Dean Barber

Where There is Hope: Our Plan for a Rural Town

In Corporate Site Selection and Economic Development on January 15, 2017 at 7:30 am

We do not know with certainty how this story will end. Most towns in rural America do not end so much as linger. Some grow. Some shrink. Some die.

Their skeletons are typically found in remote areas, ghost towns, where hope died and the people left. But I believe where there is hope, there are possibilities – that good things can and do happen if concerted action is taken.

We, a team of consultants, were hired by a small rural western town that was facing the prospect of losing its single largest and very dominant employer. In an earlier blog, I called it “A Small Town with a Company on the Hill.”

We knew what we were getting into – that economic development in rural America is and probably always will be a tough row to hoe.

But the more we learned about the community, the more we realized just how important our work would be for its future. That is not to say that we don’t take all such economic development missions as serious undertakings, but this one was of vital importance because of the potential loss of this large dominant employer.

City Slickers Who Listen

After many conversations with city officials, our thinking morphed from “strategic plan” to what we called a “Target Market Strategy Study.” I realize that these are just labels, but it became clear to us what our client wanted and we responded. But with some provisos, which I will touch on.

In short, our charge was to provide hope and direction, and I believe to a large degree that we did that.  And while I was confident in our ultimate findings and recommendations, I was bit apprehensive about what kind of reception we would get during a public meeting of the city council.

We assembled an excellent team for this project. Tim Feemster, principal of Foremost Quality Logistics, served as the project manager and spokesman. The other members were John Hoover and Valerie Battle, of the Modalgistics consulting group within Norfolk-Southern Corporation, and myself.

In comparison to our client, we were big city slickers — John and Valerie from Atlanta, Tim and me from Dallas. And while we frequently work in rural America – both on corporate site search and economic development projects – I felt somewhat self-conscious.

During our presentation at City Hall, I noticed that Tim, John and I were the only people in the room with ties.

Talking SWOT

Tim spoke for hour, with occasional interjections from John and me. Using a PowerPoint to highlight our 140-page report, he explained how we conducted our many behind-closed-doors, not-for-attribution interviews with stakeholders and came to our SWOT findings.

For the uninitiated, SWOT stands for strengths, weaknesses, opportunities and threats. All places, big, small, urban and rural, have them. Even in Heaven there is no beer.

Tim got through the SWOT phase of the presentation, with no jeers or fruit or vegetables being hurled his way from the audience. One city councilman asked a good question, but it was far from hostile. I’m thinking, so far, so good.

Tim then spoke about our freight-flow analysis, which identified and classified physicals products coming in and out of the community, and the demographic profile of the community. Together those elements, in combination with our SWOT, gave us insight in identifying the target industry groups.

Giving Lagniappe

Tim explained how and why we got there with our five identified target industry groups. Thankfully, no crank from the audience jumped up and yelled, “How come you don’t say nothing about ostrich farming and chinchilla furs?” to which Tim would have answered, “Well, sir, that would come under agribusiness, which we have listed.”

After explaining the target industry groups, Tim informed the council that we would be providing what we considered a bonus in our report — the descriptive profiles of more than 200 companies, including addresses, telephone numbers and email addresses of senior executives (about 300 names) within those target industry groups.

We thought of this as lagniappe, that 13th donut. It wasn’t asked for, but we thought it would be helpful to their future business attraction efforts once they hired a new economic development director. The previous one left, seeing the writing on the wall with the big dominant employer and following a significant other to another state, while a prospective candidate reneged on taking the job.

Dance with the One

It was at this point in the presentation, repeated in our report, that we gave an important cautionary note. It is a caveat that is often given scant attention by economic development organizations and elected officials, partially because it does not draw headlines.

And it is this: that existing employers typically create far more jobs than by recruiting new companies to any given place.

In short, it means you dance with the one that brung ya. Never, ever forget your existing industry base, for that is the lifeblood of a community. You can and should do business attraction, but keep in mind that there are 15,000 economic development organizations in this country potentially vying for several hundred new corporate site projects every year.

Those are not great odds. It is far more efficient to concentrate on your existing employers, and try to help solve their problems whenever  possible. Also, it makes imminent sense to create a favorable environment for entrepreneurial growth and business startups.

Growing your own is the best way to achieve job growth in the vast majority of places nationwide. It is a message that I cannot hammer home enough, despite the fact that I am often involved in business attraction on the corporate side by providing site selection services to companies. My teammates feel the same way.

Do All Three

In our PowerPoint, I gave Tim an image of a three-legged stool, which represents separate strategies for successful local economic development – business retention and expansion (BR&E), entrepreneurial growth, and business attraction.

Our recommendation to any community anywhere: Do all three.

Tim ended the presentation at City Hall with our recommendations on going forward. It was obvious to us that the council members and audience respected our findings and recommendations.

After the meeting outside the council chambers, representatives from the local community college officials said they thought we were too tough on them concerning vocational training. Our response, respectful in tone: We are willing to modify our report if you show us case studies, proof that you have done what you say you can do.

Proof in the Pudding

Earlier in the day, when we were out and about in the community (we arrived in the morning and our presentation was at night), we learned that a metal fabricating company had agreed to buy a vacant manufacturing facility, and would begin production there. It would start off small, with 15 employees, but with the plan to ramp up to 100 or more.

Being the sleuths that we are, we learned this from a source when we stopped at the empty building and went inside. We weren’t invited. We just went there.

Of course, we were very happy for the town, but it also vindicated one of our target industry groups. We said metal fabrication made sense for a variety of reasons and this was proof in the pudding.

Love Conquers All

We also learned that the owner/CEO of the fabricating company was standing in line at Starbucks and started asking people what they thought of their town. The answers he received, essentially sealed the deal for him. They loved their town, and he decided that he would, too.

Naturally we would have preferred that this CEO had hired us to be his site selection consultant, and we could have analyzed multiple communities on a whole host of business factors to arrive at recommendations for an optimal location.

But he did it his way, and his way may very well turn out to be a good way. Until the day comes when artificial intelligence supplants CEOs, COOs and CFOs, there always will be an emotional aspect to decision making because we are human. We feel.

We want the very best for this small town in the West where we did our work. Because we feel for them, we will periodically be checking in with them to see how they are doing. Certainly, we want to help that new economic developer when he or she is hired, because we are now emotionally attached to this small rural town in the West.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber can be reached at dbarber@barberadvisors.com or at 972-890-3733. He is available as a keynote speaker.

Digital Darwinism at Work

In Corporate Site Selection and Economic Development on January 9, 2017 at 10:06 am

Admittedly, they are not in not the same industries, but they are both old names in the annals of exceptional American companies.

Sears, Roebuck & Company, founded in 1886, might be in a slow death spiral, while conglomerate General Electric, with roots dating back to 1889, continues to invest in digital transformation in order to adapt and outperform peers.

If this smacks of Digital Darwinism, well, welcome to today, an era where technology and society are evolving faster than some businesses can naturally adapt. This will mean new business models to come, which some companies can pull off and others cannot.

When I speak at conferences, I harp on this to both companies and economic development organizations. You have to embrace digital transformation, not fight it, if you want to remain relevant.

That entails looking beyond the world as you know it, observing how things are changing on the outside, and then changing your own philosophies, models, and systems on the inside in response.

GE has been successful at doing this. Sears not so much.

At GE’s recent 2017 outlook event a few weeks ago, CEO Jeff Immelt was asked how he can get investors to appreciate the company’s new digital transformation and 3-D printing investments. His response: It “makes a shitload more sense than Six Sigma did.”

Indeed.

The Trip

A few months ago, I was an old port city on the Ohio River. The reminders of the old industrial revolution were evident, but surprisingly, it was here where I encountered a small digital company, a defense contractor, doing some seemingly out-of-this world stuff.

And when I say out of this world, I mean it. Because when I put on a virtual reality headset, I took a trip and didn’t leave the farm.

Besides being safer than psychedelic drugs, which I do not advocate, what would be the practical use for virtual reality? Certainly, I do not have all the answers, and it is safe to say that virtual reality (VR) technologies are still lagging behind the visions that people have for their use.

The Possibilities

But I can foresee the day when it will be commonplace in real estate, construction, economic development and site selection.

Donning headsets in a client company’s office in Chicago or New York, a senior executive and I can tour spec buildings in the Southeast or the Southwest. Nice high ceilings, don’t you think? Let’s go outside and look at the surrounding area. Hmmm, curb and gutter, sidewalks and landscaping, too. Not bad.

How about we go downtown and then look at some residential neighborhoods and then pop over to the local community college?

If it sounds a bit far-fetched, then slip on a VR headset for a few minutes and ponder the possibilities. From what I can tell, most VR companies are working to come up with better displays, wireless, and less bulky designs. They are not quite there yet, but they are getting there, along with a whole onslaught of other things related to the digital revolution.

The Promise of 3-D

On the digital side, GE announced in September that it would buy two 3-D printing companies for a combined $1.3 billion.

The move “adds to our strategy to become the premier digital industrial company,” Immelt said on a conference call with analysts. “These two companies bring, in addition to just equipment, a number of ideas in terms of what we can do in the future.”

If that sounds like a company leaning forward, well, you’re right.

GE believes it can sell $1 billion worth of additive metal manufacturing technology by 2020, while using the 3-D printers to drive its own costs down by as much as $5 billion. That beats Six Sigma hands down.

3-D printers build objects by fusing together thin layers of materials such as plastic powder, metal or liquid resin. The parts, built from computer-drawn blueprints, can be used to make products ranging from car parts to surgical implants.

The global market for 3-D printing is growing as companies increasingly use the technology for production of commercial parts. The aviation industry has been an early adopter because it enables more complex designs and lighter parts, cutting waste of expensive materials on factory floors. GE said it expects to print 40,000 fuel nozzles for jet engines by 2020.

Sears was The Disruptor

The news is not so positive for Sears, which announced last week that it will shutter another 150 unprofitable stores, including 108 Kmart and 42 Sears stores in order to curtail losses. How many years now has Sears been closing stores?

But at one time, Sears was the big disruptor, and changed the landscape of retail. In the late 1800s, people began moving to the suburbs and out of the inner cities. Richard Sears believed local supplies were too costly because de-urbanization had caused consumers to disperse; perhaps people would be comfortable with ordering, by mail, products they’d bought in the past at retail stores.

Sears used the railroads and post office in ways no one had, disrupting the status quo, with distribution tactics that resembled the ecommerce experience we know today.

Sears used to charge a fee for access to its mail-order catalog. If that subscription model sounds a lot like Amazon Prime, well, it was.

Now It’s Amazon

But times change. Today, Amazon is worth more than Sears, Macy’s, Kohl’s , JCPenney, Nordstrom, Best Buy, Barnes & Noble, Dillard’s, Gap and Target combined.

Overall, Amazon’s share of the 2016 holiday online market share was 38 percent. Best Buy was a distant second, at 3.9 percent, Target at 2.9 percent and Walmart at 2.6 percent.

Amazon’s largest share of online retail hit 47.8 percent on Dec. 18, 49.2 percent on Dec. 19 and and 48.2 percent on Dec. 20, according to data from Slice Intelligence. On Christmas day, Amazon’s total share of online sales shot to 46.1 percent.

Department stores up and down the price spectrum are under growing pressure to show they can still be relevant, and 2017 will be pivotal in which retailers plow ahead in the internet era and which get left behind. Digital Darwinism at work.

You, Too, Can Be a Futurist

Last month, after giving a speech to a group of stakeholders to an economic development organization, the local ED guy said I sounded like a futurist. I took that as a compliment (and I think he meant it as such.)

That’s what I have to be, and I submit that is what economic developers and company executives have to be. You don’t have to be a computer whiz. You do have to have an imagination.

I believe we are in the early stages of a digital revolution that will both destroy and create jobs. That requires us to lean forward and imagine what could be or what should be if our companies and our communities are to remain competitive and ultimately relevant.

Yes, you, too, can be a futurist. If you want, I will send you a secret decoder ring to make it official.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.

For Rural America to Win, Part 2

In Corporate Site Selection and Economic Development on December 22, 2016 at 3:16 pm

In my Dec. 11 blog entry – For Rural America to Win – I emphasized how rural communities must embrace digital technologies in order to compete and remain relevant in a fast-changing if not confusing world.

I expounded upon that theme last week in frozen rural Iowa, where I gave a speech at the annual meeting of the Clinton Regional Development Corporation.

More than 100 stakeholders attended the event, which was covered by the local newspaper and a television station. I gave my written remarks to the Clinton Herald, which published a story with the headline, “Barber Stresses Adapting to Change.”

It was an accurate nutshell of what I said, but, of course, I said a whole lot more.

Initial Impressions

I rewrote my speech after Mike Kirchhoff, president and CEO of the CRDC, gave me a tour of the region, which extends across the Mississippi River into Fulton, Ill.

My initial impressions, Clinton and the surrounding area, like most of rural America has taken its share of hits (the city’s population of about 26,000 is lower than it was in 1950 and has been on a decline for the past four decades) but unlike many rural communities, I saw some things that made me believe that it is poised for growth.

For starters, it would appear that the Clinton Community School District is embracing the idea of introducing digital technologies and critical thinking to its students in a big way.

Children, Teach Your Parents Well

In both the middle school and the high school, there are these “Innovation Rooms,” where students gather in teams around a circular tables with computers to essentially learn collaboration in solving problems.

(In my speech, I joked that the children in Clinton should teach their parents well about this.)

Twenty miles to the west, in DeWitt, Iowa, with a population of about 5,500, I learned that laptops are given to students free of charge from fourth to 12th grade, while PreK through third graders can check them out.

Truly this is greasing the skids, so that young people can be better prepared to enter a new digital machine age, more profound than the industrial revolution, and one that transcends virtually all industry groups and affects everyday life.

Blue-Chippers

I also saw that Clinton had some blue-chip manufacturing companies, including Archer Daniels Midland Company (ADM), one of the world’s largest agricultural processors and food ingredient providers; LyondellBasell, one of the world’s largest plastics, chemicals and refining companies; PCM RAIL.ONE AG, a German manufacturer of concrete sleepers and track systems for railroads, and Custom-Pak, one of the world’s largest industrial blow molded parts manufacturers.

When I see a concentration of world-class manufacturers in a particular community, that indicates to me a track record of successful manufacturing, which always peaks my interest. In short, they wouldn’t be operating there for long if they were not profitable.

And there is room for more as the 345-acre Lincolnway Industrial Rail & Air Park located adjacent to U.S. 30 and the Clinton Regional Airport has been designated a certified site, meaning the skids are greased for immediate development. Rail service to the park is provided by the Union Pacific Railroad.

I was also gratified to see that the CRDC had initiated a business retention and expansion program (BR&E should be a primary focus for most economic development groups in my opinion), and that it was part of a larger regional approach, being a member of the six-county, bi-state Quad Cities Chamber, with offices in Davenport, Iowa, and Moline, Illinois.

A Tough Row, Indeed

Seeing the creative use of digital technologies in the schools, the existing blue-chip manufacturers, the efforts at BR&E and regionalism, and the professionalism of Mike and his staff, I have to believe that the Clinton region is poised for winning a prospective company that is looking for a place to set up operations.

And if a STEM academy project that he is working on becomes a reality, Clinton will be transformed and made all the more competitive.

I only wish I could say that about every rural community that I visit. Some simply do not have the tools to compete, much less win. See my Sept. 18 blog, A Tough Row to Hoe.

But even for a community that has all (or most) of the pieces in place, it is harder for economic development organizations based in rural America to compete. Most projects, whether they are industrial or not, land in metropolitan areas, because that is where most of the people, the companies, and the jobs are. It that sense, it’s a numbers game.

Where There is Hope

Technically, rural communities are those outside of metropolitan areas, but in fact there are many communities within metropolitan areas that look and feel rural.

(I could easily take you to ranches, farms and agricultural equipment dealers within the huge Dallas-Fort Worth Metroplex where I live. In some of these places, you might guess that you were outside the boundaries of a metropolitan area.)

Back in 2009, President Obama made said “urban and rural communities are not independent, they are interdependent.” It was an adroit statement, which should give economic developers in rural communities hope.

I mentioned in last week’s blog that the cost of labor, indeed the cost of living, is typically lower in rural America than in metropolitan areas, providing companies a potential cost savings.

The local regulatory and tax climates in rural places are often more amenable, less restrictive, for companies than within metropolitan areas, a broad-brush statement to be sure.

Fixing the Digital Divide

Again, repeating myself from last week, the challenge for rural America is in providing a pipeline of talent in a new digital machine age, and, what I failed to mention, the proper infrastructure to support those digital technologies.

Truly there is a digital divide. Rural areas have significantly slower internet access, with 39 percent lacking access to broadband of 25/4 megabits per second, compared to only 4 percent for urban areas. This impedes not only students in underserved rural areas but businesses that operate are there as well.

When we think of infrastructure, we think of roads, bridges, water lines, our electrical grid, all very important, but broadband is now, in the words of U.S. Sen. Shelley Moore Capito, R-W.Va., “a pillar of our 21st century infrastructure.”

Sen. Capito, along with U.S. Sen. Kristen Gillibrand, D-N.Y., introduced the Broadband Connections for Rural Opportunities Program Act in September. The bill would authorize federal grants for up to 50 percent of a broadband project’s cost, increasing to 75 percent for rural areas.

Half Measures

What gets my goat, and we all need a good goat, is the lack of real commitment to workforce training. I continue to see only half-measures in rural communities and urban communities alike, with little or no collaboration between community colleges and local employers, particularly with manufacturers.

Certainly these are different tribes speaking different languages but that is no excuse. Both are guilty of either not reaching out to one other or not listening to one another. Of course, there are great success stories exemplifying collaboration and unison of thought, but I do not see that as the norm in most places, particularly in rural America.

I have been in too many rural communities where the absence of any meaningful vocational training programs would essentially result in them being scratched off our list during a corporate site selection project.

As one exasperated plant manager once told me, “I mean, come on, how many cosmetologists does this small town really need?”

New Approaches Needed

Earlier this month, and I mentioned this in my talk in Clinton, IBM Chief Executive Officer Ginni Rometty said her company plans to hire about 25,000 people in the U.S. and invest $1 billion over the next four years.

That is all very good, but it was her comments in an op-ed piece in USA Today that really caught my eye. Rometty said many technology jobs don’t require an advanced degree and she encouraged government investment in vocational education and training.

“We are hiring because the nature of work is evolving,” Rometty wrote. That’s also why many of the jobs are hard to fill, she said. “What matters most is that these employees – with jobs such as cloud computing technicians and services delivery specialists – have relevant skills, often obtained through vocational training.”

There are large numbers of unfilled tech-related jobs in this country, because of a shortage of workers with the requisite skills.

“As industries from manufacturing to agriculture are reshaped by data science and cloud computing, jobs are being created that demand new skills – which in turn requires new approaches to education, training and recruiting,” she wrote.

All places, rural and urban alike, should take her words to heart.

In the meantime … Peace on Earth, Good Will Toward All.

I’ll see you down the road. (Next year.)

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.