2018 IEDC Leadership Forum: Keynote on Disruption

February 13, 2018

By: Jon Roberts, principal & managing director, TIP Strategies

Jon Roberts was invited to give the keynote address at the International Economic Development Council’s 2018 Leadership Summit held in Las Vegas (January 28-30). The topic was “disruption” with observations on Amazon’s site selection process provided by Gene DePrez.

While “disruption” is rarely absent from any discussion of technology, a full accounting of its impacts requires a larger perspective. Framing disruption simply as the effects of technology and innovation obscures its long history of upheaval across a broad spectrum of environmental, social, and political spheres. And our profession is no exception.

To better understand how wide-ranging disruption is for the economic development profession, let’s take Amazon as a familiar real-world example. In the past, an economic developer looking to understand the company might have started with a supply chain analysis. Documenting the flow of inputs and outputs from Amazon is still important, but it is far from the complete picture. It is time for our tools to catch up with the businesses we are profiling. If we begin instead with a value chain analysis, we can view Amazon’s business model from a different perspective. Looking upstream, we spend less effort on Amazon’s vendors and suppliers and focus instead on the firm’s infrastructure of enabling technologies: a broad array that includes cybersecurity, credit management, information databases, server farms, and a host of other discrete technologies. Next, we contrast this with Amazon’s downstream innovations, from automated fulfillment centers to drone delivery systems. The conclusion is unmistakable: Amazon derives its value not from its vendors and suppliers but from the disruptions it continues to unleash up and down the vertical chain of its activities.

As this one example shows, the forces of disruption can seem overwhelming. So how should economic development organizations (EDOs) respond to the challenge? The answers are far from definitive, but changing our perspective on the issue is a good place to start. We face challenges that will remake our professional landscape. We must meet these challenges—as a profession—if we hope to remain relevant. TIP proposes ten actions that EDOs can pursue.

Ten Actions for EDOs

1. Rethink target industries.
The industries we recruit should do more than provide jobs. We should be focused on those companies that provide value across a broad spectrum of industries.

2. Reevaluate threats to existing regional industries.
Traditional business retention efforts are essentially reactive. EDOs must look at technology trends that threaten to eliminate entire supply chains.

3. Engage with trade associations.
Insight into the direction industry is taking can be gleaned from active participation in trade groups. A high level of engagement around disruptive trends is a regular feature of these associations.

4. Involve your organization with higher ed (and the R&D associated with universities).
Technology commercialization is the infrastructure of economic development; it’s what the farm-to-market road was to our grandparents. Your higher-ed assets are the starting point for an innovation strategy. Nurturing these relationships can also open the door to solving local talent needs.

5. Act like a P3.
In other words, emulate the best aspects of public and private partnership. Work in the public’s best interest, but move with the flexibility and efficiency of the private sector.

6. Host events and conferences relevant to your community (along the value chain model).
EDOs attend trade shows but miss out on conferences that target the industries they are seeking to attract. Hosting events that build on local assets both garners recognition for the community and serves to attract companies.

7. Become a Smart City (or a Smart County).
Smart-city technologies need smart-city testbeds. Why not your community? Las Vegas – our host city for the conference – is a leader in this area.

8. Discover local tech talent (as contrasted with entrepreneurial support or incubators).
In the 21st century your workforce defines your opportunities—or otherwise sets the limits. Retain, nourish, and encourage talent.

9. Educate yourself.
Professional development matters, but the knowledge you need for success may lie outside the bounds of traditional professional development. Becoming tech savvy is a professional necessity.

10. Educate your board.
Successful EDOs are keenly aware of the role their board members play in setting policy. Ensuring that a discussion of disruption and long-term trends is part of the agenda is critical. Doing so will make adjusting policy and engaging the community at large much easier.

2018 IEDC Leadership Forum: Three Takeaways

February 12, 2018

By: John Karras, senior consultant, TIP Strategies

Last month, I attended the International Economic Development Council’s 2018 Leadership Summit held in Las Vegas (January 28-30). This annual event offers the opportunity for economic development’s senior-most leaders to share their experiences and talk about the future of the profession.

The following are a few of my key takeaways from the event.

Disruption creates just as many opportunities as challenges.
It’s easy to get caught up in a “sky is falling” or zero-sum mindset when traditional industries are disrupted by new technologies and business models. Uber vs. taxis. Amazon vs. bricks-and-mortar retail. Social media vs. traditional media. This is especially tough when your community is home to one of these traditional industries that loses jobs due to disruption. But as economic developers, your mandate is to stay ahead of the curve and focus on the opportunities created by changes in the economy. Amazon is a great example of the new opportunities for economic development, both “upstream” (IoT and connected devices, cybersecurity, advanced data analytics) and “downstream” (fulfillment centers, warehousing, pop-up retail).

No one knows what “Smart Cities” means.
But that doesn’t mean you should ignore it. The public sector has a big role to play (with private sector involvement) in the development and deployment of new technologies that improve urban infrastructure and systems. The City of Las Vegas is one of the leaders in this space, with a range of innovations including the largest network of smart traffic signals (traffic signals that can “talk” to vehicles) in North America and the first autonomous public transit vehicle operating on city streets in the US. The challenge for Las Vegas, and the dozens of other cities making similar “smart city” investments, is to ensure that public investments are worth the cost. City-led programs must ultimately improve the operating efficiency of urban areas, enhance public safety, and create a more welcoming environment for businesses and residents.

Talent is still the top issue for economic development.
Quality of place is still an essential component of the talent equation. With it, your community can attract the best and the brightest. Without it, your city is likely to struggle to retain top-tier talent. A walking tour, organized as part of the IEDC Leadership Summit, led a group of 20-25 participants through The Downtown Project in Las Vegas. The tour provided an overview of the real estate developments and urban revitalization strategies being employed to attract talent into downtown. Conversations with economic developers throughout the event made it clear, however, that talent strategies must be part of a larger dialogue about social equity and supporting economic mobility for a broader population.

Three Workforce Trends to Watch in 2018

January 26, 2018

By: Caroline Alexander, senior consultant, TIP Strategies

Over the past decade concepts like full employment, the skills gap, and the gray tsunami—once primarily of interest to workforce professionals—have become pressing concerns in the economic development arena. Technological disruptions from automation and control engineering to digitalization and artificial intelligence, continue to cast a shadow on the future of jobs. In the face of these challenges, here are three trends that are worth paying attention to over the short term as you consider your community’s ability to support business growth.

1. The US Economy at Full Employment

Economists spent much of 2017 debating the point at which the nation’s unemployment rate dropped below “full employment,” a threshold where all workers who are willing and able are employed. There is little question however, that the most recent rate of 4.1 percent (December 2017) falls well below that mark. And there are indications it may decline further. The national unemployment rate, however, masks the underlying story of disparity. Race, educational attainment, and geography play a significant role in determining the labor outcomes of individuals. As a result, in spite of low unemployment at the national level, there are a number of pockets of available and potentially under-utilized labor pools.

For more, check out our Tableau data visualization, “The Economy at Full Employment?

2. Looming Retirements

According to the US Bureau of Labor Statistics, 23 percent of employed individuals will be eligible to retire in the next 10 years, implying a potential turnover of up to 35 million jobs. This transition will require a massive transfer of institutional knowledge within organizations as these experienced workers depart the labor force. While large companies have the training infrastructure to make sure this transition is relatively smooth, most small- and medium-sized businesses are not well-equipped for succession planning or for the kind of on-the-job training that will be required for this changing of the guard.

3. Digitalization of Industry and Jobs

It is no secret that digital technology has been, and continues to be, integrated into the workflow of a wide range of occupations, from low-skill to high-skill jobs. From handheld devices that delivery drivers use to record signatures to high-capacity super computers, most jobs now involve some kind of digital human-machine interface. A recent study [PDF] by the Brookings Institution found that the share of jobs requiring high and medium digital skills grew from 45 percent in 2002 to more than 70 percent in 2016. This implies that basic digital literacy has become essential for all workers—in the same vein as reading, writing, and arithmetic. Yet, large segments of the population remain without access to broadband, PCs, and even good cell service.

These trends are not new. Nevertheless, they will continue to influence labor markets in 2018 and to shape the fields of economic and workforce development. More importantly, these trends highlight the need for meaningful workforce planning—more, better, faster. While the future of jobs may be uncertain, one thing is clear: rapid technological advances and an insatiable demand for new workers with new skills will continue to be dominant trends in 2018.

Three Defense Sector Trends to Watch in 2018

January 25, 2018

By: Alex Cooke, senior consultant, TIP Strategies

The major theme for the US defense sector in 2018 continues to be uncertainty. Congress remains under immense pressure to raise defense spending due to ongoing military operations, decreased readiness, and aging weapons systems. However, addressing these challenges will require Congress to pass a budget that removes the spending caps mandated by Budget Control Act of 2011, which Washington currently seems unable to accomplish.

1. Defense Spending and Procurement

On January 19, 2018, the Trump Administration revealed its new National Defense Strategy [PDF]. Going forward, the Pentagon will place a higher priority on preparing for potential high-intensity conflicts with near-peer adversaries (namely, China and Russia). This new strategy will require increased levels of US defense spending on big ticket weapons and hardware. Large procurement programs being pushed by the administration include modernizing the US nuclear force, growing the number of ships in the Navy’s fleet, accelerating the deployment of ballistic missile defenses, and integrating electronic warfare systems into all service branches.

2. Long-Term Planning by the Pentagon

Federal budget uncertainty prevents the Pentagon from proceeding with long-term planning initiatives related to staffing and bases. Therefore, we are unlikely to see critical decisions made in 2018 regarding a future Base Realignment and Closure (BRAC) round or force levels within the Army.

3. Private Sector Activity for Aerospace and Defense

Despite the dysfunction surrounding the US federal budget, the aerospace and defense sector is poised for continued growth in 2018. The United States remains by far the world’s largest arms supplier, and global demand for advanced US weaponry shows no signs of abating. In fact, ongoing conflicts and rising tensions in the Far East and Europe will only stoke increased global demand for American arms.

Despite all the disarray and turmoil at home and abroad, let’s hope peace prevails in 2018.

Three Companies to Watch in 2018

January 24, 2018

By: Ashton Allison, consultant, TIP Strategies

Many US firms are poised to accomplish great things in 2018, which made narrowing down our top selections quite challenging. The companies we chose stood out, given the strategic moves they made in 2017 and the potential implications of these decisions on their respective industries and on our way of life in 2018.

1. Amazon

A no-brainer, we know. The behemoth online retailer recently shortlisted 20 communities for its second headquarters location and will announce the lucky winner sometime this year. The company also acquired Whole Foods in 2017, which is certain to cause further disruption in the grocery industry. Be sure to keep an eye on its formidable competitor, Walmart, which has made sizable investments in its online footprint and strategy.

2. Boeing

For starters, Boeing was one of the best performing stocks of 2017, with shares soaring nearly 90 percent. Shares gained another 16 percent in the first three weeks of 2018. This growth is due, in large part, to the proposed purchase of Brazilian rival Embraer, the profitability of the 787 Dreamliner, and anticipation of a possible new middle-of-the-market aircraft (replacing the 757). And despite occasional setbacks for Boeing, investors remain optimistic about new aircraft orders from major airlines around the world.

3. Virgin Galactic

While several companies are jockeying to be the first to commercialize space travel and are making great strides in doing so (Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX included), Richard Branson’s Virgin Galactic recently completed another test flight. This accomplishment, combined with Branson’s statements at an October 2017 press conference, signal Virgin’s plans to make a manned trip to space (with Branson on board) in the next 12 months.

Grab some popcorn and join us as we find out who will make headlines in 2018. It’s sure to be a fascinating year.

Three Urban Development Trends to Watch in 2018

January 23, 2018

By: John Karras, senior consultant, and Allison Long, project coordinator, TIP Strategies

Urban development trends, such as coworking, experiential retail, and big-box redevelopment will continue to impact US communities (large and small) in 2018. Economic developers, take notice! Creative approaches to development challenges will abound in the year ahead.

1. Experiential Retail

As visits to brick-and-mortar store locations diminish, retailers around the country are re-thinking how to attract customers to their stores. Often, these efforts employ methods that allow customers to try products before their purchases. These methods might include anything from taste-testing to virtual-reality changing rooms. It could also mean the creation of appealing, mixed-use environments to boost foot traffic. Competition from online shopping has encouraged retailers to look beyond their products for innovative ways to provide what online retailers cannot—a memorable experience.

2. Big-Box Redevelopment

The strategy of redeveloping empty big-box stores took on a sense of urgency as store closings escalated in 2017. According to Bloomberg, even the most stable department stores are billions of dollars in debt. Over 6,700 retail stores closed between Q1 and Q3 of 2017. Vacant storefronts serve no one’s interest—neither the property owner nor the local community. But what are the options? Examples of successful reuses include both public and private efforts. Educational institutions, gyms, call centers, churches, and libraries are just some of the examples of reuse strategies that can breathe new life into defunct real estate. In 2018, we expect even more creative schemes to emerge as solutions to retail obsolescence.

3. Coworking

The concept of coworking space has been around for a long time, but only recently have socio-economic, cultural, and technological trends converged to rebrand it for a new generation of workers. The coworking model is thriving across the country in part because it offers a range of solutions for established companies and startups alike. In addition, coworking spaces have played an important role in transforming aging districts into attractive urban environments. Cambridge Innovation Center (CIC), founded in the 1990s, served as an early coworking model for later imitators. CIC was a major contributor to the evolution of MIT’s Kendall Square and has gone on to spearhead similar coworking experiments in the US and Europe. WeWork is now the largest global coworking space provider, with more than 10 million square feet of space across 285 urban office locations in 60 cities worldwide.

As we continue to abandon the traditional for exciting new ways to shop, work, and use our urban spaces, we’re sure to see changes in our landscape―both physical and economic―in the year ahead.