• enhance the quality of academic programs,
• improve student achievement and success,
• expand further the scope and impact of research and creative activities,
• foster expanded economic development in our state and,
• increase operational efficiency and effectiveness.

As a result of revolutionary innovations in information technology and shifts in the geo-economic and geo-political environment, the global playing field in which we operate has been leveled as never before.

The International Environment

European, Asian and Australian institutions are challenging the primacy of American higher education. Other nations have recognized what America discovered in the 1940s: significant national commitments to university research provide a remarkable return on investment. In this new flat world, where knowledge has become the most valuable economic currency, other nations have followed our national lead. They are making unprecedented investments in academic discovery, particularly in the area of the life sciences.

Now, more than ever before, public research universities such as ours must compete for the most talented faculty and graduate students in a truly international arena.

Now, more than ever before, we must educate our students to succeed in a global economy, to appreciate and respect a range of cultures and to internalize the principles of diversity.
Now, more than ever before, we must assure the continued globalization of our university and develop expanded partnerships with the best higher education institutions in the world.

The National Environment

At the national level, we face a number of political uncertainties and controversies. As in the past, shifting political trends and values continue to pose threats to academic freedom?a principle we must and will defend vigorously.

We can expect less robust federal investments in science, the arts and humanities and medical research than we experienced five years ago. The factors making this an inevitable trend include: the war in Iraq, federal tax and spending priorities, rising health care costs, the rising cost of debt service and the cost of both relief and rebuilding efforts in the wake of Hurricanes Katrina and Rita.

While sustaining our current record of accomplishment will be increasingly more difficult, we can all be proud that the level of federal funding flowing to IU has significantly increased during this era of constrained federal support for university research. This accomplishment is a dramatic testament to the strength and excellence of our faculty.

The State Environment

We also face challenges within our state. The Hoosier economy is not growing as rapidly as we would like. We must create, attract and keep more high-wage jobs. These jobs will assure personal income levels at or above the national average and protect the quality of life for Hoosier families into the future.

As our governor and the General Assembly work to address budget deficits, in the short-term the state’s revenues are not sufficient to meet growing, competing demands. Reflective of this difficult economic environment, higher education’s share of the state budget continues to shrink. Indeed, state investment lags behind remarkable increases in enrollment and research productivity at Indiana's public universities and colleges. In 1975, 18.4 percent of Indiana’s budget was allocated to support Hoosier higher education. For fiscal year 2006?07, that percentage will fall to 13.4 percent.

These trends and forces are so powerful and pervasive that we must adapt to change in strategic ways that are in keeping with our history, mission and values.
In their book, The Remaking of the American University: Market-Smart, Mission-Centered, University of Pennsylvania Professor Robert Zemsky and his colleagues explore the ways in which market forces have shaped the behaviors, purposes and missions of higher education institutions over the last half-century. The authors argue that colleges and universities must use “market smarts” to refocus and enhance their institutional mission and to renew their historical identity as places of public purpose.

If we are to create a future of shared purpose for Indiana University, we must become increasingly more strategic in our priority planning and investments. We must accept that public funding is only one means of advancing our public mission. We must avoid isolationist thinking. We must become increasingly more effective and efficient in all of our operations. We must find new ways to advance IU and the state of Indiana.

An Impressive History of Thriving in Adversity

Our university has a long history of rising to the occasion in times of adversity. In 1854, when fire destroyed the main building of the university’s first campus, a strong movement developed to relocate the university to Indianapolis. The citizens of Monroe County rose to the occasion by pooling their resources and contributing $50,000 to keep the campus in Bloomington.

In the 1940s, when European scholars were fleeing the devastation of World War II and the Holocaust, IU became a welcoming environment for the world’s great musicians, scientists and mathematicians. In the 1950s, at the height of the Cold War when isolationist sentiment prevailed, Herman Wells set about transforming a small, Midwestern college into a major research university with great strengths in area studies, international languages and culture.

President Wells and his colleagues augmented the scarce financial resources of a public institution in a relatively poor state with ingenuity and determination. This was best evidenced in their development of an imaginative retirement plan they called 18/20 that would enable IU to recruit promising and outstanding faculty members to a small town campus in the middle of the country. The rest is history.

While these also may be difficult times for higher education institutions, we will not be daunted by the challenges confronting us. We will continue the strong IU tradition of rising to the occasion. We will rely on our core values and Hoosier resourcefulness to do more than simply survive these challenges; we will devise strategies that will enable us to thrive in spite of them. Our goals and priorities for this fiscal year are reflective of this commitment.

Advancing the University’s Distinction and Distinctiveness

Our overarching strategic goal will be to reach ever-greater levels of academic distinction by advancing the distinctiveness of our professional schools and campuses as we continue to strengthen IU’s core identity as a world-class liberal arts institution.

Mission Differentiation

If we are to advance the university’s distinction in this regard, we must bring the individual campus missions and that of the institution as a whole into sharper focus. If we do not take such a proactive role, the forces of change will do it for us.

I initiated the IU Mission Differentiation Project in the belief that it will enable us to become more “market-smart and mission-centered. ” It will help us to optimize the use of scarce resources. It will position us for future growth. It will enable us to serve our constituents more effectively and become a better partner with the state’s other higher education institutions.

It also provides a framework for IU to play an even stronger and more visible leadership role in collaborating with the state’s community colleges. While the advent of the community college system in Indiana will impact IU’s market share of associate degree students, it also presents us with opportunities to improve student achievement and success.

Community colleges play a vital role in remedial education and prepare more students for success in pursuing four-year degrees. Thus, it is essential that we engage Community College faculty as colleagues. It is essential that we continue to engage fully in transfer and articulation discussions about how best to make our respective programs work together in the best interest of the students we serve.

We are now approaching the conclusion of the first phase of the project. Each of our campuses has developed a new proposed mission statement. One has been developed for the entire university. Each will be submitted to the Board of Trustees for approval during its November meeting.

With regard to the second phase of the Mission Differentiation Project, Vice President Nelms and his staff have conducted contextual research for each campus and held one-on-one meetings with faculty, the chancellors and their executive staff members. That dialogue revealed a number of recurring policy issues.

Included among those policy issues are such matters as the development of student housing, the offering of associate and graduate degrees, student admissions requirements specific to each campus and achieving the goal of full diversity. Policy reports and recommendations will be submitted to the Board of Trustees on each of these policy issues by the end of this fiscal year.

We deeply appreciate the hard work and many contributions of the chancellors, faculty members, staff and community leaders who have contributed to the completion of this important initiative. I encourage our colleagues to continue contributing their perspectives as we enter the policy development phase of this process.

Accountability

As IU becomes a more strategic, goal-oriented institution, it is essential that we strengthen our ability to demonstrate the effectiveness with which we are fulfilling the more clearly defined missions of our individual campuses, academic programs and the institution as a whole.

To support this effort, I am pleased to announce the establishment of a new, university-wide unit to gather and analyze university data. It will be led by Associate Vice President Victor Borden and will report to Vice President Charlie Nelms.

The Office of University Planning, Institutional Research and Accountability will support institutional advancement and promote more effective stewardship of both public and private resources. It will focus on:

• institutional research,
• university planning,
• policy analysis and,
• performance accountability at the program, campus and university levels.

This new office will facilitate the development of an evidence-based culture throughout the university. As the official institutional research unit of Indiana University, it will coordinate data collection and analysis efforts with the university’s existing information gathering operations. It also will combine information in a centralized location that offers a capacity for much more sophisticated data analysis than is currently available to the Board of Trustees and university leaders.

In short, the activities of this new unit will enable us to plan more effectively, measure our progress more accurately and represent the university to our internal and external constituents in ways that more clearly illustrate our impressive accomplishments.

Additionally, next month I will establish an Institutional Research Council. All IU campuses will be represented on the council. It will have as one of its priority goals the promotion, development and coordination of institutional research capacities on each of our campuses.

A Strategic Focus on the Life Sciences

A third major institutional priority that will receive significant university focus throughout the balance of this decade is an expansion of the university’s capacity to become an international-class life sciences research community. This priority is consistent with the state’s economic growth and development agenda.

We will build such a community by establishing a stronger level of collaboration between traditional basic science strengths on the Bloomington campus with faculty in the IU School of Medicine and in the sciences at IUPUI. These efforts will be enhanced further as School of Medicine faculty members translate basic research findings from these productive research laboratories into their clinical research and treatment activities.

I have asked Vice President for Research and Information Technology Michael McRobbie, Dean Brater of the IU School of Medicine and Dean Subbaswamy of the IUB College of Arts and Sciences to develop a strategic plan for the life sciences. This plan will establish the basis for elevating the life sciences to the high international status we seek. It will provide the strategy for an effort to secure expanded federal and state government investment in life sciences research at IU. It also will lay out an aggressive life sciences economic development strategy for IU.

I am very optimistic about the achievement of this priority because we are currently home to one of America’s very best bio-analytical chemistry research and development groups. We are developing one of the finest comprehensive neuroscience groups in the country.

We have such an array of strengths in cancer research, diagnosis and treatment that I established a goal for Indiana University to become one of the top five cancer centers in the nation. Last week, in collaboration with Clarian Health Partners, we broke ground for a new cancer hospital in Indianapolis that will bring us closer to this goal.

We are already expanding one of the nation’s best multidisciplinary clusters of scientists exploring the causes and treatments of diabetes, including the accompanying conditions of obesity and vascular disease.

We have in place and are further enhancing our world-class synthetic organic chemistry group that custom designs small molecules that investigators can use in their laboratories for cutting- edge research. This capability will make IU’s scientists more competitive for research funding and result in the discovery of compounds that have value in the drug development marketplace.

We will continue development of educational programs that aggressively promote excellence and diversity in the life sciences workforce.

We also will focus further attention on and make decisions regarding the resources, organizational structure and strategic actions that are needed to achieve our life sciences and information technology priorities.

All of these efforts will be enabled and enhanced by the university’s outstanding information technology infrastructure and expertise. IU continues to exhibit unparalleled leadership in high performance and international networking, in cybersecurity and in open source collaborations such as the Sakai project. To achieve our aspirations in the life sciences, we must not only maintain but also advance further the leadership we have achieved in information technology.

The Arts and Humanities

We also must and will remain true to our core identity as a liberal arts university. As federal funding for the arts and humanities has declined, institutions such as ours have sought other resources to fund research in these areas of such critical importance.

In my State of the University address last year, I announced a new competitively funded IU program for research and creative activity in the arts and humanities. We are deeply grateful to the Lilly Endowment for providing $5 million to establish the New Frontiers initiative.

The program has four components: 1) New Frontiers grants for development of new compositions, performances and scholarly work in the humanities; 2) New Perspectives grants for workshops, symposia, conferences, roundtables and master classes; 3) Visiting Visionary Scholars grants to support extended visits to IU by internationally-acclaimed visionary scholars; and 4) Traveling Fellowship grants to support national and international travel for scholars and researchers pursuing innovative projects.

Proposals totaling more than $2 million were submitted during the first year of the program. After careful review of the proposals, approximately $1 million was disbursed in support of 73 projects. These funded initiatives ranged from travel grants, to workshops on the history of human rights, to an on-campus residency of the New York Baroque Dance Company. The New Frontiers program will significantly enrich our university and the wider community of scholars.

The Moveable Feast of the Arts

As a public institution, IU has an obligation to share its rich cultural resources with the citizens it serves. Last year I also announced the creation of Indiana University’s Moveable Feast of the Arts. Under the leadership of Dean Gwyn Richards, this initiative has offered performances by IUB School of Music faculty and students in venues across the state. Most recently, the School of Music Festival Orchestra, with renowned violinist and IU faculty member Jaime Laredo, performed on the IU South Bend campus.

It is my hope that the program will expand to include theater, dance performances and traveling art exhibitions. The Office of the Interim Chancellor and Senior Vice President for Academic Affairs will coordinate these efforts.

Faculty Compensation

The quality of any university is directly determined by the excellence of its faculty. The quality of IU’s faculty is quite apparent. Yet, an annual survey conducted by the American Association of University Professors revealed that in 2004?05, IU’s average faculty salary ranked ninth among the Big Ten public universities.

I believe that salary compression is one of the primary factors keeping IU faculty salaries at the bottom of the Big Ten. If we are to continue to enhance academic quality, we must begin to address more aggressively this faculty salary situation.

Within the next few months, I will submit a proposal to the University Faculty Council outlining a university-wide strategy designed to enhance our ability to recruit and retain top faculty. I will propose the creation of a new faculty rank beyond full professor. This new rank would be included in the normal, peer-reviewed tenure and promotion process.

This proposal also will include an increase in the minimum salary increments attached to promotions at each professorial level. These minimum increases will better reflect our pride in faculty members’ professional accomplishments and the honor they bring to the university.
This strategy would extend the strong Hoosier tradition of not merely surviving, but thriving during difficult times.

Leadership Development and Succession Planning

Just as we must address issues such as faculty salaries, IU also must devote priority attention to the graying of our faculty. Over the next decade many of our most senior faculty and administrators will take advantage of the 18/20 retirement program. We must prepare to recruit and retain IU’s next generation of intellectual leaders and other institutional leaders.

This effort begins with the completion of our search for the next IUB chancellor and senior vice president for academic affairs. Through the outstanding work of the search committee, we are in the final phase of the screening process for this position. I remain optimistic that a recommendation will be submitted to the Board of Trustees at its November meeting. As one of his or her first appointments, our new chancellor and vice president for academic affairs will select a new dean for the University Graduate School.

Given the internal and external challenges confronting the university, the maximization of IU’s leadership capabilities cannot be over emphasized. As the university looks to its leadership future, we have both quality and quantity issues with which to deal. The baby boom wave, which produced most of today’s executive leaders in our institution, will result in “retirement echoes” throughout IU in the not too distant future.

Over the past 10 months I have been working with a distinguished group of former senior IU administrators in the design of a leadership development initiative for the University. SPEA Dean Emeritus Chuck Bonser has led this group. Kelley School of Business leadership experts have supported him and his colleagues. We are especially grateful for the support of Dean Dan Smith and the Kelley School in this effort.

Although I look forward to announcing more details about this comprehensive development program in the next few weeks, the goals we have established for the project are worthy of note. Our intent is to:

• raise awareness of the necessity for leadership development throughout the IU system,
• attract and develop new university leaders,
• strengthen the current management and leadership of Indiana University,
• build leadership "bench strength" throughout the university,
• develop a system that identifies potential faculty and staff leaders throughout the
  university and,
• make a special effort to identify potential leaders in under-represented groups.

We will work with IU faculty governance and current university leaders to reach consensus on the use of a “balanced scorecard” accountability measure and on the finalization of a prototype IU leadership competency model. Ultimately, they will be used in program and administrative reviews, as well as in recruiting, leader selection and promotion, training and the development of career paths. I also will ask the deans for nominations of faculty and administrators who will be in the first cohort of the leadership development program in the spring semester of this academic year.

I believe IU’s leadership capabilities will be strengthened significantly through this important initiative.

Advancing Indiana

IU’s efforts in economic development are a central part of our mission as a public university. They also are an investment in IU’s future. The fortunes of our university and the economic welfare of the state of Indiana are inextricably linked. One cannot flourish without the other.

Our university economic development efforts will be conducted under the theme Advancing Indiana. We are very grateful for the volunteer efforts and leadership former Arvin CEO Bill Hunt is providing his alma mater. The immediate goal of Advancing Indiana is to provide a central point of contact for the university's economic engagement efforts. Additionally, we will continue to focus on building institutional capability and collaborations in the areas of research, workforce and human capital development, commercialization and entrepreneurship.

IU research is big business for Indiana. The Kelley School of Business estimates that IU’s annual research expenditures funded by external grants are supporting approximately 8,500 jobs statewide. That is the equivalent of two new automobile manufacturing plants. Significantly, the vast majority of the jobs we generate are in the higher paying professional, scientific and technical sectors.

Indiana University will continue to make significant contributions to the economy of the state through technology transfer and business development. The Indiana University Emerging Technologies Center in Indianapolis is operating at full capacity after only two years of operation with 23 resident start-up companies. It has created over 150 new high-tech Hoosier jobs.
Our efforts in technology transfer are a high priority and continue to pay dividends. We aided in the patenting of over 125 new inventions from university research during the last fiscal year. Many of these inventions are resulting in new technologies that will be marketed in both the IT and the health and life sciences industries.

Indiana University also will continue to be a wellspring for the creation of new biotechnology, information technology and health sciences companies. Five of these new companies were created in the last fiscal year.

An essential element in building a Hoosier culture of entrepreneurship is venture capital investment that will bring ideas to the market. IU is putting its resources to work and partnering with other enterprises, such as BioCrossroads and the IU Research and Technology Corporation, to assist IU faculty and staff in creating spin-off companies from promising intellectual property.

In partnership with the IU Foundation, we also have made significant investments in the Indiana Future Fund. Regional and national venture capital firms are now distributing these funds. We will continue to leverage and build upon these institutional relationships to ensure that IU affiliated start-up companies are aware of and connected to important capital sources.

Donor Generosity

Although state support is an essential element of the university’s resource base, state budget deficits and reduced appropriations have reinforced the significance of donor generosity as we strive for higher levels of institutional distinction. Their strong support has enabled the university to make remarkable progress during a period in which standing still is not an option.

As I indicated earlier, we can be very proud and are extremely grateful that IU received over $301 million last year in donor support of our academic enterprise. To rank at the top of the highly competitive Big Ten in donor contributions last year was extraordinary. We are grateful for the leadership of IU Foundation President Curt Simic and the hard work of our chancellors, deans and development officers. Their efforts have made a difference. This strong level of support says so much about the respect our faculty members have earned. It also reflects the love that so many loyal donors have for their university.

The impact of this generosity has been far reaching. For instance, the IUETC, which plays such an important role in our economic development efforts, is supported by gifts from more than 25 corporations, both large and small.

The Multidisciplinary Building I under construction on this campus is supported by a gift from the Simon family.

We remain deeply grateful to the Lilly Endowment, which has funded the Indiana Genomics and METACyt Initiatives. Its gifts have laid the foundation for significant institutional accomplishments in the life sciences over the years ahead, particularly in the area of cancer and in information technology.

The Jack and Linda Gill Center for Biomolecular Science also is having a dynamic effect on IU life sciences research. It is now serving as an anchor for neurosciences research on the Bloomington campus.

In the area of student financial aid, through generous donor support, programs such as the Kelley Scholars and Wells Scholars at IUB draw the best and brightest students to IU. We also have just welcomed the first class of IU Hoosier Presidential Scholars to our campuses across the state.

The Cox scholarships affirm and reward the efforts of Indiana University students who have demonstrated the motivation and resourcefulness required for success through their part-time work and solid academic performance. The Nina Scholarships at IUPUI provide financial support fo r single parents and handicapped students.

The new Presidential Incentive Scholars Program has facilitated the enrollment at IUB of 19 first-generation college students from inner city schools. In the last two years, we have sent more than 11,000 students from the Hutton Honors College abroad.

Last year at IUPUI we concluded the first billion-dollar campaign ever completed by any university in Indiana. This achievement places us among only 22 other universities in the nation that have completed billion-dollar campaigns.

This year, we launched our first joint fundraising campaign with Purdue. The $2 million IU East Campaign for Community is 75 percent complete after six months. Our Columbus center has gone public with a $4 million campaign that is quickly approaching its goal. We also continue to secure funds for the IU Cancer Hospital and other major cancer initiatives in the IU School of Medicine.

Although our “Matching the Promise” campaign on the Bloomington campus is currently in its silent phase, the support we are receiving has been extremely encouraging. As an enticement to increase the number of undergraduate scholarships and graduate fellowships, the campus will match the income of endowments created through new gifts.

The campaign also includes fundraising for capital projects such as Simon Hall and Multidisciplinary Science Building II.

More than ever before, the contributions of generous donors are critical elements in our ability to reach IU’s high academic aspirations. Their support is essential as we push forward the frontiers of knowledge and improve the lives of the citizens of our state and nation.

Conclusion

Nearly two centuries ago, the president of another Midwestern university articulated the mission of higher education in these terms:

Of all mere human institutions there is none so important and mighty as universities. Because, when rightly constituted, they are made up of the most enlightened and the choicest spirits of our race. They embrace the means of all human culture. They act directly upon the fresh and up- springing [potential] of a nation.1

That is our role: we must do our part to bring to fruition the potential of our world, our nation and our state.

It is of vital importance that public institutions such as ours continue to make progress in this time of international transition, national crisis and state economic constraint. The initiatives, priorities and support I have outlined today reflect our efforts to do so as we “embrace the means of all human culture. ”

There is much to be done. There is much for us to do. I have no doubt that individually and as a university, we will rise to the occasion. I have no doubt that we will extend well into the future the strong Indiana University tradition of Hoosier resourcefulness that enables us to do more than survive during periods of transition and adversity, but to thrive in spite of them.

It is important that we stand together to face the future as a community of scholars dedicated to common goals. I invite each of you to join with the Board of Trustees and me as we work to create a future of shared purpose for Indiana University.

1 Excerpt from an 1858 lecture by University of Michigan President Henry P. Tappan

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