While visiting Shreveport, LA a few months ago, I was given a brief tour of the lobby of the new Air Force Cyber Warfare Center.  This brand new, 100,000 sq. ft., high security, $100 million dollar facility sat in the middle of a new 3,000 acre business park designed for the military contractors that would supply service for this new mission.  The park was next door to a new community college campus with curriculum designed to support the personnel needs of this emerging cluster of economic activity.

Up to this point, I had no idea the extent to which our country was preparing for the next threat to our national security.  I was told during my tour that the mission for this facility had been moved from Shreveport to San Antonio, Texas and placed under a joint command rather than just the Air Force.  This move shows the elevated level of importance being given to cyber warfare (as well as the competition among the branches of the military).

We have all by now had some experience with computer viruses, computer worms, and, in some cases, denial of service attacks.  Most of our computers have anti-virus software that attempts to prevent these from infecting our computers.  What I hadn’t realized is the extent to which the United States, Russia, China, and a host of other countries have gone to in order to be able to disrupt the computer networks that support our daily lives.

The very nature of our technology contains within it the threat to our security.  In his book, “Cyber War – The Next Threat to National Security and What to Do About It,” Richard Clarke describes the vulnerability of our systems and those of other nations and the ability to disable, disrupt, and even destroy these system remotely from anywhere using the Internet.   Mr. Clarke tells of a number of cases in which Cyber Warfare tactics have been use in a preemptive way. In one example, he said that in 2007 Israeli aircraft were made invisible on Russian built Syrian radar by hacking into the radar computer, and then the planes destroyed a nuclear weapons plant being built in Syria.  Clarke details the vulnerability of everything connected to the Internet, the unsecure network protocol, flaws in hardware and software and the extensive supply chain.  All of which provides  ample opportunity to use “back door” entrances to take control of the computer networks that control everything from manufacturing, transportation, utilities, defense and a host of other systems.

Having grown up during the Cold War, I remember the anxiety I felt as I researched how to build a fallout shelter in our basement after my grade school teachers drilled us on getting under our desks and covering our heads.  Cyber warfare takes on a similar nebulous feeling.  However, Clarke points out that a cyber war would last about fifteen minutes from beginning to end of assured mutual self destruction. China’s and Russia’s stated goal is to be on a par with the United States with thousands enrolled in cyber warfare schools in all three countries.  Brace yourself, this is the new frontier.  

What are the implications for economic development?   Currently, there are over 14,000 unfilled Information Technology jobs in the Washington D.C. area, one of the few places in the country where there is no recession.

Earlier this month, I was made aware of a beneficial website for economic development professionals – Strengthening Brand America. This educational site, created by The Burghard Group, aims to help economic development organizations leverage product and corporate branding principles to create strong, competitive community images. As the website states, “The competition for capital investment is becoming less between states, and more often versus other countries.” That is why ensuring the health of Brand America through thriving local communities is so important for sustainable economic growth.

This website serves as a forum where individuals from both the private sector and economic development community can come together to educate themselves about place branding and discuss community image issues. For example, Place BrandAid is a page on the site that is an effort to help communities affected by the BP oil spill. This help is in the form of collective input about how these communities can reverse the damage the spill has had on their images. Perhaps, your community is facing challenges where an objective, outside party’s wisdom could help you discover new avenues to finding a solution. Or, maybe your community has a success story that could help other areas tackle similar problems. Strengthening Brand America is a fantastic resource to start a dialogue to get help and information about building up Brand America one community at a time.

Another great feature of the website is the Expert Interviews section. This contains over two dozen interviews with professionals who provide insight into place branding matters. The site also contains white papers, academic papers, recommended reading suggestions, and links to relevant resources. If you have knowledge to share or a story to tell, visit Strengthening Brand America’s blog or contact The Burghard Group. Your input can make a difference!

We have heard many economists say that the U.S. economy is heavily dependent on consumer spending. Consumption expenditure accounts for approximately 70 percent of the nation’s GDP. Since the so-called Great Recession began in late 2007, there has been a tremendous shift in consumer habits in the United States.

The chart below shows the changes in consumption expenditure since the U.S. Bureau of Economic Analysis started measuring it in the late 1940s. You will notice that the shift in the total per capita consumption spending is mostly the result of a shift in expenditure in the Goods sector, while the impact on the Services sector is less severe.

How has this shift affected retail sales across the various sectors? The U.S. Census Bureau tracks retail sales volumes across different sectors every month, and the data shows that some sectors are impacted more than others.

Health and Personal Care Stores (e.g. CVS or Walgreens) have not seen much of an impact due to the recession. Neither has there been a significant impact on Food & Beverages Stores. On the other hand, Motor Vehicle and Part Dealers, as well as Building Material and Garden Equipment and Supplies Dealers are the two sectors that have suffered the most during the recession, while sectors like Clothing and Clothing Accessories Stores, Electronics and Appliances Store and Sporting Goods, and Hobby and Music Stores have seen just a moderate impact. The figure below shows the winners and losers among various retail sectors since January 2006.

For a detailed view of the data, please visit Google’s Public Data page for U.S. Retail Sales. To learn more about Google Public Data Explorer click here.

Analyzing the stock market performance of industries in the stock market also gives us a general idea about which sectors are doing better or worse in this economy. Whittaker Associates conducted an analysis of 35 different sectors by using the Dow Jones Industrial Indexes to study how these sectors have performed over the last three years as compared to the S&P 500 Index.

The slides below (shared through Slideshare), graphically compare the results of our analysis. The industries are listed in the order of the sectors with the best overall returns in the last three years (as of August 26, 2010).

View more presentations from Whittaker Associates.

As the slides illustrate, sectors like Tobacco, Food & Beverage, Chemicals, Industrial Transportation, and Personal Goods are among the best performing sectors. Sectors like Consumer Electronics, Banking, Financial Services, General Industrials, and Insurance are among the worst performing sectors.

What these two analyses tell us is that sectors like food and beverage and personal products have been impacted least by the recession. Though there has been a dramatic shift in consumer expenditure patterns, these two sectors have continued on an upward trend. Non-essential spending on sectors such as household furniture, electronics, and motor vehicles has decreased significantly.

Note: It is worth remembering that stock market indices like the one used in this analysis are largely impacted by the public’s expectation about the future returns of the stocks in the industry’s index. Some sectors like Consumer Electronics, which have had only a moderate impact in retail sales due to the recession, is the worst performing index among the 35 industries chosen for this analysis. This can either mean that the sector is severely undervalued or there is a great expectation in the market that the retail sales in this sector will decline rapidly over the coming months.

Last Wednesday, when my cell phone rang at 4:18 AM, I thought it was my alarm to wake me for my 7:15 AM flight to Lexington, KY.  I was to teach the following day at the Kentucky Economic Development Institute. But, instead it was Delta Airlines calling to tell me my flight was going to be two hours delayed in departing, thus beginning my lesson in leadership, courage, and faith.

When I arrived at the airport a leisurely two hours before the flight, I learned that I would be missing my connection in Cincinnati and would be re-booked on a later flight arriving at 3:00 PM rather than the 10:30 AM on which I had originally planned.  Ironically, it was the same flight that I had inadvertently purchased an extra ticket for when making my reservation.  Unfortunately, I had been refused a refund on the extra ticket by the reservation supervisor.

After telling the gate agent my saga when checking in, I had my first lesson in courage.  She courageously “bent” the rules and refunded my earlier, more expensive ticket and gave me a voucher for lunch.  Hours later, when I arrived to the gate early, I encountered the flight crew. They were disappointed that the dispatcher had botched their schedule, inconveniencing passengers throughout their schedule of flight for the day.

By this time, only eight of us hearty souls had stuck around for Delta Flight 6500. Despite the obstacles each of us had experienced that day, the flight crew used their leadership and courage to make the trip enjoyable and fun. They joked with the passengers, and gave us unlimited access to snacks and “adult” beverages (another bending of the rules). They lifted our spirits and theirs on flight 6500 by the attitude they chose and by treating the situation with humor and a positive attitude. The flight crew helped reshape the experience for everyone it touched.

These examples of leadership and courage reminded me of the importance of demonstrating both as we work our way through the current economic contraction.  We need to be leaders who lead with courage and help instill confidence and faith in the future, for and in ourselves and others.  Our attitude can and will make a difference.

This month, I had the privilege to host a webinar presented by Rebecca Ryan, founder of Next Generation Consulting. The thought-provoking discussion focused on the “next generation” of workers – why they matter, what they want, and how to design an authentic strategy to attract and retain their talent. 

In her remarks, Rebecca said that the next generation matters because we will need their talent to fill the large talent gap being created by the retirement of the baby-boomers and the shrinking population resulting from a decline in fertility rates in developed countries.  She pointed out that the “fresh eyes” of the next generation will provide a new perspective on our intractable challenges, and that by engaging them, we will realize that it is not only the current generation’s responsibility to solve the issues we face.  She reminded us that we need to go beyond GIT “guy-in-ties” and the PMS “pale, male, and stale” leadership, and give the next generation a voice in the discussion.

Based upon 40,000 interviews with young professionals (20-40 years old) conducted by Rebecca’s firm, the next generation feels that where they live is just as important (or more important) than what they do. In her book, Live First, Work Second, Rebecca describes these survey results in more detail.  She writes that the next generation will organize their life differently than the current generation has done.  She points out that efforts to attract this next generation will require a community to be on-line, findable, and positively positioned.  The next generation is looking for communities that have “inclusive attitudes,” meaning they embrace differences in culture, life style, ethnicity, and others factors.  The next generation is more skeptical about the institutions they are inheriting and the institutions’ ability to perform.

Rebecca also suggested several strategies to attract the next generation. To start, communities need to re-energize their language to reflect the importance of “quality-of-life” rather than an exclusive focus on creating and attracting jobs. While jobs are important, they are not the sole focus of the next generation despite a 39% unemployment rate for those in their 20s.  Looking at the world through the lenses of the average 20-40 year old person is the key. We need to realize that cities are for people, not buildings. The design of our cities should reflect the needs of its people. 

Further, the relationship between people and their cities was stressed in Rebecca’s comments.  She said that we fall into one of three groups: lifers (never left the zip code), boomerangers (left and came back), or transplants (moved there from somewhere else).  She recommended that the latter two groups should be recruited as ambassadors for the city because they frequently have the most positive outlook since they have chosen to be there.  She also believes that people leave cities when the city is boring, and that we often move for money or love.

As mentioned earlier, quality-of-life, while hard to measure, is a major factor in attracting and keeping talent.  Rebecca’s firm has developed a process and metrics for doing so.   They measure seven factors: Vitality, Earnings, Learning, Social Capital, Cost of Lifestyle, After Hours, and Around Town.  Vitality looks at the physical health of the community and opportunities to exercise. Earnings measures the availability and diversity of job opportunities as well as the entrepreneurial environment. Learning looks at teacher/student ratio, library usage, and continuing education opportunities.  Social Capital focuses on the engagement of all people regardless of subgroup.  Cost of Life Style  evaluates affordability.  After Hours  concerns after work activities.  Around Town  explores getting around in the city (without a car) and getting out of town (direct flights). These seven factors provide an insight into a community’s quality-of-life.

Lastly, Rebecca discussed four levers to pull to become a talent magnet.  We can use public policy by giving young people a voice.  We can use social networks to provide a vehicle to connect people with the city and each other. We can shift cultural attitudes to reflect one of inclusion, and we can change behavior through such things as a “buy local” program like a farmers’ market.

These many strategies recommended by Rebecca offer wonderful action items that communities can take to ensure the attraction and retention of talent in their area. Rebecca can be contacted through her company’s website at: http://nextgenerationconsulting.com/.

As a research analyst, I get to scour through hundreds of websites per week. These sites belong to several different types of companies and organizations, public and private, manufacturing and service companies, small business and Fortune 500, and government agencies. While each website has something different to offer, one thing can be said about all of them: They only have mere seconds to create a first impression on their visitors.

Just like individuals, websites have their own personalities which make them unique. Your website is an extension of your company and, often, the first experience a potential client will have with your company. What kind of first impression do you want them to have? What is the most important message to convey in a matter of seconds? Below are a few questions to ponder when creating or visiting a website:

Does it showcase the company’s competitive advantage? For what is the company known? Innovation and design? Durable products? Friendly service? Green practices? Does the website’s content and layout effectively communicate these capabilities?

Is it user-friendly? Is the website’s navigation intuitive? Does the format look neat and clean? Is the text easy to read? Does the site provide important information in a concise manner? Is it appealing? Does it make you want to browse around to learn more about the company?

Is it personal? Does the website express how the company can cater to your needs? Is it apparent how to contact the company and with whom to speak? Does it evoke an emotional response? Do you get a sense for the company’s personality?

Great websites feature the above characteristics. They not only create a pleasant user experience, but they’re also the foundation to build trust, integrity, and loyalty.

One website that gets an A+ in my book is www.2advanced.com. The company, 2Advanced Studios, is a design firm specializing in website design and development, rich media, branding, and other interactive solutions. Their website contains sensory features which provide users with a fun, aesthetically-pleasing experience that creatively showcases the company’s capabilities and innovative nature. Click on the link above, and take a look!

According to the Edward Lowe Foundation’s website, www.YourEconomy.org, the number of self-employed people in the United States has increased from approximately 2.2 million in 1993 to 7.8 million in 2008, an increase of over 250 percent. In that same time period, however, the number of Americans employed at large companies (Stage 4 companies – or those with more than 500 employees) has decreased from 15.8 million to 13.6 million, or 14 percent. This trend has repeated itself in almost all the geographies around the country.

The growth of Stage 1 companies, or those with between two and nine employees, is equally remarkable, rising from employing roughly 23 million people to approximately 39 million people from 1993 to 2008.

What many people may be surprised to learn is that Stage 2 companies, those with between 10 to 99 employees, accounted for 35% of the nation’s employment in 2008– the largest among any group identified by the Edward Lowe Foundation.

The picture below shows how the overall employment in the United States has changed over the last two decades:

This trend can be observed across the country in an even more dramatic fashion. Whittaker Associates created a sample of 15 metro areas for which to conduct this analysis. We selected five metro areas each among high, mid and low ranked cities from the Forbes Magazine’s Ranking of Best and Worst Places for Business and Careers 2010. The following metro areas were chosen for analysis:

The following Motion Chart depicts how the 15 metro areas compare with one another.

Tips on how to use the motion chart properly:

• Make sure the Size option on the right hand side is set to Population.
• Set the y-axis to either per-capita income or unemployment rate.
• For x-axis select one of the option that give you the percentage of labor force.
• For the color variable on the right-hand side, select the Forbes Ranking
• Hit the play button to see the motion chart in action (to change the speed of the motion chart, adjust the play speed to the right of the play button.

What you will notice among the 15 metro areas is that the total population that is self-employed rises in all metro areas. In the case of Stage 1 and Stage 2 companies, their share of employment rises more impressively in cities ranked higher by Forbes as the best place to do business. Many Midwestern cities, which are mostly relegated towards the bottom of the ranking, are usually concentrated more on the large companies (Stage 3 and Stage 4 companies) even though its share of the city’s employment is declining rapidly.

What city leaders and economic development officials need to recognize is that the economic picture has changed significantly in the United States. Large companies are not the primary job creators any more. Cities that are doing well (i.e. growing in population and economic prosperity) are those that provide equal, if not more, attention to the small businesses.

Review the change in employment by establishment size in the slides below. You can can click the play button and navigate the slides to view information about different cities. To view the images in full size, click on the images to view them on Picasa.

Access to capital has long been the key to economic success.  Whether it is from savings, friends and families, venture capital firms, or borrowed from a bank, capital is a key component to economic growth.

Recently, I attend a panel discussion by a group of venture capital managers who outlined their view of the current economic situation to an audience of start-up entrepreneurs.  They made several key points.  While capital is available, the competition for access to it has grown significantly while fewer VC s invest due to low rates of return and business failures.  They pointed out that start-ups now compete with established companies that have track records, profits, established customer bases, and proven business models. What was surprising to me was the exponential growth rate they seek of 20% or more per year with the end goal of being a $100 million company within 3-5 years.

The panelists pointed out the need to think like an investor when approaching the VC companies.  Look for ways to mitigate the risks: customers, products, management, market, capital, and investment.

They offered seven tips to the would-be venture capital clients:

1. Venture capital firms tend to bet on the jockey not the horse – talent is the key.
2. Be creative in a small box – stay focused.
3. Find a problem people are willing to pay to have solved.
4. Be committed.
5. Tap into the entrepreneurial ecosystem of support.
6. Entrepreneurs will repeat past behavior – show what you have done in the past.
7. Accept rejections gracefully – you may be back in the future with a better idea.

As our economy struggles to recover from the “Great Depression”, raising capital for business growth continues to be an issue.  Our financial system suffered a “heart attack” in 2007 when circulation stopped due to a loss of trust among financial institutions. Those businesses that depended upon borrowed money, such as real estate development, were the first to feel the impact as our economy went into shock and banks canceled lines of credit and called loans to address issues of capital requirements of the banks’ own balance sheet.    

Our recovery continues to work its way out from under the lack of access to capital. Companies now have orders to fill, employees to hire, and material to purchase.  There are encouraging signs in the increasing demand for temporary and permanent workers through employment agencies as fears of a “double dip” recession diminish. So, take heart. In past economic recoveries, these employment trends are the first signs of better times ahead.

The cleantech industry, which includes goods and services that reduce costs but are environmentally friendly, is growing at a rapid pace. Not too long ago, many green technologies were too costly to use and too complex to mass produce. Due to governmental backing of green initiatives through legislation such as the American Recovery and Reinvestment Act of 2009, federal loans, and tax credits, clean technologies have gained the support they need to become viable opportunities.

According to an article in Area Development magazine, The Promise of the U.S. Cleantech Industry, clean manufacturing jobs are scattered throughout the U.S. and found in cities of all sizes. The article ranked the top 15 metro areas with cleantech jobs, with progressive MSAs such as San Francisco and Boston placing first and fourth, respectively. But surprisingly, Detroit and other heavy industrial manufacturing cities were among the same list. These findings show promise that almost any area, regardless of size or historical industry clusters, can take part in the new green economy. So how can areas attract clean manufacturers to their region?

Several location factors need to be considered. Taken from the same article mentioned above, the figure below shows some of the location factors for solar, wind, and battery manufacturers.

Similar to any industry, proximity to customers, logistics, and labor costs play a role in the relocation of green manufacturers. However, for sectors such as solar, wind, and advanced battery manufacturing, the cost of power, availability of skilled labor, and business climate are even more critical when making a relocation or expansion decision. To attract clean manufacturers, it’s important for areas to possess these advantages in addition to offering substantial incentives.

Case Study: One state that has done an amazing job of attracting and growing clean energy firms is Oregon. Visit Business Oregon’s website to view an interactive map of success stories and learn more about their competitive advantages and incentives for the cleantech industry.

Source: Babinet, O., Gellman, D. (2010, Apr/May). The promise of the U.S. cleantech industry. Area Development Magazine, pp 24-30.

For many years, Europe appeared to be at the forefront of the solar industry. Most of the world’s major manufacturers were located there, and most of the sales happened in Europe as well. However, many European countries are now scaling back their incentive programs for solar installations, which were aiding the growth of the industry on the continent, leading to a dramatic decrease in new installations. Spain, for example, saw its annual new installations decrease from 2,710 MW in 2008 to a mere 180 MW in 2009. Germany and Italy, with new installations of 3,800 MW and 700 MW respectively in 2009, are among the most sought after markets in the solar industry. However, even in these countries, new installations are projected to decline over the years. The table below shows the comparison of the 10 most active markets in the solar industry in 2009.

The Solar Energy Industries Association (SEIA) reported in April that total employment within the solar industry in 2009 hit 46,000, an increase of 10,000 jobs even as the worst recession in decades hit our economy. SEIA estimates that by the end of 2010, the industry will directly employ around 60,000 people. Total grid-tied solar electricity production increased by 37%, or 441 MW, in 2009 bringing the total production in the U.S. to 1,653 MW. It is estimated that an additional 6,000 MW of solar installations are in the pipeline and are expected to become available over the next few years.

With such positive trends and an administration that is looking to diversify the country’s energy needs away from oil, the United States has become a destination of choice for many foreign solar companies.

Since January of this year alone, seven international solar companies have announced plans for new locations in the United States and Canada. These companies come from Germany, Netherlands, Spain, Greece, and China. Over 1,300 new jobs will be created as a result of these expansions. The table below has more information about these seven companies.

All of these announcements come on the heels of several other expansions and new investment plans announced by other U.S.-based solar product manufacturers. A total of 30 new projects and 17 expansions of solar product manufacturing facilities were recorded by Conway Data in 2009. These projects resulted in $4.6 billion in investment and creation approximately 8,000 new jobs.  The chart below shows the growth of solar projects in the U.S. since 2003.

Along with the number of projects, the number of jobs created by the industry has also increased dramatically over the last seven years. While there were just four projects creating 635 jobs in 2003 in the country, in 2009 there were 47 projects creating around 8,000 jobs. The chart below shows the progression of jobs created by the solar industry in the U.S.

While the Southwestern and Western United States had the highest growth in solar installations over the past few years, states like Pennsylvania and Michigan are now taking the bulk of the manufacturing projects in the country. In fact, Pennsylvania, with 11 projects in 2009, had the highest number of projects in the industry followed by Michigan with 8 projects. Below is a table of the Top 10 states in terms of projects in solar product manufacturing.

As the solar industry grows in the U.S., economic development officials and leaders need to recognize that our country is just catching up with a movement that has been around in Europe for more than a decade. With India and China both targeting to have over 20,000 MW installed capacity by 2020, the industry is going to continue this growth trend. As economic development officials embark on business recruitment efforts, it is important to recognize that the industry in more mature outside of the United States and international recruiting is needed to stay ahead of the game.

As a service to our friends in the economic development world, Whittaker Associates is putting together a list of international solar companies. The list will contain major international solar product manufacturers that are yet to have a manufacturing presence in the United States. A limited number of copies of that list will be available on our website early next month. Please keep an eye out for that announcement. If you would like to pre-order the list, please contact Vidhan Rana.