TIP Strategies was engaged by the Prosperity Partnership, a coalition of over 300 government, business, education, labor and community organizations serving the Seattle area, to update the region’s economic strategy. The foundation for this work is an occupation-based cluster analysis that matches regional workforce strengths with innovative assets. Our talent-based approach provides a new way of looking at the region’s economy and understanding its opportunities.

Why Talent?
The decision to use talent as a framework for economic analysis is a response to two things:

(1) The relationship between labor productivity and regional competitiveness. The presence of a skilled workforce continues to be a critical site location issue for businesses and economic developers.

(2) The limitations of current approaches to understanding industry competitiveness. Industry cluster analysis has become an important tool for economic developers; however, a fundamental flaw of this approach is the implicit assumption that the “health” of an industry is reflected by its employment levels. Manufacturing is a prime example; the sector has seen a steady decline in employment at the same time long-term gains in output have been achieved.

Typical workforce analyses focus on describing the available labor pool: the number of available workers, educational attainment levels, commuting distance, wage rates, and so on. The concept of talent goes a step further by considering the question of skills. As a result, a talent-focused approach adds a dimension not revealed by standard labor market data. When talking about the vitality of a region, this distinction can be instructive. Skill levels typically correlate closely with wages. The presence of a skilled workforce can also be an important driver of capital investment and innovation.

In other words, traditional approaches to cluster analysis overlook a fundamental aspect of a long-term strategy, namely whether or not a given region has the workforce necessary to support its industry clusters.

Methodology
The primary task for a talent-driven cluster analysis is devising a process for grouping occupations together. Existing approaches for clustering occupations—such as the Standard Occupational Classification (SOC) system used by federal agencies to organize data collection or the U.S. Department of Education’s Career Clusters Framework—do not fully capture the distribution of skills in the workplace. Businesses include a mix of occupations pulled from across the SOC system and industry needs are not necessarily aligned with the career paths of individual workers.

TIP’s methodology for defining talent clusters was formulated to serve the following objectives:

(1) Reconcile local policy goals and aspirations with broader national and global economic trends;

(2) Inject new conceptual thinking about evolving competitive challenges; and

(3) Preserve and utilize the region’s existing framework for addressing industry issues.

For our Puget Sound analysis, we used a three-step process to identify regional talent clusters:

1) Employment trends. First, TIP identified occupational strengths and examined relevant trends. For example, to understand which types of jobs were growing in the region, we examined changes by major occupations during the recent recession.

2) Occupational filtering. TIP filtered the region’s occupations to arrive at an occupational “short-list” for each cluster. The objective of this task was to devise a simple approach that focuses on critical mass, earning power, and opportunity.

In light of our objective, we placed the highest emphasis on two criteria: job quality (evaluated in terms of wages) and the presence of a “critical mass” in the region, awarding 70 percent of the possible 100 points for these criteria. For occupations that received full credit on these two criteria, the remaining 30 percent was distributed among the six additional criteria which considered factors such as the occupation’s strength relative to the nation, projections for growth, and the stability of the occupation over time.

3) Innovation and assets. Because of the strong connection between talent networks and business retention and formation, our next step was to consider the capital investment trends driving innovation nationally and in Washington State. Since venture capital (VC) is used to fund new ideas and business models, data on VC investments was used as a proxy for investment in innovation. We also considered how the region’s tangible and intangible assets were related to both the existing occupations and capital flows.


Linking clusters to strategy
In the central Puget Sound Region, both direct and indirect talent clusters emerged from this analysis. The direct occupational clusters align with the areas of innovation that emerged from this process: aerospace, logistics & infrastructure, information technology (IT), and life sciences. The remaining occupations that met our evaluation criteria fell into two key areas of support services: social development and business services. These two support clusters provide a foundation for the innovative clusters.

This cluster framework will form the basis for our work in the region. Talent clusters have been matched with industries, providing a new lens through which to understand the needs of the region’s businesses. Occupations have been linked with available training in the region to highlight potential gaps in the higher education network. The talent framework was used to drive the selection of peers, which will be used to document the region’s competitive position.

Concurrently, the consulting team is coordinating five working groups to formulate strategies and actions addressing key economic foundation issues in the region: higher education and workforce, business climate, physical infrastructure, entrepreneurship and innovation, and aerospace. The result will suggest strategic responses to enhance the region’s talent base; help align economic development, workforce, and education activities; and leverage regional opportunities for growth.

Related posts:

1. Regional Economic Strategy – Opportunities Workshop Recap
2. Workforce Matters
3. Industry Clusters: The Modern-Day Snake Oil
4. How Well Supplied Are the Nation’s Fastest-Growing Jobs?
5. Manufacturing’s New Innovation Labs