered  through    several   sources  including  the  European  Commission,  The  International  Society  for  Optics  and   Photonics  (SPIE),  academic  papers,  and  a  rigorous  Internet  search.    Some  are  identified   through  critical  analysis  by  researchers  while  others  are  “self-­‐selected”  in  that  they   identify  themselves  as  a  cluster  support  entity.    They  run  the  gamut  from  very   substantive  optics/photonics  clusters  and  organizations  that  support  them  to   “aspirational”  entities  that  are  formed  to  attempt  to  induce  cluster  development.   9 Table  2:  US  Optics  Clusters  and  Organizations6   US  Optics  Clusters  and  Organizations  Location   Arizona  Optics  Industry  Association  Tucson,  AZ   Colorado  Photonics  Industry  Association  Boulder,  CO   Connecticut  Optics  and  Photonics  Association  Hartford,  CT   Florida  Photonics  Cluster  Orlando,  FL   New  Mexico  Optics  Industry  Association  Albuquerque,  NM   New  York  Photonics  Industry  Association  Rochester,  NY   Rochester  Regional  Photonics  Cluster,  Inc.  Rochester,  NY   Carolina  Microptics  Triangle  Charlotte,  NC   Carolinas  Photonics  Consortium  Greenville,  SC     Table  3:  International  Optics  Clusters  and  Organizations7   International  Optics  Clusters  and  Organizations  Location   Asia  Pacific  Region     Victorian  Photonics  Network  Australia   Optics  Valley  of  China  China   Korean  Association  for  Photonics  Industry  Development  Korea   Singapore  Photonics  +  Optics  Singapore       Canada     Ontario  Photonics  Technology  Industry  Cluster  Ontario,  Canada   Ottawa  Photonics  Cluster  Ontario,  Canada   Quebec  Photonic  Network  Quebec,  Canada       Europe     Austrian  Photonics  Platform  Austria   Cluster  Wallons  "Photonique"  Belgium   Tampere  Centre  of  Expertise  Finland   Joensuu  Science  Park  Ltd.  Expert  Services  -­‐  N.  Karelia  Center  of   Expertise  Finland   Optoelectronics  Research  Centre  Finland   Laser  Competence  Centre  (LCC)  Finland   6 Sources for Tables 2 & 3: European Commission, Photonics Unit, 2101; International Society for Optics and Photonics, Regional Technology Strategies. 7 Sources for Tables 2 & 3: European Commission, Photonics Unit, 2101; International Society for Optics and Photonics, Regional Technology Strategies. 10 International  Optics  Clusters  and  Organizations  (Continued)8  Location   Route  Des  Lasers  France   POPSUD  -­‐  OPITEC  France   Optics  Valley  France  France   ELOPSYS  –  Poole  de  Compètitivitè  France   Poole  ORA  (Optics  Rhone-­‐Alps)  France   Rhenaphotonics  –  Alsace  Optics  and  Photonics  Poole  France   PhotonAIX  e.V.  Germany   Bayern  Photonics  e.V.  Germany   HansePhtonik  e.V.  Germany   Optec-­‐Berlin-­‐Brandenburg  e.V.  Germany   Optence  e.V.  Germany   OpTech-­‐Net  e.V.;  Duisburg  Germany   OptecNet  Deutschland  e.V.  Germany   OptoNet  e.V.  Germany   Photonic  Net  Germany   Photonics  BW  Germany   ANTICIPA  -­‐  Technopoole  du  Tregor  Germany   PHOTONICSGR  -­‐  Greek  Photonics  Platform  Ireland   Optics  &  Photonics  Cluster  in  Ireland  Italy   PHORIT  –  Italian  Photonics  Platform  Netherlands   Potonics  Cluster  Netherlands  Netherlands   Wroclaw  Research  Centre  EIT+  Poland   KLASTER  “Knowledge  and  Innovation  Community  for  Information   and  Communication  Technologies"  Poland   Mazovian  Photonics  Technology  Cluster  -­‐  OPTOKLASTER  Poland   Polish  Photonics  Platform  Slovenia   Southern  European  Cluster  in  Photonics  and  Optics  Spain   FOTONIKA21  Slovenian  Photonics  Platform  Spain   Fotonica21  Spanish  Photonics  Platform  Spain   PhotonicSweden  -­‐  The  Swedish  Photonics  Platform  Sweden   SLN  Swiss  Laser  and  Photonics  Network  Switzerland   Swiss  Photonics  and  Laser  Network  Switzerland   Electronics,  Sensors,  Photonics  Knowledge  Transfer  Network  UK   Photonics  Cluster  UK  UK   Scottish  Optoelectronics  Association  UK   The  Welsh  Opto-­‐Electronics  Forum  UK   UK  CPO  -­‐  UK  consortium  for  Photonics  &  Optics  UK   SEPNET  Ltd.  Photonics  Network  /  South  East  Photonics  Network  UK   8 Sources for Tables 2 & 3: European Commission, Photonics Unit, 2101; International Society for Optics and Photonics, Regional Technology Strategies. 11 Defining the Optics Industry in Montana In  the  U.S.  there  is  no  standard  definition  yet  for  optics  or  photonics  as  an  industrial   sector  or  subsector.    Attempting  to  actually  define  all  of  this,  as  an  industry  comprised  of   discrete  NAICS  codes,  is  an  impossible  task  for  two  reasons.    First,  because  the   technologies  are  developing  so  rapidly  and  applications  are  multiplying  and  morphing  so   quickly,  any  attempt  at  a  definition  would  be  a  moving  target.    Second,  and  more   importantly,  under  the  current  NAICS  code  taxonomy,  many  of  the  subsector  codes  that   might  logically  be  applied  to  capture  the  optics/photonics  industry  also  include  firms,   and  in  many  cases  a  majority  of  firms,  that  would  not  be  part  of  the  optics  industry.  For   example,  depending  on  the  specific  optics  technology  or  market  orientation  an  optics  firm   might  place  itself  in  the  NAICS  code  for  Engineering  Services  (541330)  or  Research  and   Development  in  the  Physical,  Engineering,  and  Life  Sciences  except  Biotechnology   (541712)  or  Welding  and  Soldering  Equipment  Manufacturing  (333992).    All  three  of   these  subsectors  will  include  firms  not  associated  with  the  optics  industry.   As  a  result  of  the  NAICS-­‐based  definition  dilemma,  analysts  may  use  NAICS  codes  for   guidance,  but  for  the  most  part  they  then  build  up  their  particular  industry  or  cluster   description  organically  by  identifying  firms,  one-­‐by-­‐one  that  appear  to  engage  in  optics  or   photonics-­‐related  commerce.    Even  then,  in  many  cases,  firms  cannot  be  clearly  assigned   to  a  NAICS  code.    In  the  course  of  this  work  they  have  occasionally  constructed  working   definitions  based  on  what  they  have  found  in  their  market  or  state.    The  working   definition  for  this  assessment  combines  two  approaches.    First,  it  populates  the  cluster   with  known  establishments  that  have  self-­‐selected  as  optics  firms  and  then  identifies   their  NAICS  codes.    It  then  triangulates  among  several  analyses  that  identified  NAICS   codes  in  which  optics  firms  resided  (Connecticut,  Arizona,  Florida)  and  compiles  this  list   and  then  merges  with  the  NAICS  codes  for  known  Montana  optics  firms.    The  resulting   NAICS-­‐based  template  is  then  used  to  identify  the  names  of  Montana  firms  in  each  of   these  NAICS  subsectors.    The  firms  are  then  vetted  one-­‐by-­‐one  to  determine  if  they  are  a   “fit”  that  should  be  included  in  the  Montana  optics  industry  or  cluster  definition.       As  was  the  case  with  the  emergence  of  Information  Technology  in  the  80’s  and  90’s  as   both  a  new  and  evolving  industry  and  as  a  ubiquitous,  enabling  technology  across  many   sectors  and  applications,  there  are  optics  intensive  user  firms  in  just  about  every   industrial  sector  and  sub-­‐sector.    For  the  purposes  of  qualifying  the  optics  cluster  in   Montana  we  will  focus  on  the  core  of  this  cluster  –  on  firms  that  generate  optics  products   or  services  or  the  technologies  in  which  they  are  embodied  and  the  innovation   infrastructure  that  enables  this  activity.    Additionally,  the  cluster  definition  is  subject  to   refinement  and  may  be  amended  to  include  groups  within  significant  Montana  optics   user  market  segments  as  additional  findings  come  to  light  during  the  course  of  this   analysis.   Based  on  the  NAICS  codes  associated  with  the  list  of  self  identified  optics  firms  and  on   other  codes  gleaned  from  other  definitions  as  described  above,  here  is  the  initial  list  of   NAICS  codes  that  might  include  establishments  that  qualify  as  optics  firms.       12 Table  4:  Optics  Industry  Definition   NAICS Optics Cluster Definition 313210 Broadwoven Fabric Mills 323111 Commercial Gravure Printing 325188 All Other Basic Inorganic Chemical Mfg 332312 Fabricated Structural Metal Mfg 332993 Ammunition (except Small Arms Mfg) 333314 Optical Instruments & Lens Manufacturing 334512 Auto Environ Ctrl Mfg for Residential, Commercial, & Appliance Use 334513 Displaying & Controlling Industrial Process Variables 334519 Other Measuring & Controlling Device Mfg 335122 Commercial, Industrial, & Institutional Electric Lighting Fixture Mfg 335129 Other Lighting Equipment Mfg 335931 Current-Carrying Wiring Device Mfg 336321 Vehicular Lighting Equipment Mfg 336992 Military Armored Vehicle, Tank, & Tank Component Mfg 339112 Surgical & Medical Instrument Mfg 339115 Ophthalmic Goods Mfg 339999 All Other Miscellaneous Mfg 517919 All Other Telecommunications 541330 Engineering Services 541511 Custom Computer Programming Services 541712 R&D in the Physical, Engineering, & Life Sciences 541720 R&D in the Social Sciences & Humanities 561990 All Other Support Services   With  at  least  the  parameters  of  an  industry  definition  established,  our  first  step  was  to   query  Hoover’s  online  business  directory,  a  Dun  &  Bradstreet  company,  for  companies   associated  with  the  above  NAICS  codes.    Each  company  was  then  researched  one  by  one   to  determine  whether  or  not  its  products  and/or  services  were  in  alignment  with  the   established  definition.    In  some  cases,  calls  were  made  to  confirm  the  company’s  current   activity  and/or  location.    We  removed  companies  that  were  no  longer  in  business  and   those  that  were  outside  of  our  scope.    In  this  regard,  because  our  focus  is  on  the  optics   industry’s  core  value-­‐creating  companies,  we  chose  not  to  include  ophthalmology  and   optometry  offices,  service  labs  and  product  distributors  though  they  are  included  in  some   industry  and  especially  cluster  definitions  as  they  are  part  of  some  of  the  marketing,   distribution  and  end-­‐user  chains.    The  remaining  38  companies  included  in  Table  5  form   the  basis  for  the  optics  industry  in  Montana.    The  geographic  distribution  of  these   companies  is  depicted  below  in  Figure  1.         13 Table  5:  Montana  Optics  Companies   Company  City   ADVR  Inc  Bozeman   Altos  Photonics    Bozeman   Bridger  Photonic  Inc  Bozeman   Christensen  Research  LP  Missoula   Chrono-­‐Chrome  Inc  Bozeman   DRS  Technical  Services  Inc  Polson   Electronic  Realization    Bozeman   Fluorescence  Innovations  Bozeman   Fusion  Technologies  Billings   GFT  Technologies  Inc    Bozeman   Gradient  Geophysics  Inc  /  Gradient  Geothermal  Inc    Missoula   GT  Equipment  Technologies  Missoula   Horne  Technologies  Bozeman   ILX  Lightwave  Corporation    Bozeman   Image  Labs  Bozeman     Lattice  Materials  LLC    Bozeman   Litron  Lasers    Bozeman   Montana  Instruments  Corporation  Bozeman   MSE  Technology  Applications  Inc    Butte   New  Gate  Technologies  Inc    Bozeman   New  Wave  Research  Incorporated    Bozeman   Nu-­‐Trek    Bozeman   NWB  Sensors    Bozeman   Phenix  FO  Bozeman   Phoretic  Technologies  Inc  Kalispell   Photon  Machines  Bozeman   Quantel  Laser  Bozeman   Quantum  Composers    Bozeman   Resodyn  Corporation  Butte   Resonon  Bozeman   S  &  K  Electronics  Inc    Ronan   S2  Corporation  Bozeman   Scientific  Materials  Corporation  /  FLIR  Systems    Bozeman   SensoPath  Technologies  Inc    Bozeman   Snider  Technology  Inc  Bozeman   TerraEchos  Inc  Missoula   Wavelength  Electronics  Inc  Bozeman   Zdye  LLC    Bozeman     14 Figure  1:  Geographic  Distribution  of  Montana  Optics  Companies   15 Does Montana Have The Ingredients for an Optics Cluster? The  short  answer  is,  “Yes.”      In  absolute  terms  the  Montana  cluster  is  not  the  scale  of   perhaps  the  most  well  known  cluster  in  southern  Arizona,  which,  according  to  the   Arizona  Optics  Industry  Association  (AOIA),  boasts  160  companies9.    However,  at  least   three  of  the  critical  ingredients  are  present  that  define  developed  clusters:  a   geographically  dense  (in  this  case,  very  dense)  concentration  of  optics  companies,  a   burgeoning  infrastructure  that  includes  a  third  ingredient,  talent  production,  and  an   innovation  hub.       Table  6:  Comparisons  -­‐  Gallatin  County,  Montana  to  Maricopa  and  Pima  Counties,   Southern  Arizona10   Non-­‐Farm  Establishments  2010  Optics   Estabs  Estabs  Opt  Estabs/           All  Estabs  %  MT/AZ   Gallatin  County,  MT  28  4,759  0.00588  0.5884%  3.86   Maricopa  &  Pima  Counties,  AZ  160  104,839  0.00153  0.1526%       Maricopa    84,520         Pima      20,319               Non-­‐Farm  Employment  2010  Optics   Estabs    Employ    Opt  Estabs/           All  Employ  %  MT/AZ   Gallatin  County,  MT  28  37,337  0.00075  0.0750%  8.03   Maricopa  &  Pima  Counties,  AZ  160  1,712,987  0.00009  0.0093%       Maricopa      1,411,836               Pima      301,151               Population  2010  Optics   Estabs  Population  Opt  Estabs/     Population  %  MT/AZ   Gallatin  County,  MT  28  89,513  0.00031  0.0313%  9.38   Maricopa  &  Pima  Counties,  AZ  160  4,797,380  0.00003  0.0033%       Maricopa      3,817,117               Pima      980,263               Twenty-­‐eight  of  the  38  Montana  optics  industry  companies  are  located  in  or  around   Bozeman  (Gallatin  County),  Montana.    In  order  to  generate  a  rough  sense  of  the  density  of   the  Gallatin  County  optics  cluster  compared  to  the  one  in  southern  Arizona,  RTS   compared  its  estimated  number  of  optics  establishments  in  Gallatin  County  to  the   number  of  optics  establishments  in  southern  Arizona  normalized  with  three  different   measures:  optics  firms  as  percent  of  total  non-­‐farm  establishments  for  the  area,  optics 9 http://www.biztucson.com/biznews/cover-story/170-driving-tucson-optics, Friday 27 February 2009 10 Regional Technology Strategies; U.S. Census Bureau: State and County QuickFacts. 16 firms  per  capita,  and  optics  firms  per  non-­‐farm  employment.    Although  AOIA  ascribed   160  optics  companies  to  all  of  southern  Arizona,  only  Maricopa  County  (Phoenix)  and   Pima  County  (Tucson)  were  used  for  the  establishments,  employment,  and  population   counts.   When  the  percent  of  establishments  in  each  region  that  represent  optics  companies  was   used  as  a  density  measure,  the  Gallatin  County  optics  cluster  was  about  3.8  times  denser   than  the  southern  Arizona  cluster.    When  both  population  counts  and  employment  counts   were  used  to  produce  a  normalized  density  measure,  the  Gallatin  County  optics  cluster   was  over  9  times  denser  than  the  southern  Arizona  optics  cluster  on  a  per  capita  basis   and  8  times  denser  when  normalized  with  employment  counts.   The  optics  company  core  of  the  cluster  developed  in  three  stages.    First  was  the   establishment  of  Big  Sky  Laser  (now  Quantel)  in  1981.    This  was  followed  by  three  more   firms  from  1986-­‐1989  –  ILX  Lightwave,  Lattice  Materials  Corporation,  and  Scientific   Materials  Corp.  (now  Scientific  Materials/FLIR).    Another  group  of  five  companies  was   formed  in  the  1992-­‐1995  period  –  Wavelength  Electronics,  Quantum  Composers,  New   Wave  Research,  Image  Labs,  and  Altos  Photonics.    Over  the  next  sixteen  years  the  number   of  optics  companies  operating  in  Gallatin  Valley  grew  from  9  to  28.    The  companies’   efforts  span  a  wide  range  of  activities  and  applications  and  for  the  most  part  are   distributed  across  four,  occasionally  overlapping,  industry  segments  though  there  is  also   some  activity  in  other  areas  including  Medical  Technology  and  IT/Consumer  Electronics   areas.   1. Optics  Production  Technology   2. Optical  Measurement  and  Machine  Vision   3. Defense  Photonics   4. Optical  Systems  and  Components.   Though  some  of  this  information  will  be  addressed  in  more  detail  in  later  sections  of  this   analysis,  for  the  purposes  of  a  general  characterization  of  the  cluster,  several  other   aspects  should  be  noted.   • The  group  of  companies  that  comprise  the  Bozeman/Gallatin  Valley  concentration   engage  in  a  rich  mix  of  production  manufacturing,  custom  design  and   manufacturing,  R&D,  and  product  and  process  development  activities.   • A  sizeable  majority  of  the  firms  in  the  cluster  were  formed  since  2000  and  they  tend   to  be  young,  small  and  innovation  intensive.   • Many  of  the  companies  have  a  strong  connection  to  Montana  State  University’s   Optical  Technology  Center  (OpTeC)  and  its  associated  non-­‐profit  Spectrum  Lab.   17 • Though  there  is  always  competition  for  talent  from  the  labor  pool  for  any  cluster,  in   spite  of  their  numbers  the  Bozeman  area  optics  firms  tend  not  to  compete  in  the   same  market  segments  for  the  same  customers.   Infrastructure A  common  element  among  clusters  that  produce  numbers  and  levels  of  jobs,  income,   wealth  and  competitive  advantage  within  regional  economies  is  a  well  functioning   infrastructure.    In  this  case,  we  define  “infrastructure”  as  “the  underlying  resource  and   public  and  private  entities  that  advance  the  competitiveness  of  the  firms  within  the   cluster.”    Fully  developed  clusters  reach  a  level  of  activity  that  induces  the  formation  of   entities  whose  operations  are  directly  tailored  to  servicing  the  cluster.    This  can   encompass  a  wide  range  of  activities  but  typically  includes  post-­‐secondary  and  higher   education  institutions  with  offerings  targeted  to  the  cluster,  public  and  non-­‐profit   research  operations  that  support  innovation  within  the  cluster,  technical  assistance   providers  with  cluster-­‐specific  expertise,  attorneys  and  capital  providers  with  very   specialized  cluster-­‐specific  expertise  and  so  on.     Industry  associations,  alliances,  networking  organizations  and  centers  are  also  important   cluster  infrastructure  elements.    These  entities  often  end  up  functioning  as  robust  hubs   that  connect  and  leverage  talent  and  innovation  resources,  transmit  and  relay  technical   and  business  information,  and  advance  the  overall  interests  of  the  cluster.    As  presented   below,  to  a  great  extent  the  elements  to  form  a  strong  hub  are  already  in  place  within   Montana’s  optics  cluster.   The Optical Technology Center (OpTeC) Officially  formed  in  1995,  the  Optical  Technology  Center  (OpTeC)  at  Montana  State   University  is  a  virtual  multi-­‐disciplinary  center  that  supports  and  advances  education  and   research  in  optical  science  and  engineering.  To  accomplish  this,  OpTeC  includes  research   groups  and  students  from  three  MSU  departments:  Electrical  &  Computer  Engineering;   Physics;  and  Chemistry  &  Biochemistry.    OpTeC  functions  as  the  Montana  optics  cluster’s   primary  information  sharing  and  networking  platform  for  university  researchers  and   faculty,  private  industry  and  students.    As  part  of  this  work  in  addition  to  an  annual   conference  that  features  presentations  from  students,  faculty  and  research  staff  on  recent   optics  developments  at  the  university  it  also  sponsors  a  colloquium  over  the  course  of  the   academic  year  that  addresses  a  broad  range  of  optics  topics  and  promotes  cross-­‐ disciplinary  interactions  of  students,  faculty,  staff  and  employees  from  optics  cluster   companies.   OpTeC  plays  a  prominent  role  within  the  optics  cluster  as  its  networking  center  for   research  and  talent  production.    Many  of  the  companies,  especially  those  formed  since   2000,  are  staffed  and  led  by  scientists  and  engineers  from  MSU  that  were,  and  in  many   cases  still  are,  active  OpTeC  participants.    A  number  of  these  companies  also  have  on-­‐ going  research,  intellectual  property  creation  and  licensing  relationships  with  MSU  and   its  faculty  through  the  OpTeC  conduit.   18 Spectrum Lab Spectrum  Lab  was  “spun  out”  of  OpTeC  in  1999  to  further  develop  technologies  from   Montana  State  University’s  research  laboratories,  to  move  those  technologies  into  private   companies  and  to  provide  educational  opportunities  for  MSU  students.    To  this  end,   Spectrum  Lab  serves  as  a  kind  of  optics  “applications  incubator”  for  faculty  and  industry   and  as  a  bridge  between  MSU  labs  and  the  private  sector.    Spectrum  Lab  is  funded   through  contracts  and  grants.    It  has  a  strong  mission  track  record  that  includes  spinning   out  two  of  the  cluster’s  very  active  companies  –  Bridger  Photonics  and  S2  Electronics.     Spectrum  Lab  is  another  prominent  element  within  the  cluster’s  innovation   infrastructure.    At  present  it  has  formal  collaborations  in  progress  with  four  optics  cluster   companies  –  ADVR,  Bridger  Photonics,  S2  Corporation,  and  Scientific  Materials   Corporation.     Montana Manufacturing Extension Center Montana  Manufacturing  Extension  Center  (MMEC)  at  Montana  State  University’s  College   of  Engineering  in  Bozeman  is  a  statewide  manufacturing  assistance  center  that  provides   technical  support  and  training  to  Montana  businesses.    MMEC  is  also  a  part  of  the   National  Institute  of  Standards  and  Technology  (NIST)  nationwide  network  of  centers   created  to  assist  small  and  mid-­‐size  manufacturers,  the  Manufacturing  Extension   Partnership  (MEP).    MMEC  offers  a  wide  array  of  services  to  Montana  manufacturers   including  business  management,  design  and  product  development,  lean  enterprise,   process  improvement,  and  quality  systems  services  as  well  as  a  variety  of  training   courses.    While  MMEC  works  throughout  Montana  and  services  all  manufacturing  sectors,   it  has  played  an  on-­‐going  role  as  a  highly  valued  technical  assistance  resource  for  those   optics  companies  with  a  production  and  manufacturing  focus.    MMEC  engineers  have   specialized  optics-­‐related  manufacturing  expertise  and  the  center  itself  has  developed   into  an  integral  part  of  the  optics  cluster  infrastructure.   TechLink and MilTech Established  in  1996  at  Montana  State  University  and  funded  primarily  through  the  US   Department  of  Defense  (DoD),  TechLink  connects  companies  throughout  the  country   with  DoD  research  laboratories  for  licensing,  development,  transfer  and   commercialization  of  new  technologies  including  photonics  and  sensor  technologies.    It   also  assists  Montana  companies  in  the  preparation  of  SBIR  and  STTR  proposals  for   submission  to  any  federal  agency.       MilTech  is  a  DoD  sponsored  effort  that  provides  technical  and  management  assistance  to   small  companies  to  accelerate  the  transition  of  technology  to  the  US  warfighter  more   quickly,  reliably  and  cost-­‐effectively.    This  national  program  is  a  partnership  between   TechLink  and  MMEC.   Though  both  TechLink  and  MilTech  operations  are  national  in  scope,  Montana  optics   companies  benefit  from  both  programs  being  headquartered  in  Bozeman  in  at  least  three   ways.    First,  DoD  is  a  major  customer  for  several  of  the  cluster  companies. Second,  much   19 of  the  on-­‐going  R&D  and  product  development  within  the  cluster  is  geared  toward  DoD   applications.  Third,  DoD  is  in  itself  a  source  of  funds  through  grants  and  contracts  for   Montana  optics  cluster  R&D  efforts.   Cluster Profile and Development Assessment RTS  designed  and  deployed  a  short  10  question  Internet-­‐based  survey  to  sketch  out  a   profile  of  the  state’s  optic  cluster  companies  –  who  they  were,  what  they  did,  and  their   perceptions  about  their  most  pressing  business  issues  (see  Appendix  A).    This  was   followed  by  a  series  of  on-­‐site  face-­‐to-­‐face  interviews  to  generate  a  more  detailed   understanding  of  the  competitiveness  issues  the  firms  were  facing  as  well  the  resources   they  understood  to  be  at  their  disposal  and  connectivity  and  relationships  among  the   firms.       The  information  gleaned  from  the  survey  responses  and  interview  results  was  then  used   to  compile  an  Optics  Company  Group  Profile  and  to  craft  a  Cluster  Competitiveness   Factor  Profile,  both  of  which  are  presented  below.    Information  was  gathered  from  12  of   the  28  (43%)  Bozeman  optics  cluster  companies  (this  response  level  also  represents  32%   of  the  Montana  optics  industry  total).    Face-­‐to-­‐face  interviews  were  also  conducted  with   seven  of  these  respondents  as  well  as  the  two  previously  described  major  optics   infrastructure  elements  that  connect  to  the  university  community  and  to  the  companies  -­‐   OpTeC  and  Spectrum  Lab.   Optics Company Respondents Group Profile Company Characteristics All  the  respondents  were  from  Gallatin  County/Bozeman  area.  Sixty-­‐four  percent  of  the   respondents  had  just  a  single  office  while  36%  had  additional  offices  –  all  located  out  of   state.       Sixty-­‐three  percent  of  the  companies  reported  less  than  20  employees  while  18%  had  21  to   50  employees  and  another  18%  had  50  to  100  employees.       The  companies  represented  a  variety  of  product  or  service  areas  including  production  of   laser  components,  lasers  and  laser  systems,  R&D  and  prototype  development,  instrument   manufacturing,  custom  instrument  manufacturing,  and  measurement  services.    Most  of  the   firms  (70%)  reported  in-­‐state  sales  but  at  very  modest  levels.    In  terms  of  sales  volume,   roughly  55%  of  their  sales  were  in  out-­‐of-­‐state  US  markets  and  39%  of  sales  were  in   international  markets.    Only  6%  of  sales  were  to  Montana  customers.   Forty-­‐five  percent  of  the  companies  had  received  SBIR/STTR  awards  with  three  quarters  of   those  firms  also  receiving  Phase  II  awards.   20 Business Needs and Issues The  respondents’  were  asked  to  select  their  most  pressing  business  issues  from  the   following  list.       • Experienced/specialized  employee  recruitment   • Worker  training   • Access  to  capital   • Strategic  partners   • Business/market  development   • Distribution  and  logistics     • Access  to  specialized  suppliers  or  materials   • Intellectual  property  management   • Manufacturing  or  process  issues   • Access  to  specialized  scientific  or  engineering  expertise   • Administrative  assistance   • Human  resources  assistance     • Using/maximizing  impact  of  social  media   • Other-­‐  please  specify   The  following  four  needs  were  flagged  by  at  least  one  third  of  the  firms.       1. Experienced/specialized  employee  recruitment  (64%)   1. Business/market  development  (64%)   2. Access  to  capital  (45%)   3. Strategic  partnering  (36%)   Experienced/specialized  employee  recruitment  and  Business/market  development  tied  for   first,  each  with  64%.    Next  was  Access  to  capital,  which  was  selected  by  45%  of  the   respondents  followed  Strategic  partnering,  selected  by  36%  of  the  responding  firms.   Three  need  categories  were  identified  by  just  over  18%  of  the  respondents,  Intellectual   property  management,  Manufacturing  or  process  issues,  and  Access  to  specialized  scientific   and  engineering  expertise.   Just  under  10%  of  the  respondents  identified  Worker  training,  Distribution  and  logistics,   Access  to  specialized  suppliers  or  materials,  and  Administrative  assistance  as  pressing   business  issues.   No  firms  indicated  that  Human  resources  assistance  or  Using  social  media  were  pressing   needs.   21 Networking Interest The  survey  concluded  with  the  following  question:    Are  you  interested  in  participating  in   events  or  functions  that  bring  Montana  optics  companies  together  to  network  or  address   common  issues?   Ninety-­‐one  percent  of  the  respondents  answered  “yes”  to  this  question.  One  respondent   offered  a  comment  that  bears  noting  here  as  it  was  often  refrained  in  the  follow-­‐up   interviews.   The  optics  community  is  a  strong  collection  of  individuals  with  various  niche   technologies,  and  it  is  of  interest  to  bring  them  together,  although  it  will  be   challenging.    I  am  interested  in  being  a  part  of  a  new  community,  but  will  like   and  need  to  see  the  common  elements  grow.   Competitiveness Factor Profile Based  on  the  Internet  survey,  the  nine  on-­‐site  interviews  with  cluster  members  and  follow-­‐ up  communications,  RTS  constructed  the  below  presented  Montana  Optic  Cluster   Competitiveness  Factor  Profile.    Using  a  variation  of  the  template  RTS  has  designed  over  its   15  years  of  cluster  analysis  at  the  regional,  state,  national  and  international  levels,  the   profile  is  organized  around  eight  key  cluster  asset  categories.    The  completed  profile  is  then   used  to  chart  a  future  development  strategy  for  the  cluster.   1. Workforce And Human Capital Strengths   • MSU  and  OpTeC  are  viewed  as  major  resources  for  knowledgeable  entry-­‐level  or   near  entry-­‐level  employees  and,  from  a  human  capital  perspective,  were  viewed  as   infusing  their  students  and  researchers  with  an  innovation  mindset.       • The  high  concentration  of  companies  in  the  Bozeman  area  was  also  viewed  as  a   significant  workforce  and  talent  attraction  asset  in  and  of  itself.    As  stated  by  one  of   the  optics  company  officials,  “A  concentration  of  companies  really  helps  build  the   talent  pool  as  people  now  come  here  with  the  expectation  that  if  a  job  doesn’t  work   out  they  can  find  another  one  in  the  industry  right  here.”     • The  younger,  more  R&D  intensive  companies  did  not  view  talent  recruitment  as  a   significant  problem.    While  they  often  hired  MSU  graduates,  they  also  recruited   out-­‐of-­‐state  for  employees  with  specialized  experience  or  knowledge.     Weaknesses   • Companies  with  more  than  20  employees  and/or  with  more  of  a  production   orientation  indicated  they  had  issues  with  finding  specialized  and  experienced   engineering  expertise  and  in  finding  optics-­‐qualified  manufacturing  technicians.    In   one  case  a  company  was  looking  out-­‐of-­‐state  for  technicians  from  two  post-­‐ secondary  training  programs.   22   • Several  company  representatives  mentioned  that  more  research  support  is  needed   for  OpTeC  to  get  “more  kids  working  in  labs  to  get  hands-­‐on  experience.”   2. Innovation And R&D Assets Strengths   • OpTeC  and  Spectrum  Lab  form  the  innovation  infrastructure  for  the  Montana   optics  industry  and  the  Bozeman  optics  cluster.    As  such,  they  function  as  the   industry’s  major  optics  research,  applications  development  driver  and  talent   source  and  have  historically  played  an  integral  part  in  the  development  of   Bozeman  cluster.   • While  the  group  has  several  older  well-­‐established  companies,  to  a  great  extent  it   is  characterized  by  young,  small  technology  or  applications  development   companies  committed  to  innovation  within  the  market  segments  they  have   targeted.   • On  the  innovation  deployment  side,  the  Montana  Manufacturing  Extension  Center   (MMEC)  is  regarded  as  a  valuable  technical  assistance  resource  by  those  optics   companies  with  a  manufacturing  orientation.   Weaknesses   • Several  company  respondents  felt  that  there  is  a  real  need  for  innovation-­‐  and   business-­‐oriented  technical  assistance  specifically  tailored  to  optics  companies.     The  general  sentiment  was  the  cluster  companies  and  their  interactions  with   OpTeC  and  Spectrum  Lab  together  have  generated  a  cadre  of  existing  technical   entrepreneurs  and  continue  to  produce  aspiring  optics  entrepreneurs  who  need   help  in  areas  such  as  intellectual  property  management,  contracts  administration,   access  to  capital,  recruiting  strategic  partners  for  continued  applications   development  or  market  development  and  so  on.   • There  was  a  sense  among  several  respondents  that  the  overall  innovation  capacity   of  the  Bozeman  optics  cluster  was  not  clearly  understood  and  therefore,  under-­‐ recognized  because  so  many  of  the  firms  were  unfamiliar  with  each  other.   3. Entrepreneurial Energy and Financial Capital Strengths   • There  appears  to  be  a  burgeoning  entrepreneurial  culture  within  the  Gallatin   Valley  optics  cluster.    A  distinct  majority  of  the  firms  in  the  cluster  have  been   formed  since  2000  so  they  tend  to  be  young,  small  and  innovation  intensive.    This   Gallatin  Valley  innovation  ethos  is  also  fueled  by  MSU,  OpTeC  and  Spectrum  Lab,   which  tend  to  produce  and  support  graduates  and  researchers  with  bleeding  edge   optics  science  and  technology  orientations.     23 • Capital  is  an  issue  (see  weaknesses)  however  many  of  the  companies  are  adept  at   obtaining  SBIR  Phase  I  and  II  awards  as  well  as  other  federal  grants.    Several  have   also  been  successful  applicants  for  Research  and  Commercialization  Board  grants.       • Capital  requirements  for  companies  within  the  optics  industry  tend  to  be  relatively   low  when  compared  to  other  knowledge-­‐intensive  industries  like  bioscience.    As  a   result,  many  optics  companies  are  desirable  targets  for  angel  investors  and  angel   networks.    Although  there  is  some  angel  investment  in  play  among  the  Montana   optics  companies,  angel  investors  as  a  reliable  early  stage  capital  source  were  not   viewed  as  having  a  strong  presence.    This  may  represent  an  opportunity  to  develop   a  larger  scale  initiative  tailored  to  the  optics  cluster.      Weaknesses   • Access  to  capital  was  identified  as  a  top  priority  business  issue.     • Several  company  representatives  pointed  out  that  there  were  very  few  visible  and   successful  optic  entrepreneurs  to  serve  as  role  models  and  mentors  and  that   mentors  were  badly  needed  for  startups  and  early  stage  companies  within  the   cluster.     • There  was  a  perceived  lack  of  access  to  startup  and  growth  management  technical   assistance  and  experience  specific  to  optics  companies.    Because  the  underlying   science,  engineering  and  technology  is  dynamic  and  constantly  changing,   applications  are  diverse  and  in  a  state  of  flux  and  it  is  so  niche  oriented,  there  is  a   feeling  that  any  help  here  needs  to  be  tailored  to  the  optics  sector  –  generic   entrepreneurial  assistance  will  be  of  limited  value.   4. Ease of Moving Goods, People and Information Strengths   • The  companies  use  Fed  Ex,  UPS,  et  al  to  ship  and  receive  materials  and  product.    In   general,  they  viewed  these  services  as  adequate  for  their  needs.                Weaknesses   • Transportation  for  people  was  the  most  frequently  mentioned  weakness  for  this   element  –  specifically,  airfares  and  flight  availability  and  times.     • In  terms  of  moving  information,  bandwidth  limitations  and  expense  was  also   identified  as  an  occasional  issue.   5. Quality of Life and Amenities Strengths   • Quality  of  Life  and  Amenities  were  frequently  cited  as  major  strengths  for  Montana   optics  companies.    This  was  true  both  for  recruiting  key  employees  and  for   24 business  startups  and  location.    This  is  a  substantive  marketing  asset  for  the   cluster.   The  Montana  outdoors  lifestyle  and  the  attractiveness  of  Bozeman  as  a  college   town  and  amenities  were  the  key  factors.  A  CEO  from  one  of  the  very  well   established  and  older  optics  companies  indicated  they  initially  located  in  Bozeman   explicitly  as  a  lifestyle  choice.                    Weaknesses   • Montana’s  remoteness  and  distance  from  major  commercial  centers  was  the  only   quality  of  life  and  amenity-­‐related  disadvantage  that  was  mentioned  during  the   interviews.   6. Connectivity Within the Cluster Strengths   • A  number  of  the  cluster  companies,  especially  the  “younger”  ones,  have  strong  and   on-­‐going  connections  to  OpTeC  at  MSU  and  in  some  cases  to  Spectrum  Lab.  For   these  companies,  OpTeC  for  all  intents  and  purposes  functions  as  a  conduit  to  and   window  for  cutting  edge  optics-­‐related  and  often  inter-­‐disciplinary  research  and   as  a  talent  pipeline  for  the  cluster  companies.    OpTeC  and  Spectrum  Lab  together   through  their  missions,  practices,  graduates  and  researchers  have  over  time   fostered  an  entrepreneurial  culture  and  strong  innovation  mindset  within  the   cluster.    In  effect,  they  function  as  cluster  hub  for  talent  production  and  bleeding   edge  research  and  applications  development.   • A  subset  of  the  cluster  companies  are  pretty  tightly  networked.   • The  companies  as  a  rule  do  not  compete  in  the  same  market  spaces.    Many,  but  not   all,  feature  niche  applications.    This  bodes  well  for  any  attempts  to  build   collaborative  networks,  strategic  alliances  and  other  associative  behavior.   • Ninety-­‐one  percent  of  the  survey  respondents  answered  “yes”  to  the  question:     “Are  you  interested  in  participating  in  events  or  functions  that  bring  Montana   optics  companies  together  to  network  or  address  common  issues?”   • The  Montana  Manufacturing  Extension  Center  (MMEC)  is  a  major  asset  here  in  that   they  provide  highly  valued  technical  assistance  to  those  optics  companies  with  a   manufacturing  orientation.                  Weaknesses   • While  some  of  the  cluster  companies  were  networked  either  through  vendor   relationships  or  through  connections  to  OpTeC  or  Spectrum  Lab,  in  interviews   several  companies  indicated  they  “had  no  idea”  what  most  of  the  other  cluster   companies  did.   25 • One  company  described  the  connectivity  environment  as  “a  number  of  us  are   connected  to  OpTeC  but  we  are  not  really  connected  to  each  other.”     • While  there  are  some  supplier/vendor  relationships  and  occasional  business   referrals  among  the  companies,  there  is  not  a  significant  level  of  on-­‐going   business-­‐to-­‐business  collaboration  and  mentoring.   7. Access to Specialized Suppliers and Services Strengths   • There  were  a  number  of  specialized  supplier/vendor  relationship  among  of  the   cluster  companies.  Seventy  percent  of  the  survey  respondents  reported  in-­‐state   sales  and,  based  on  follow-­‐up  interviews,  many  of  these  customer  relationships   were  with  other  optics  companies.    However,  the  actual  sales  levels  reported  by   the  respondents  on  average  represented  6%  of  their  total  sales  with  55%  of  sales   going  out-­‐of-­‐state  in  domestic  markets  and  39%  into  international  markets.   • Those  optics  companies  that  engaged  in  manufacturing  often  cited  MMEC  as  a   valued  technical  assistance  provider.                Weaknesses   • As  many  of  these  companies  are  developing  or  offering  niche  products  or  services,   most  (but  not  all)  of  the  specialized  service  providers  were  outside  the  cluster.   • For  the  smaller  and/or  younger  firms,  a  need  for  specialized  optics  business-­‐to-­‐ business  services  was  often  mentioned  in  the  follow-­‐up  interviews.    This  includes   administrative,  accounting,  business  development  and  intellectual  property   management  help  for  established  business  plus  startup  assistance  for  new  firms   and  entrepreneurs.   8. Government Regulations Strengths   • No  one  mentioned  local,  state  or  federal  government  regulations  as  being  of   specific  benefit  to  their  company  or  the  optics  industry.              Weaknesses   • International  Traffic  in  Arms  Regulations  (ITAR)  export  compliance  regulations   were  cited  and  characterized  by  defense  contractors  selling  lasers  and  laser   system  components  as  a  major,  unfair  and  irrational  trade  restriction  burden  in   that  they  were  developed  years  ago  when  lasers  “were  new.”    The  regulations  have   not  been  updated  and  as  a  result  US  companies  cannot  sell  lasers  and  components   in  international  markets  when  their  competitors  in  other  countries  can.   • Montana’s  business  equipment  tax  was  also  mentioned  as  a  government  generated   business  cost  –  especially  for  small  companies  using  very  high  value  equipment.   26 Findings An International and National Context • As  a  ubiquitous  enabling  technology  domain,  optics  is  already  established  with  a  wide   and  deep  technology  platform  that  encompasses  a  group  of  technologies  with  a   multitude  of  existing  applications  as  well  as  the  promise  of  an  untold  number  of  future   technologies  and  applications.       • Defining  optics  or  photonics  as  an  industry  is  problematic  as  it  is  still  emerging.    Its   existing  base  of  technologies  and  applications  are  continuing  to  evolve  while  new   technologies  and  applications  are  constantly  and  rapidly  being  created.    The  US  has   adopted  no  definition  for  this  industry.    At  this  point  US  optics  companies  can  be  found   in  numerous  NAICS  codes.   • The  European  Commission  has  sponsored  the  development  of  its  own  industry   definition  through  Photonics  21,  a  European  Technology  Platform  formed  in  2005  to   unite  Europe’s  photonics  industry  and  research  institutions.    The  group  has  over  1800   members  and  drives  the  European  optics  agenda.    This  activity  has  produced  several   developments  that  should  be  noted  for  the  purposes  of  this  Montana  optics  industry   strategy  development  effort.   o The  total  world  market  for  photonics  products  in  2008  was  estimated  at   €277bn  or  about  $370bn  in  2008  US  dollars  at  current  exchange  rate.   o The  annual  real  global  photonic  market  growth  rate  was  10%  for  the  2005-­‐ 08  period.  By  way  of  comparison,  for  this  same  time  period,  worldwide   gross  national  income  grew  at  4.4%.   o Photonics21  released  a  statement  of  its  vision  for  photonics  as  a  key   enabling  technology  of  Europe  (Photonics  –  Our  Vision  for  a  Key  Enabling   Technology  of  Europe,  European  Technology  Platform  Photonics21,  May   2011).   o In  September  of  2011  Photonics21  issued  a  press  release  to  announce  its   commitment  to  a  proposed  public-­‐private  photonics  partnership  with  the   European  Commission.  According  to  Photonics21,  the  proposal  targets  a  7   billion  euros  investment  level  by  2020  with  5.6  billion  euros  contributed  by   the  photonics  industry  and  1.4  billion  euros  provided  by  the  European   Commission.   o At  present  the  US  has  no  photonics  or  optics  industry  innovation  strategy   or  development  policy  at  the  national  level  nor  is  it  regarded  a  trackable   category  from  an  industrial  activity  standpoint.   27 • A  domestic  and  international  inventory  of  optics/photonics  clusters  and/or  cluster   support  organizations  identifies  nine  clusters  or  cluster  support  organizations  in  the  US   and  50  organizations  in  Asia/Pacific  Rim,  Canada  and  Europe.     Pinning Down the Optics Industry in Montana • In  the  US  there  is  no  standard  definition  yet  for  optics  or  photonics  as  an  industrial   sector  or  subsector.    As  a  result  of  this  NAICS-­‐based  definition  dilemma,  analysts  may   use  NAICS  codes  for  guidance,  but  for  the  most  part  they  then  build  up  their  particular   industry  or  cluster  description  organically  by  identifying  firms,  one-­‐by-­‐one  that  appear   to  engaged  in  optics  or  photonics-­‐related  commerce.   • The  working  definition  for  this  assessment  combines  two  approaches.    First,  it   populates  the  cluster  with  known  establishments  that  have  self-­‐selected  as  optics  firms   and  then  identifies  their  NAICS  codes.    It  then  triangulates  among  several  analyses  that   identified  NAICS  codes  in  which  optics  firms  resided  (Connecticut,  Arizona,  Florida)  and   compiles  this  list  and  then  merges  with  the  NAICS  codes  for  known  Montana  optics   firms.    The  resulting  NAICS-­‐based  template  is  then  used  to  identify  the  names  of   Montana  firms  in  each  of  these  NAICS  subsectors.    The  firms  are  then  vetted  one-­‐by-­‐one   to  determine  if  they  are  a  “fit”  that  should  be  included  in  the  Montana  optics  industry  or   cluster  definition.       • Because  our  focus  is  on  the  optics  industry’s  core  value-­‐creating  companies,  we  chose   not  to  include  ophthalmology  and  optometry  offices,  service  labs  and  product   distributors  though  they  are  included  in  some  industry  and  especially  cluster  definitions   as  they  are  part  of  some  of  the  marketing,  distribution  and  end-­‐user  chains.    This   narrowly  defined  approach  identified  38  companies  that  form  the  basis  for  the  optics   industry  in  Montana.       • Twenty-­‐eight  of  the  38  optics  companies  in  Montana  were  located  in  or  around   Bozeman.    From  1981  to  1995  nine  optics  companies  were  established  in  the  Bozeman   area.    From  1996  to  2012  18  optics  companies  were  established  in  the  Bozeman  area.       • A  sizeable  majority  of  the  firms  in  the  cluster  were  formed  since  2000  and  they  tend  to   be  young,  small  and  innovation  intensive.   • Though  in  absolute  terms  the  Montana  cluster  is  not  the  scale  of  perhaps  the  most  well-­‐ known  cluster  {in  southern  Arizona,  at  least  three  of  the  critical  ingredients  are  present:   a  geographically  dense  (in  this  case,  very  dense)  concentration  of  optics  companies,  a   burgeoning  infrastructure  that  includes  a  third  ingredient,  talent  production,  and   innovation  hub}.       • The  companies’  efforts  span  a  wide  range  of  activities  and  applications  and  for  the  most   part  are  distributed  across  four,  occasionally  overlapping,  industry  segments  though   there  is  also  some  activity  in  other  areas  including  Medical  Technology  and   IT/Consumer  Electronics  areas.   28 1. Optics  Production  Technology   2. Optical  Measurement  and  Machine  Vision   3. Defense  Photonics   4. Optical  Systems  and  Components.   • The  group  of  companies  that  comprise  the  Bozeman/Gallatin  Valley  concentration   engage  in  a  rich  mix  of  production  manufacturing,  custom  design  and  manufacturing,   R&D,  and  product  and  process  development  activities.   • Many  of  the  companies  have  a  strong  connection  to  Montana  State  University’s  Optical   Technology  Center  (OpTeC)  and  its  associated  non-­‐profit  Spectrum  Lab.   • Though  there  is  always  competition  for  talent  from  the  labor  pool  for  any  cluster,  in   spite  of  their  numbers  the  Bozeman  area  optics  firms  tend  not  to  compete  in  the  same   market  segments  for  the  same  customers.   Infrastructure • Industry  associations,  alliances,  networking  organizations  and  center  are  also   important  cluster  infrastructure  elements.    These  entities  often  end  up  functioning  as   robust  hubs  that  connect  and  leverage  talent  and  innovation  resources,  transmit  and   relay  technical  and  business  information,  and  advance  the  overall  interests  of  the   cluster.    As  presented  below,  to  a  great  extent  the  elements  to  form  a  strong  hub  are   already  in  place  within  Montana’s  optics  clusters.   • OpTeC  plays  a  prominent  role  within  the  optics  cluster  as  its  networking  center  for   research  and  talent  production.    Many  of  the  companies,  especially  those  formed  since   2000,  are  staffed  and  led  by  scientists  and  engineers  from  MSU  that  were,  and  in  many   cases  still  are,  active  OpTeC  participants.  A  number  of  these  companies  also  have  on-­‐ going  research,  intellectual  property  creation  and  licensing  relationships  with  MSU   and  its  faculty  through  the  OpTeC  conduit.   • Spectrum  Lab  was  “spun  out”  of  OpTeC  in  1999  to  further  develop  technologies  from   Montana  State  University’s  research  laboratories,  to  move  those  technologies  into   private  companies  and  to  provide  educational  opportunities  for  MSU  students.    To   this  end,  Spectrum  Lab  serves  as  a  kind  of  optics  “applications  incubator”  for  faculty   and  industry  and  as  a  bridge  between  MSU  labs  and  the  private  sector.   • While  MMEC  works  throughout  Montana  and  services  all  manufacturing  sectors,  it   has  played  an  on-­‐going  role  as  a  highly  valued  technical  assistance  resource  for  those   optics  companies  with  a  production  and  manufacturing  focus.    MMEC  engineers  have   specialized  optics-­‐related  manufacturing  expertise  and  the  center  itself  has  developed   into  an  integral  part  of  the  optics  cluster  infrastructure.   29 Optics Company Survey Responses • Information  was  gathered  from  12  of  the  28  (43%)  Bozeman  optics  cluster  companies   (this  response  level  also  represents  32%  of  the  Montana  optics  industry  total).    Face-­‐ to-­‐face  interviews  were  also  conducted  with  seven  of  these  respondents  as  well  as  the   two  previously  described  major  optics  infrastructure  elements  that  connect.   • Most  pressing  business  needs  and  issues  -­‐  Experienced/specialized  employee   recruitment  and  Business/market  development  tied  for  first,  each  with  64%.    Next  was   Access  to  capital,  which  was  selected  by  45%  of  the  respondents  followed  by  Strategic   partnering,  selected  by  36%  of  the  responding  firms.   • The  survey  concluded  with  the  following  question:    Are  you  interested  in  participating  in   events  or  functions  that  bring  Montana  optics  companies  together  to  network  or  address   common  issues?    Ninety-­‐one  percent  of  the  respondents  answered  “yes”  to  this  question.   Competitiveness Assessment Summary The  emergence  of  the  Montana  optics  cluster  is  not  really  a  recent  phenomenon.    Although   it  has  certainly  become  more  visible  over  the  last  few  years  as  a  presence  in  Bozeman  and   as  a  significant  economic  development  asset  for  the  state,  it  is  a  thirty-­‐year  story  that   unfolds  in  fits  and  starts  beginning  in  1981.  Hindsight  allows  us  to  spot  a  cluster   development  path  that  begins  with  a  small  group  of  production  oriented  optics  companies   in  the  80’s  and  then  expands  in  the  90’s  with  another  group  of  companies  along  with  the   establishment  of  OpTeC  and  then  Spectrum  Lab.    The  path  continues  to  expand  and  extend   itself  over  the  next  15  years  as  the  pace  quickens  as  more  optics  companies  and   connections  develop.                       30 Table  7:    Cluster  Competitiveness  Factors   Asset Category Comments Workforce & Human Capital OpTeC is a major contributor to the talent pool. High concentration of companies in Bozeman is a talent attraction asset. Some issue with finding specialized engineering expertise and qualified manufacturing technicians. Innovation & R&D Assets OpTeC and Spectrum Lab function as research and applications driver and talent source and promote a strong innovation mindset. MMEC is a valuable technical assistance resource for firms with manufacturing orientation. However, there is a need for entrepreneurship and business assistance tailored to optics. Entrepreneurial Energy & Financial Capital There is a burgeoning entrepreneurial culture within the Gallatin Valley optics cluster. Access to capital is a major issue. Optics company capital requirements are relatively low so should be an attractive angel investor target. Need for entrepreneurial assistance tailored to optics companies. Ease of Moving People, Goods & Information No major issues shipping and receiving product due to FedEx, UPS, et al but some concerns with air fare and flight availability and schedules for people. Quality of Life and Amenities Montana outdoors lifestyle and beauty frequently cited as a major strength for recruiting talent and for business location decisions. Connectivity with the Cluster A number of the younger companies are connected – often through relationships with OpTeC. Older, more established companies not as well connected within the cluster. 91% of optics company survey respondents indicated interest in participating in networking functions. Access to Specialized Suppliers and Services Most specialized supplier sources were outside Montana. Many of the companies had traded relationships with each but on average only represented 6% of sales (94% outsides the state). MMEC often mentioned as major specialized assistance source for manufacturers. For younger firms, need for optics specialized business assistance often mentioned. Government Regulation Obsolete and irrational ITAR export compliance regulations a major obstacle for optics defense contractors. 31 Clearing the Development Path: The Optics Cluster Strategy To  a  great  extent  the  goal  of  this  strategy  is  to  help  clear  the  development  path  this  cluster   is  already  in  the  act  of  charting.    As  stated  earlier  in  this  document,  clusters  do  not  need  a   public  sector  strategy  in  order  to  exist  but  the  right  strategies  can  help  the  businesses  in   them  become  more  successful  and  competitive.  To  this  end,  then,  this  strategy  needs  to   accomplish  five  things.   1. By  this  analysis’  count,  at  least  28  of  Montana’s  38  optics  companies  are  located  in   Gallatin  County,  in  or  around  Bozeman.    The  strategy  should  focus  on  Bozeman   cluster  power  as  the  differentiating  organizing  asset.  However,  it  is  important  to   note  there  are  other  optics  companies  scattered  around  the  state  including  four  in   the  Missoula  area  plus  three  more  north  of  Missoula  up  Highway  93  in  Ronan,   Polson  and  Kalispell  as  well  as  two  companies  in  Butte.    While  the  focus  should  be   on  the  geographically  bounded  Bozeman  concentration  of  optics  companies,  the   cluster  development  strategy  should  be  implemented  in  a  way  that  facilitates  and   connects  and  the  flow  of  benefits  and  information  to  Montana  optics  industry   companies  outside  of  Bozeman.   2. The  strategy  should  respond  directly  to  the  most  pressing  needs  expressed  by  the   companies.   The  companies  say  they  need  help  with:   • Specialized  employee  recruitment   • Business  development   • Getting  access  to  capital   • Identifying  and  developing  strategic  partnering  relationships   The  companies  surveyed  indicated  a  strong  interest  in  networking,  getting  better   connected  to  each  other  and  improving  business  and  technical  information  flows   within  their  group.   3. The  strategy  should  feature  a  mechanism  that  responds  to  the  above  listed  needs.   4. The  strategy  should  protect  and  feed  the  cluster’s  key  infrastructure  elements  and   fill  in  important  infrastructure  gaps.   The  key  elements  are  the  OpTeC  –  Spectrum  Lab  tandem  that  perform  and  advance   multi-­‐disciplinary  bleeding  edge  research,  drive  into  applications  development,  and   generate  talent  and  MMEC  that  provides  valued  technical  assistance  to  optics   companies  with  manufacturing  operations.     5. The  strategy  should  position  the  cluster  as  an  economic  development  marketing   asset  for  Montana.   32 Actions The  below  presented  action  recommendations  define  a  cluster  development  strategy   designed  to  both  respond  to  optics  companies’  most  pressing  business  needs,  as  expressed   by  those  companies,  while  pressing  the  advantage  on  the  cluster’s  most  distinctive  and   powerful  development  assets.  To  this  end,  these  actions  are  designed  to  enrich  the   entrepreneurial  culture  and  very  strong  innovation  orientation  that  define  the  cluster  and   its  companies  –  a  culture  and  orientation  that  is  fueled  by  an  innovation  infrastructure  that   generates  multi-­‐disciplinary  science  and  engineering  talent,  bleeding  edge  research  and  a   strong  flow  of  application  possibilities  for  this  ubiquitous  industry  with  diverse   international  market  segments  and  niches.   Action  1     Working  with  a  steering  committee  of  key  optics  cluster  companies  and  stakeholders,  design   and  establish  the  Big  Sky  Optics  Alliance  to  oversee  the  implementation  of  the  strategy  and  to   function  as  a  hub  for  the  cluster.   The  steering  committee  would  be  charged  with  managing  the  development  of  the  initial   business  plan  for  the  Alliance  including  mission,  structure,  operating  priorities  and  funding   sources  and  with  recruiting  the  first  board  of  directors.   Two  early  and  key  decision  points  here  are  1)  whether  the  Alliance  should  be  “incubated”   within  another  organization  during  its  formative  stages  and  2)  whether  the  Alliance  should   be  designed  as  a  stand-­‐alone  entity  or  as  a  working  entity  under  the  umbrella  of  another   entity  such  as  Innovate  Montana  or  the  Governor’s  Office  of  Economic  Development.   Action  2   Assuming  they  are  amenable,  factor  in  roles  for  OpTeC,  Spectrum  Lab,  and  MMEC  within  the   strategy  implementation  effort  as  key  innovation  infrastructure  elements.   The  Alliance  should  focus  on  responding  to  optics  company  business  needs  and  on  helping   them  grow  and  prosper.    In  view  of  its  mission,  its  board  should  be  private  sector   dominated.    However,  a  well  developed  innovation  and  technical  assistance  infrastructure   here  imbues  the  optics  industry  with  competitive  advantage  –  it  helps  the  firms  and  the   cluster  continuously  create  new  value.    These  three  organizations  together  are  to  a  large   extent  what  make  this  a  cluster  rather  than  just  a  collection  of  companies.  Because  they   produce  talent,  research,  commercialization  paths,  applications  and  technical  assistance  for   the  manufacturing  dimension,  they  create  an  advantage  for  the  companies.   Action  3   Establish  very  focused  initiatives  to  address  the  optics  company-­‐specific  entrepreneurship   training  and  technical  assistance  gap.   While  OpTeC,  Spectrum  Lab,  and  MMEC  help  define  a  well-­‐developed  infrastructure  for  this   cluster,  there  is  still  a  notable  gap.    A  number  of  companies  expressed  a  need  for  business-­‐ 33 oriented  technical  assistance  specifically  tailored  to  optics  companies.    The  general   sentiment  was  that  cluster  companies  and  their  interactions  with  OpTeC  and  Spectrum  Lab   together  have  generated  a  cadre  of  technical  entrepreneurs  within  the  cluster  and  that  they   will  continue  to  produce  aspiring  optics  entrepreneurs  who  need  help  in  areas  such  as   intellectual  property  management,  contracts  administration,  access  to  capital,  recruiting   strategic  partners  for  continued  applications  development  or  market  development  and  so   on.   To  this  end,  two  initiatives  are  recommended  –  one  directed  at  university  students  and   researchers  so  they  are  better  prepared  for  the  business  of  optics  company  development   and  one  aimed  at  providing  assistance  to  existing  entrepreneurship  and  companies.   1. Either  through  GOED  or  under  the  auspices  of  the  Big  Sky  Optics  Alliance,  working   with  and  through  MSU  and  OpTeC,  design  and  find  funding  for  an  initiative  to  infuse   entrepreneurship  courses  and  experiences  into  optics-­‐related  curriculum.     2. Either  through  GOED  or  under  the  auspices  of  the  Big  Sky  Optics  Alliance,  establish  a   program  to  provide  optics  companies  access  to  entrepreneurship  and  business   assistance  providers  that  work  with  technology  companies  and  are  viewed  as  credible   by  the  optics  companies.       At  the  moment,  the  demand  for  these  services  is  acute  but  limited.  Put  more  simply,  due   to  the  size  of  the  cluster,  for  the  near  future  only  a  handful  of  companies  will  need  this   kind  of  help  at  a  moment  in  time.  But,  those  that  do  need  it  really  need  it.    As  the  cluster   continues  to  develop  and  expand  the  demand  for  this  type  of  assistance  will  also  expand.     These  services  could  be  delivered  by  putting  a  qualified  individual  or  organization  on   retainer,  by  providing  the  optics  firm  with  a  voucher  to  be  used  for  the  purchases  of   technical  assistance  help,  or  by  working  with  an  existing  technology  entrepreneurship   entity  to  develop  more  in-­‐depth  optics  industry  specific  business  knowledge.   Action  4   Design  and  launch  an  initiative  to  promote  and  encourage  angel  investment  in  Montana   optics  companies.   Capital  requirements  for  companies  within  the  optics  industry  tend  to  be  relatively  low   when  compared  to  other  knowledge-­‐intensive  industries  like  bioscience.    As  a  result,  many   optics  companies  are  desirable  targets  for  angel  investors  and  angel  networks.    Although   there  is  some  angel  investment  in  play  among  the  Montana  optics  companies,  angel   investors  as  a  reliable  early  stage  capital  source  were  not  viewed  as  having  a  strong   presence  though  cluster  companies  as  a  group  regard  access  to  capital  as  one  of  their   highest  priority  needs.     As  a  starting  point,  two  actions  are  recommended  here.   1. GOED  could  encourage  the  formation  of  a  small  optics  angel  investment  network  by   paying  for  the  development  of  the  group’s  business  plan  and/or  helping  to  defray  the   34 network’s  organizing  costs.    In  the  past  these  types  of  modest  efforts  have  been   effective  in  fomenting  the  formation  of  business  and  manufacturing  networks.    The   GOED  role  here  is  that  of  a  catalyst  and  not  a  sustainer.   2. Enact  financial  incentives  for  angel  investment  in  qualified  companies.  This  could  be   accomplished  by  providing  a  tax  credit  for  early-­‐stage  investment  in  qualifying   companies  and/or  by  deferring  taxation  of  capital  gains  from  investment  in   qualifying  early-­‐stage  companies  that  are  reinvested  in  qualifying  early  stage   companies.     Action  5     Continue  to  build  the  talent  base  –  talent  trumps  everything.    Establish  a  robust  optics   internship  program.     Spearheaded  by  GOED  or  under  the  auspices  of  the  Big  Sky  Optics  Alliance,  this  internship   program  would  work  with  and  through  OpTeC  to  place  promising  students  in  cluster   companies.    An  effective  approach  here  might  fund  these  positions  at  some  prescribed,   competitive  rate,  say  $15/hour,  and  the  state  could  reimburse  the  company  for  half  the   hourly  wage.    This  would  be  an  “everybody  wins  scenario”  where  the  student  receives  an   attractive  wage  and  obtains  in-­‐the-­‐trenches  experience,  the  company  gets  a  good  deal  and   the  cluster  and  state  build  talent  with  a  very  modest  fiscal  impact.   Action  6   Connect  to  the  Globe:  Establish  a  formal  initiative  to  connect  Montana  optics  companies  and   the  Montana  optics  cluster  to  firms  and  clusters  in  other  places  –  especially  in  other  countries.   Montana  optics  company  survey  respondents  indicated  almost  40%  of  their  sales  were   outside  the  US.    This  report  identifies  at  least  50  optics/photonics  alliances  and   associations  in  other  countries.  These  organizations  are  now  participating  in  numerous   international  optics  alliances  and  collaborations  covering  North  America,  Europe,  the   Pacific  Rim  and  Australia.    Their  activities  include  information  exchange  among   researchers,  rotating  summer  schools,  employee  exchange,  and  internship  programs.       The  most  logical  entity  to  undertake  this  initiative  is  the  Big  Sky  Optics  Alliance  once  it  is   up  and  running.    OpTeC  should  also  be  regarded  as  a  valuable  participant,  especially  on   education-­‐related  and  research  connections  and  exchanges.   Action  7   Consider  larger  optics  firms  outside  of  Montana  as  a  strategic  recruitment  target  to  anchor   the  cluster.   The  Montana  optics  cluster  is  comprised  of  small  firms  and  very  small  firms.    There  are   some  circumstances  in  which  recruiting  a  larger  firm  to  anchor  the  cluster  makes  business   sense  for  the  cluster  and  economic  development  sense  for  the  state.    The  strategic   35 recruitment  target  would  need  to  meet  two  criteria:  1)  it  could  not  be  a  direct  competitor   of  existing  firms  and  2)  it  would  need  to  have  the  capacity  to  be  a  substantive  customer  for   a  subset  of  the  existing  cluster  firms.   If  the  recruitment  target  meets  these  criteria  then  the  remaining  issue  is  the  labor  market   and  workforce  availability  impact  associated  with  adding  a  larger  firm  into  the  cluster  mix.     An  argument  can  be  made  that  while  this  may  indeed  be  an  issue,  it  is  a  good  issue  to  have.     You  address  this  by  producing  more  talent  and  importing  more  talent  –  both  important   capacities  for  dynamic  clusters.   Marketing Considerations For the Governor’s Office of Economic Development And The Economic Development Community As  a  final  note,  based  on  the  foregoing  analysis  and  recommendations,  the  Montana  optics   cluster  can  boast  at  least  five  characteristics  that  can  serve  as  distinctive  assets  from  an   economic  development  marketing  standpoint.   1. Company  density  can  be  a  talent  recruitment  magnet.    The  large  number  of   companies  in  the  Bozeman  area  portends  employment  mobility.    A  talented   engineer  or  scientist  considering  a  move  to  Bozeman  can  anticipate  other   employment  and  career  advancement  opportunities  if  the  one  in  question  does  not   work  out.   2. Bozeman  (Big  Sky  Country)  as  a  place  and  lifestyle  is  one  of  the  most  desirable   locations  in  the  country.   3. Through  OpTeC  (and  Montana  State  University)  and  Spectrum  Lab,  optics   companies  and  optics  talent  have  access  to  bleeding  edge  science,  engineering  and   applications.   4. Youth  and  Energy.    Young  entrepreneurs,  engineers,  and  scientists  drive  the   companies  and  environment.   5. Big  Sky  Optics  Alliance  (assuming  it  is  established).    The  cluster  has  its  own  activity   and  information  hub  that  supports  a  wide  range  of  company  business  needs  and   promote  peer-­‐to-­‐peer  networking  and  collaboration.                 36 Appendix A: Montana Optics Company Survey Instrument     Page 1 Montana OpticsMontana OpticsMontana OpticsMontana Optics Montana’s  optics  industry  is  one  of  the  state’s  best-­kept  economic  development  secrets.  We’d  like  to  change  that.  We   are  contacting  you  because  your  company  has  been  flagged  as  member  or  potential  member  of  our  state’s  optics   industry.     The  Governor’s  Office  of  Economic  Development  wants  to  know  what  it  can  do  to  help  Montana  optics  companies   continue  to  start  and  to  grow.  We  also  want  to  shine  a  national  spotlight  on  what  you  and  your  peers  have  already   accomplished.  To  do  this  we  need  to  know  who  you  are,  what  you  do,  and  what  business  issues  are  on  your  mind   when  you  are  driving  to  work  in  the  morning.  Please  take  a  few  minutes  to  complete  this  very  short  on-­line  survey.  Once   we  assemble  this  information  we  will  act  on  it.     Please  note  this  survey  guarantees  respondent  confidentiality.  Findings  are  only  reported  at  an  aggregate  level,  not  on   an  individual  basis.     1. Company Information 2. Do you have offices other than the location listed above? 3. If yes, where are your other locations?   4. Approximately how many employees do you have?   Name: Company: City/Town: State: Email Address: Phone Number:     Yes   No   1-­5   6-­20   21-­50   50-­100   Over  100   37         Page 2 Montana OpticsMontana OpticsMontana OpticsMontana Optics 5. What are your products or services OR planned products and services?   6. Where are your markets (approximate % local, national, international)? 7. What are your most pressing business issues at the moment? You can select more than one answer. 8. Have you ever received an SBIR grant?   Local National International     Experienced/specialized  employee  recruitment   Worker  training   Access  to  capital   Strategic  partners   Business/market  development   Distribution  and  logistics   Access  to  specialized  suppliers  or  materials   Intellectual  property  management   Manufacturing  or  process  issues   Access  to  specialized  scientific  or  engineering  expertise   Administrative  assistance   Human  resources  assistance   Using/maximizing  impact  of  social  media   Other  (please  specify)   Yes   No   38   Page 3 Montana OpticsMontana OpticsMontana OpticsMontana Optics 9. If so, what phase(s) and what is the title? What is the status?   10. Are you interested in participating in events or functions that bring Montana optics companies together to network or address common issues? Thank  you  for  participating  in  this  survey!  We  truly  hope  this  project  benefits  companies  like  yours.       Yes   No   Comment    