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©2007 ViTAL Economy, Inc. 1 Southern Illinois: Garden of the Gods Readiness Assessment Chapter 1: State, National & Global Trends December 18, 2007; revised Feb 15, 2008 CONNECT SI ViTAL Economy Alliance Frank Knott, Project Lead; Stan Halle, Senior Editor; Jim Haguewood, Rob Beynon, & Neil Gamroth, Principal Economic Researchers
©2007 ViTAL Economy, Inc Globalization: The World is Flat 1.02 eCommerce & Connectivity 1.03 KBE and Innovation 1.04 Transformation of U.S. Economy 1.05 Livable Communities & Age of Choice 1.06 Manpower & Immigration 1.07 Aging Population 1.08 Tourism 1.09 Logistics, Transportation & Distribution 1.10 Energy 1.11 Conclusions Table of Contents EXECUTIVE OVERVIEW: the Big Picture & Importance of Change in Southern Illinois EXECUTIVE OVERVIEW: the Big Picture & Importance of Change in Southern Illinois READINESS ASSESSMENT (RA) READINESS ASSESSMENT (RA) 1. State, National & Global Trends 2. Indigenous Resources & Industry Asset Mapping 3. Enabling Environment 4. Climate of Innovation, Incubation & Entrepreneurship 5. Southern Illinois Competitiveness 6. Regional Perspectives 7. Roadmap to Success APPENDICES
©2007 ViTAL Economy, Inc. 3 Chapter 1: State, National & Global Trends 1.01 Globalization: The World is Flat …… eCommerce & Connectivity ………… KBE and Innovation ………………… Transformation of U.S. Economy …… Livable Communities & Age of Choice ………………………………… Manpower & Immigration …………… Aging Population … Tourism …………… Logistics, Transportation & Distribution..…… Energy.…………… Conclusions ………. 133 Rural communities typically focus on their local geographic area and have limited insight into the larger world around them. This chapter provides key trend information and what this means for Southern Illinois. Each of these trends represents potential opportunities for Connect SI. Southern Illinois "Garden of the Gods"
©2007 ViTAL Economy, Inc. 4 Understanding Trends is Critical: Assumptions are Often Wrong I think theres a world market for maybe five computers - IBM Chairman, 1943 I think theres a world market for maybe five computers - IBM Chairman, 1943 American business must embrace globalization as the new reality or risk losing their place in the economy of the future. There are others out there willing to do the work if we arent. - - Globalization: The New Reality - Univ. of Wisconsin Journal Of Management In Engineering / Nov/Dec 2000 American business must embrace globalization as the new reality or risk losing their place in the economy of the future. There are others out there willing to do the work if we arent. - - Globalization: The New Reality - Univ. of Wisconsin Journal Of Management In Engineering / Nov/Dec 2000 "The range of what we think and do is limited by what we fail to notice. And because we fail to notice that we fail to notice, there is little we can do to change, until we notice how failing to notice shapes our thoughts and deeds. - Dr. Ronald Laing, Scottish Psychiatrist & Philosopher Chapter 1: Perspective
©2007 ViTAL Economy, Inc. 5 Chapter 1: State, National & Global Trends 1.01 Globalization: The World is Flat Southern Illinois "Garden of the Gods" Certain events, new technology and other shifts over the last two decades have fundamentally changed the rules of competition world-wide. Southern Illinois (SI) is now a virtual neighbor with every corner of the globe and, as such, can do business with any and all of them.
©2007 ViTAL Economy, Inc. 6 Globalization: The World is Flat Overview Tom Friedmans book The World is Flat provides many insights about how dramatically the world has changed over the last two decades m While any one of the ten (more recently eleven) flatteners could be viewed as a notable trend, it is the cumulative effect of the whole set that is truly profound m Taken together, these flatteners have opened up the world to everyone Barriers to entry have all but disappeared regarding almost any business, particularly those knowledge-based Size doesnt matter as much as what the Region brings to the table Combining the unique assets of a region, packaging these in a compelling manner, using connectivity to its fullest are the key enablers Moving goods & services has become far easier than moving people a Thai farmer can sell mangos to Carbondale, but may find it rather difficult to visit 1.01 Globalization: The World is Flat Every business in the world is now competing with each other in a closer and more intimate way
©2007 ViTAL Economy, Inc. 7 Results of Not Playing on the Global Stage SIs economy has not achieved potential due to not effectively participating in the Global Economy Source: State of Working Illinois, by Northern Illinois University (Nov 2005); 21st Century Workforce (May 2004); IMF Average Annual Growth Rate % 3.14% 2.19% 1.34% 5.62% 1.01 Globalization: The World is Flat Reduction of trade barriers & increased capital investment flow internationally have fueled this dramatic growth AAGR = Average Annual Growth Rate
©2007 ViTAL Economy, Inc. 8 Ten Flatteners: Intro Source: The World Is Flat, by Thomas Friedman The following five slides explain each of the Ten Flatteners in more detail Global unification under the auspices of capitalism Global unification under the auspices of capitalism Web-Browsers equals technology for grandmothers Web-Browsers equals technology for grandmothers Web-based standards Self-organizing collaborative communities (Apache, Wikipedia) Self-organizing collaborative communities (Apache, Wikipedia) Turbo-charged by the dot.com bubble Turbo-charged by the dot.com bubble China joins WTO China joins WTO Horizontal collaboration (Wal-Mart) Horizontal collaboration (Wal-Mart) Third-party managed logistics Third-party managed logistics Ability to build & maintain your own supply chain (Google) Ability to build & maintain your own supply chain (Google) Computing speed, file sharing, wireless Computing speed, file sharing, wireless Supply Chaining Off-Shoring Outsourcing Open- Sourcing Workflow Software New Age of Connectivity Fall of the Berlin Wall Amplifying Technologies Informing Insourcing Ten Flatteners Globalization: The World is Flat
©2007 ViTAL Economy, Inc. 9 The World is Flat: Ten Flatteners 1.Berlin Wall Comes Down November 1989 Millions of highly skilled engineers, scientists and technicians became available to serve the global market at bargain prices Human resource marketplace became global. Firms access best practice skills at competitive prices anywhere at any time. SI workforce supply chain must benchmark its performance against global best practice education & training 2.When Netscape Went Public, August 1995 from PC-Based to Internet-Based Platform The Internet became the medium for electronic communication. Anyone could communicate with anyone else on the planet without regard to boundaries Vertical, hierarchical control is gone. Geo-political boundaries became barriers to progress. The world became flat. Individuals communicating with each other, regardless of boundaries, create new ideas faster and cheaper. SI success will be directly related to how effectively it moves away from boundary-based policies and hierarchical organizational control 1.01 Globalization: The World is Flat Source: The World Is Flat, by Thomas Friedman
©2007 ViTAL Economy, Inc. 10 The World is Flat: Ten Flatteners 3.Workflow Software Enables a Global Supply Chain Workflow software seamlessly connects applications to applications, so that people can manipulate all their digitized content using their computers and the Internet People all over the world can now shape, design, create, buy and sell things, track inventories, prepare tax returns, read X-Rays from half a world away using a common software platform* SI is competing in a world without boundaries, which uses workflow software to improve productivity and increase prosperity. SIs economy will only be transformed when it encourages investment in workflow software to improve the efficiency and effectiveness of every citizen, business, NGO and government entity 4.Open Sourcing-Shareware Free tools from software (Linux) to servers (Apache) and encyclopedias (Wikepedia) enable millions of people and firms to compete with bigger organizations on a level playing field and get to market faster SI firms, governments, NGOs and citizens have the opportunity to leap frog traditional development timeframes and become global competitors through the savvy and effective use of Open Sourcing 1.01 Globalization: The World is Flat Source: *The World Is Flat, by Thomas Friedman
©2007 ViTAL Economy, Inc Outsourcing, Y2K, Using Telecom to Contract to Another Firm in Another Country Y2K proved that firms could access well developed intellectual capability in developing countries 24 hours per day without owning the capacity or reducing quality. Production is no longer limited by time or geography SIs mid-U.S. location and its significant educational resources positions SI to be a potential outsourcing hub for the Heartland of America to the world and the world to the Heartland of America. SI collaborating with next door neighbors resources versus competing with them is a critical step in making Outsourcing an opportunity rather than a threat 6.Off Shoring Moving a U.S. Operation to Another Country All prior flatteners prepared global firms to be able to produce the same product or service in the same way to serve local markets and expand global capacity. Off-Shoring is occurring from U.S. locations to the world and from global locations to the U.S. Off-Shoring is as much an opportunity as it is a threat to SI. The key is to identify those indigenous human, natural, geographic location and knowledge resources that enable SI to offer products and services to the global marketplace at higher value rather than at commodity prices The World is Flat: Ten Flatteners 1.01 Globalization: The World is Flat Source: The World Is Flat, by Thomas Friedman
©2007 ViTAL Economy, Inc Supply Chaining Connected Throughout the Chain Without Owner Control Elements of the supply chain from raw material to customer are connected, resulting in on-demand production and logistics resulting in increased efficiency and lower costs (Wal-Mart, CISCO, etc) Effective supply chaining requires that SI know what elements already exist in the region as well as where gaps exist. There is Supply-Chaining opportunities for SI in every field of economic output (tourism, healthcare, government services, agriculture, energy, healthcare products and services, etc). Expanded markets and increased numbers of higher value jobs resulting from effective supply chaining strategies 8.In-Sourcing UPS into Your Company Logistic companies (UPS, FEDEX) enter into a brand new market of relieving major product producers of non-core competencies. This results in improved quality and speed of service to the customer. It enables customers to go global faster using proven logistics resources SI has an opportunity to become a global logistic services hub for logistics firms because of its geographic location. SI business and government entities can identify In-Sourcing opportunities for improving customer service, quality and speed to market The World is Flat: Ten Flatteners 1.01 Globalization: The World is Flat Source: The World Is Flat, by Thomas Friedman
©2007 ViTAL Economy, Inc Informing: The Ability to Build and Deploy Your Own Personal Supply Chain of Information, Knowledge, and Entertainment (Google, Yahoo, MSN Web Search) Informing is searching for knowledge, allies and collaborators and connecting them. Small and mid-sized enterprises (SMEs) are able to level the marketplace by being able to operate and present themselves as an equal to large multinational corporations SI businesses, governments, NGOs and citizens have the opportunity to create new services and products and reach broader local, regional, national and global markets through the use of informing technologies and strategies 10.The Steroids Digital, Mobile, Personal and Virtual Information and communication technology innovations have created the ability to work from anywhere, anytime improving the speed of transactions whether we are at work, at home or on the go, whether we are wired or wireless SI, through Connect SI, is in the process of developing and implementing a broadband connectivity strategy that will enable all of SI to take advantage of these digital, mobile, personal and virtual steroids. Learning and adapting these technologies will be critical to SI economic transformation The World is Flat: Ten Flatteners 1.01 Globalization: The World is Flat Source: The World Is Flat, by Thomas Friedman
©2007 ViTAL Economy, Inc. 14 Globalization & The World is Flat:Implications SI is competing with World-is-Flat-savvy country economic strategies m SI political/jurisdictional boundaries are a competitive disadvantage m Collaboration across SI assets will be required to expand SI economy m Continued internal competition will relegate SI to continued decline m One of the fastest growing sectors: Logistics, Transportation & Distribution Its changing so fast, SI better get moving SI broadband access, penetration and usage need to be at best practice levels m SI institutions, governments, citizens and businesses must become more knowledgeable about the value and impact of web based productivity tools to take advantage of the ten flatteners for accelerated SI economic growth m World is Flat education of SI citizens needs to become a priority strategy m Wired and Wireless connectivity and applications strategy is essential Global markets are an opportunity for SI growth, not a threat to growth m SI needs to expand the percentage of its economy that is globally driven m A greater focus on value added KBE growth is critical to future success of SI m Public policies focused on industrial attraction must be changed 1.01 Globalization: The World is Flat
©2007 ViTAL Economy, Inc. 15 Globalization & The World is Flat: Opportunities The Global Economy is growing at 4xs the rate of SI SI can literally double its economy by tapping into global markets, by fostering new working relationships with foreign companies that desire entrance to the U.S. market m This means jumping from 1.34% to 3.85% average annual growth rate (AAGR) SI should use the ten flatteners as an opportunity to leverage its geographic location and inter-modal transportation and logistics assets to become a global logistics service center for In-Sourcing and Out-Sourcing SI should leverage its significant research and development knowledge base as well as workforce education and training assets to develop a significant regional collaborative KBE and innovation growth strategy SI has the opportunity to demonstrate to the rest of Illinois how to use the Ten Flatteners to develop a collaborative regional approach to economic development, 24x7 government services and industry cluster strategies that cross traditional political, industry and jurisdictional boundaries building prosperity for all 1.01 Globalization: The World is Flat
©2007 ViTAL Economy, Inc. 16 Chapter 1: State, National & Global Trends 1.02 Broadband Connectivity & eCommerce Southern Illinois "Garden of the Gods" While the Ten Flatteners have opened up access to global markets for all, broadband connectivity is the key to getting there market access has expanded exponentially. To take full advantage of this growing enabler, SI must learn how to maximize its usage.
©2007 ViTAL Economy, Inc. 17 Broadband Connectivity & eCommerce: Overview Broadband connectivity is bringing the undeveloped and developing countries on even par with the industrialized nations remoteness is now becoming an asset m Rural broadband parity with global best practice economies is as important as Rural Free Delivery was in the 19th century, electrification in the 1930s, the Interstate in the 1960s Key trends to watch: m Global connectivity has now put small & medium sized enterprises (SMEs) on an equal footing with corporate giants competitively m In 2006, the U.S. fell to 19th globally in household broadband penetration m As of Dec 2005, 87.5% of U.S. at-work connected users had high speed internet connections m Broadband access is now one of the top ten considerations in deciding business location m Annual eCommerce growth is six-times faster than the overall U.S. economy m Connectivity & eCommerce have made knowledge & human capital more important than physical-infrastructure and financial capital Broadband has the power to make geographic isolation irrelevant Tom Friedman 1.02 Broadband Connectivity & eCommerce Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 18 ICT Makes a Disproportionate Contribution to National Productivity Growth Country Overall Economic Growth Rate % Contribution of ICT ICT Contribution to Economic Growth United States4.3%0.819% Canada4.75%0.511% Japan1.5%0.533% Germany2.5%0.520% France2.2%0.314% UK3.1%0.619% Australia4.9%1.327% Belgium2.8%0.518% Korea5.0%1.224% Source: Enabling Canadas Economic Potential: ICT and National Economic Performance, InterVISTAS, 2005 ICT = Information, Communications & Technology Productivity growth is a key driver of economic growth Studies indicate ICT is responsible for somewhere in the region of 1/2 to 2/3 of overall productivity growth Evidence is showing that ICTs contribution to economic growth is continuing to increase 1950s – 2% 1990s – 17% 1.02 Broadband Connectivity & eCommerce
©2007 ViTAL Economy, Inc. 19 Growing SI Broadband Penetration is Critical Source: Organization for Economic Cooperation and Development (OECD) Broadband Statistics Dec 2005 (Survey of 14 Countries); Pew Internet and American Life Project Rural Broadband Internet Use Feb 2006 % Penetration of Population USAUSA S IS I ICELANDICELAND 1.02 Broadband Connectivity & eCommerce Since 2005, the U.S. has been slipping even further behind in Broadband penetration Technology Deployed in the U.S. DSL 39% Cable 54% Other 7% Note: SI 12% penetration (Jan 06) has already increased by 1/3 to 16% due to the collaborative efforts of Network Providers COI & Connect SI 12% 24% 54%
©2007 ViTAL Economy, Inc. 20 Source: PEW/ Internet, Home Broadband Adoption 2007 Rural vs. Urban Broadband: The Divide is Shrinking 1.02 Broadband Connectivity & eCommerce 47% of all adults have a broadband connection at home (2007) Among individuals who use the Internet at home, 70% have broadband and 23% have dialup 55% of Rural Internet users have a broadband connection at their home vs. 73% of Urban and Suburban Rural broadband adoption at 31% continues to lag behind Urban 51% & Suburban 52% 55% of Urban and Suburban workers have hi-speed internet at their work vs. 38% of Rural workers 47% of all adults have a broadband connection at home (2007) Among individuals who use the Internet at home, 70% have broadband and 23% have dialup 55% of Rural Internet users have a broadband connection at their home vs. 73% of Urban and Suburban Rural broadband adoption at 31% continues to lag behind Urban 51% & Suburban 52% 55% of Urban and Suburban workers have hi-speed internet at their work vs. 38% of Rural workers * SI SI as of Jan 06 Only 12% Penetration, less than 1/2 National Rural Average! SI as of Jan 06 Only 12% Penetration, less than 1/2 National Rural Average! Quote from SI Citizen: Connect SI has achieved more broadband growth in one year than the previous decade! * SI SI as of Nov 07 Up 1/3 to 16% Penetration SI as of Nov 07 Up 1/3 to 16% Penetration
©2007 ViTAL Economy, Inc % of American Adults Now Use the Internet eCommerce Activity U.S. Adults Who Have Ever Engaged in Activity (%) Researched a product or service prior to purchase78 Obtained travel information73 Purchased a product71 Purchased or made a reservation for travel63 Look for how-to, DIY or repair information55 Online banking43 Obtain financial information (i.e. stock quotes, mortgage interest rates) 41 Pay bills38 Rate/ review a product, service or person32 Use online classified ads or sites30 Sell something15 Buy/sell stocks, bonds, mutual funds13 Source: PEW Internet & American Life Project Home Broadband Adoption March Broadband Connectivity & eCommerce
©2007 ViTAL Economy, Inc. 22 U.S. Online Retail Sales: More than Doubled in 3 Years* *Excludes Travel, Prescription, and Auto *AAGR = Average Annual Growth Rate Source: Jupiter Internet Shopping Model, 2006 $Billions $12.3 $63.9 $130.3 Since the 3rd Quarter of 2003 U.S. Economic Growth has Averaged 4.6% vs. 26.8% AAGR in Online Retail Sales nearly 6xs faster! Since the 3rd Quarter of 2003 U.S. Economic Growth has Averaged 4.6% vs. 26.8% AAGR in Online Retail Sales nearly 6xs faster! 1.02 Broadband Connectivity & eCommerce
©2007 ViTAL Economy, Inc. 23 eCommerce Enables U.S. SMEs to Go Global Strong U.S. growth in flexible and dynamic SMEs (small/medium enterprises) driven by eCommerce m In 2005, SMEs employed 57 million Americans, over half of U.S. employment m 65% of European Gross Domestic Product (GDP) comes from SMEs, vs. 45% in the U.S.. SMEs dominate development of new eCommerce sites: m Accounted for 90% of new commercial sites in 2007 (vs. 80% in 2006 and 75% in 2003) m SMEs focus on eCommerce because it provides access to international markets in a cost-effective manner Small businesses turn to the Internet because: m Impact – communicates a strong organizational identity m Partnerships – allows companies to partner with distant companies for product development, marketing, etc. m Export Opportunities – opens up markets at lower cost of entry m Growth – replaces power in employee count with power of technology Strong U.S. growth in flexible and dynamic SMEs (small/medium enterprises) driven by eCommerce m In 2005, SMEs employed 57 million Americans, over half of U.S. employment m 65% of European Gross Domestic Product (GDP) comes from SMEs, vs. 45% in the U.S.. SMEs dominate development of new eCommerce sites: m Accounted for 90% of new commercial sites in 2007 (vs. 80% in 2006 and 75% in 2003) m SMEs focus on eCommerce because it provides access to international markets in a cost-effective manner Small businesses turn to the Internet because: m Impact – communicates a strong organizational identity m Partnerships – allows companies to partner with distant companies for product development, marketing, etc. m Export Opportunities – opens up markets at lower cost of entry m Growth – replaces power in employee count with power of technology Source: SMEs rule the world. Peter Cochrane. July 2006 Export Power with eCommerce 1.02 Broadband Connectivity & eCommerce
©2007 ViTAL Economy, Inc. 24 Broadband Connectivity & eCommerce: Implications Extreme growth in Online Retail Sales has a direct impact on Rural main-street retail as well as entrepreneurial-generated goods and services Broadband: key distribution channel for existing digital content & applications, driven by: m Rapid diffusion of read/write storage within consumer access devices (MP3 players, PVRs) m Benefits of interactive online purchasing tools, such as search, find and compare tools m Efficiency gained in bypassing off-line old distribution channels, getting closer to C (Ref: P=>C) Broadband content & applications: packaged or bundled with other services, driven by: m Convenience of a single relationship for order entry, billing, & customer service, Content & applications production stimulate significant cross-sector linkages, driven by: m Sharing production costs for content across a range of broadband platforms Broadband will stimulate new content and applications for the consumer and business markets, driven by: m Latent consumer demand for interactivity greater choices, e.g., anywhere, anytime, anything type access m Advanced user-devices, with technical capabilities approaching that of a PC, and the ability to perform multiple functions 1.02 Broadband Connectivity & eCommerce Broadband & eCommerce enables SI to take advantage of the Ten Flatteners to transform its economy not be the victim of these Broadband & eCommerce enables SI to take advantage of the Ten Flatteners to transform its economy not be the victim of these
©2007 ViTAL Economy, Inc. 25 Broadband Connectivity & eCommerce: Opportunities Southern Illinois Opportunity SectorsSector Niche Applications Tourism Development of a SI wide online tourism portal for one stop reservations and purchases (11 million people within 4-hrs drive) Healthcare Utilization of a SI wide healthcare Intranet for EMR, telemedicine, etc. International Incubation Online access and interaction with global best practice R&D and companies desiring to enter U.S. markets Telecommunications Creation of virtual organizations linking multiple sites using Intranets Homeland Security Remote locations enable better distribution of knowledge assets that avoid single-points-of-failure, reducing 9/11-type impact & risk Customer Service Development of virtual call centers for customer support Product Design Online global collaborations for product design and maintenance Education and Training Remote worker training for the national 10 million worker shortfall Product Procurement Creation of virtual buying groups, especially government for large common orders Retail Services Online retail and service franchises for small business; mobile-IT desks Southern Illinois Points of Light include: Illinois Virtual High School Audio-Image Marketing Shawnee Hills Wine Trail Illinois Eastern Community College On-line Nursing Southern Illinois Points of Light include: Illinois Virtual High School Audio-Image Marketing Shawnee Hills Wine Trail Illinois Eastern Community College On-line Nursing 1.02 Broadband Connectivity & eCommerce
©2007 ViTAL Economy, Inc. 26 Chapter 1: State, National & Global Trends 1.03 KBE and Innovation Southern Illinois "Garden of the Gods" While connectivity is a great enabler, it requires knowledge, innovative thinking and entrepreneurial spirit to take full advantage of this conduit to global markets growth, prosperity, & economic advantage (past and future), come from innovation.
©2007 ViTAL Economy, Inc. 27 KBE and Innovation: Perspective Every person, company or organization has IDEAS, INVENTIONS, PRODUCTS, & KNOWLEDGE with potential KBE market value m A KBE Economy is driven by the production, distribution and use of knowledge for growth, wealth creation, productivity and employment increases m KBE competition is based in innovation rather than price as in classical economies m Countries and regions that show more evidence of innovation are richer and grow faster m Companies that show more evidence of innovation post better financial performance Source: ViTAL Economy 1.03 KBE and Innovation TIME REVENUE GROWTH Traditional Economy Innovation Economy
©2007 ViTAL Economy, Inc. 28 KBE and Innovation: Overview KBE (Knowledge-Based Enterprise) Economies that grow as a result of innovation are transforming their regulatory and community resources to support just-in-time partnerships, lifelong learning and 24/7 global access Trends to watch include: m Small and medium-businesses (SMEs) & innovation have been key to U.S. job growth in recent decades many relying on unique knowledge or skills m In the last ten years, 90% of all U.S. job growth has been in KBE firms of 50 employees or less m Innovation is shortening the life-span of new/existing businesses at ever increasing speed m KBE work and workers are more mobile and are choosing active lifestyle in Urban or Rural settings … suburban living is no longer in vogue m ALL Product and services have the potential to exchange ever quicker and cheaper via the internet around the world Most SI businesses have not leveraged this opportunity Many new businesses have yet to be created to accomplish this 1.03 KBE and Innovation In a KBE Economy, the best strategy for profits is to invest in the connecting power of the internet In a KBE Economy, the best strategy for profits is to invest in the connecting power of the internet Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 29 Knowledge versus Industrial Enterprise Industrial EnterpriseKnowledge-Based Enterprise Economies of scaleSmaller business units Standardization of workCustomization of work Standardization of workforceFlexible, multi-skilled workforce Financial capital as scarce resourceHuman capital as scarce resource Corporate HQ as operational controllerCorporate HQ as advisor & core competency guardian Hierarchical pyramid structureFlat or networked structure Employees seen as expenseEmployees seen as investment Internally focused top-down governanceBoth internal and external distributed governance Individualistic functional orientationTeam orientation, emphasis on cross-functional teams Information based on need to knowOpen & distributed information system Vertical decision makingDistributed decision making Emphasis on stabilityEmphasis on change Emphasis on vertical leadershipEmphasis on empowered self-leadership 1.03 KBE and Innovation Business has shifted from where you compete to how you compete Source: ViTAL Economy; 1000ventures.com
©2007 ViTAL Economy, Inc. 30 Must Haves of a KBE Economy 1.03 KBE and Innovation Education Level m Percentage of college graduates is primary indicator of higher per capita income Science and Technology Activity m 75% of personal income growth during the 90s tied to technology output Export-Oriented Industries m Industries oriented to national/global markets produce higher value products and pay more Entrepreneurial Initiative m 90% of the new jobs created in the new economy will be generated by companies of 50 or less employees Innovation Across Industries and Sectors m Productivity gains do not depend on what region an industry competes, but rather how it competes Talent Strategy m Regions that promote talent across industries are most likely to become economic winners Reduction of Poverty and Inequality m Broad-based well-being of residents and decreased poverty are important for sustained increases in economic growth Source: ViTAL Economy
©2007 ViTAL Economy, Inc. 31 Microprenuers are the Stars of KBE Economy Micropreneurship is a business trend for individuals that falls between the traditional entrepreneur and the garage salesman m With eBay, Amazon, PayPal, low cost manufacturing in Asia, and logistical support from companies like UPS, an micropreneur can start a business even without a bank loan m These businesses run lean with very little out-of-pocket cost New business creation is at record high levels: m Over the past two years there have been between 2.3 and 3.5 million new businesses, 0.5 million per year in the 1970s Source: NFIB m Most will remain small mom-and-pop operations m A small share of start-ups will grow into titans exceptionally important: 4% of all U.S. companies, yet create 60% of all new jobs Technology progress stems from: m New radical innovations (50%) m Incremental or sustaining improvements (50%) m 95% of radical innovations come from new companies, not big, established firms R&D spending in largest companies declined from 65% to 43%, while R&D has grown in smaller companies 1.03 KBE and Innovation Source: National Federation of Independent Business
©2007 ViTAL Economy, Inc. 32 KBE Economy: Emergence of the Creative Class 1.03 KBE and Innovation The Creative Class composed of workers whose job is to create meaningful new forms m Composed of scientists and engineers, university professors, poets and architects, to name a few m 38.3 million Americans and 30% of the workforce in America identify themselves with the creative class m Grow more than 10% in the past twenty years m Shaping a new culture for the America of the 21st century The Creative Class and the Global economy m Will bring any country who has them to great economic power and growth m Driven by the shift towards technology, research and development, and the internet m Creates new ideas, high-tech industry and regional growth m Europe is now almost equal with America's numbers for this class m Regions & cities compete to attract the Creative Class Jobs follow the Creative Class! *Source: Work of Nations by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004: Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida
©2007 ViTAL Economy, Inc. 33 The Creative Class Fuels a KBE Economy Business Trends m Business, engineering and design schools are revamping curriculum within traditional programs to meet companies demand for innovation, globalization, knowledge management and product design skills as competitive advantage m Companies are addressing customer and organizational demands for consumer power and online cultures by recruiting professionals who understand and can manage in a world where global consumers co-create goods and services in peer relationships m Businesses now recognize that a vibrant cultural arts community is critical to the development of livable communities which encourage creativity and innovation in their workforce. Creative Worker Trends m Creative workers play an increasing role in forming new jobs and companies, and helping mature industries retool m The U.S. non-profit arts and culture community grew by 24% from generating $166.2 billion in annual economic activity and supporting 5.7 million full-time jobs m Creative workers thrive in an environment where there is an authentic sense of place, a recognition of diversity and opportunities for an energetic exchange of ideas m Creative workers are mobile and are attracted to areas where creativity is welcomed *Source: Work of Nations by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004: Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida 1.03 KBE and Innovation
©2007 ViTAL Economy, Inc. 34 SIs Opportunity to Attract the Creative Class 1.03 KBE and Innovation Creative Class populations are converging in areas that provide them special amenities; the key is offering the three 'T's: m Talent have a highly talented/educated/skilled population m Tolerance have a diverse community, which has a 'live and let live' ethos m Technology have the technological infrastructure necessary to fuel an entrepreneurial culture The Creative Class is looking for regions that better accommodate their cultural, creative, and technological needs m SI can provide these qualities attractive to the Creative Class m SIUC, the Community Colleges and R&D Parks are great attractors and could be promoted to these creative people *Source: Work of Nations by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004: Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida
©2007 ViTAL Economy, Inc. 35 High Performing Rural Communities Rural communities that attract Creative Class professions have strong job growth and tend to generate more patents and adopt technology faster m Richard Florida Research defines the Creative Class as jobs that are generated by KBE workers m Counties with Creative Class attributes are among the top 25% highest performing in the U.S. m More than twice as many metro counties (593) have Creative Class attributes as non-metro counties (205) m Rural communities with a high percentage of Creative Class jobs had stronger job growth than Urban regions Key to growth of rural communities, which support Creative Class professions, is the strategic role of a locally based research university U.S.D.A. ranks Jackson and Williamson Counties as non-metro Creative Class counties; by comparison, IN had none; IL had only two others U.S.D.A. ranks Jackson and Williamson Counties as non-metro Creative Class counties; by comparison, IN had none; IL had only two others 1.03 KBE and Innovation *Source: Work of Nations by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004: Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida;
©2007 ViTAL Economy, Inc. 36 Role of Universities in a KBE Economy Teaching Research Service Ivory Tower 3 Pillars Teaching to Learning Classrooms Classrooms without walls Teaching inputs Educational outcomes One-way content delivery Two-way exchange Preparation of next generation Continuous prep of all generations Research to Innovation Idea generation Idea application Individual inventions Collaborative inventions Single discipline focus Interdisciplinary focus University-centered work Regional collaborations Service to Shared Leadership Episodic, short-term involvement Sustained, long-term involvement Tactical, individual contributions Strategic, institutional commitment Issue/cause focus Community/region well-being focus Accountability for services rendered Shared responsibility for results FROM:TO: Stewards of Place 3 Pillars Source: Collaborative Economics; 2006; Alliance for Regional Stewardship, AASCU, & NCHEMS 1.03 KBE and Innovation
©2007 ViTAL Economy, Inc. 37 KBE and Innovation: Implications No high-growth economy can maintain high wages and living standards, and hold its own in global markets, by producing standard products using standard methods We live in an age of increasing pace of change and information innovation healthy communities are both knowledge-centric & creative Communities need to create a climate that encourages the development, incubation and growth of UNIQUE ideas/opportunities Universities, colleges and incubators are critical to developing a prosperous KBE (Knowledge-Based Enterprises) economy m Effective technology transfer is key to ensuring that innovation is commercialized m Productivity and prosperity cannot increase without innovation m In an age where economies are driven by ideas, universities must do more than creating & disseminating ideas it requires a redefinition of the university-model that fosters permanent engagement as a full partner in the viability & vitality of the region to which each university is connected, …* There are prerequisite elements/qualities to attract & retain KBEs in a rural community (see Section 1.05 Livable Communities) 1.03 KBE and Innovation * ©2006 Alliance for Regional Stewardship, AASCU, & NCHEMS Tools & Insights for Universities Called to Regional Stewardship
©2007 ViTAL Economy, Inc. 38 KBE and Innovation: Opportunities Encourage the development of innovation-fostering incubators, knowledge transfer and commercialization systems, that lead to more local start-ups m Continually improve your ability to identify and commercialize new products, services and processes Transform to a KBE Economy SI has existing assets supporting innovation: SIU research, Community Colleges, Incubators, Research Parks, etc. m The best opportunities will link R&D innovations with entrepreneurs and specialty finance bringing economic benefit to the region Over 7,000 new KBE jobs can be created by SI innovators with knowledge that can address global trends such as: m Green technologies m Homeland security response and services m Mining & safety-related technologies m Bio-sciences, plant and animal Existing success stories in SI are proof that this can be done: m Dinger Bats driven by individual passion to produce in SI and compete globally m Dippin & Dots new application for CO 2 technology m Precision Mining (see Chapter 4) innovative application of mine infrastructure m Crownline Boats – innovators in recreational boating m Green Locomotives – National railway m CommunityLink – a service of Craig Williams Creative 1.03 KBE and Innovation
©2007 ViTAL Economy, Inc. 39 Chapter 1: State, National & Global Trends 1.04 Transformation of U.S. Economy Southern Illinois "Garden of the Gods" The U.S. is experiencing a profound economic transformation driven by globalization and our transition to an economy based on knowledge. Tried and true industries of the past are shrinking and whole new ones are emerging.
©2007 ViTAL Economy, Inc. 40 Transformation of U.S. Economy: Introduction Americas Great Lakes region, once the core of the nations industrial production and wealth creation, is struggling to maintain its ground m This 12-state region reaches from Buffalo and Pittsburgh in the east, to Minneapolis-St. Paul and St. Louis in the west m Some parts of the region, such as Chicago and the Twin Cities, are thriving in the KBE Economy, while other communities, like Buffalo, Detroit, Cleveland, and Milwaukee, are losing jobs, talent, and economic vitality Great Lakes states lots to offer, yet have suffered more than others: m More than a third of U.S. manufacturing job losses from 2000 to 2005 occurred in seven Great Lakes states m Yet, colleges and universities in these states annually produce 38% of all U.S. bachelor degrees, 36% of all science and engineering degrees, and 37% of all advanced science and engineering degrees m The Great Lakes watershed includes one-fifth of the worlds fresh water and almost 11,000 miles of coastline Source: The Vital Center: A Federal-State Compact to Renew the Great Lakes Region: The Brookings Institution, October Transformation of U.S. Economy
©2007 ViTAL Economy, Inc. 41 Transformation of U.S. Economy: Overview KBE and innovation are fundamental driving forces changing the very basis of our economy the rules, structure, systems have all changed m The old way: For 25 years have only paid for my hands, when you could have had my brain for nothing GE hourly worker to Jack Welch, CEO Trends to watch for: m Over the last four decades there has been a monumental shift in the structure of the U.S. Economy from Manufacturing to Services Manufacturing employment shrunk as a result of productivity improvements due to more efficient use of labor, automation and new IT Service industries created more high-skilled occupations than manufacturing 30%+ of the these jobs were in the highest skill category of professional, technical, managerial and administration, versus only 12% in the manufacturing sector m Traditional commodities and services have also been transforming as new opportunities for value-added niches have emerged e.g., in bio-agriculture creating new pharmaceuticals from tobacco m Agriculture is also declining as a % of the national economy 1.04 Transformation of U.S. Economy In ten years only one in seven businesses existing today will still be in business in the USA. Change is happening quickly, open your eyes or be left behind - Peter Drucker Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 42 U.S. Economy Restructured Since the 1960s Share of U.S. Economy GDP by Economic Sector Source: Bureau of Economic Analysis From 1960 to 2006: Manufacturings share of GDP fell by more than 50%, while Services share almost doubled *F.I.R.E. = Finance, Insurance & Real Estate 1.04 Transformation of U.S. Economy Biggest % Declines: Agriculture Manufacturing Biggest % Growth: Services F.I.R.E. Biggest % Declines: Agriculture Manufacturing Biggest % Growth: Services F.I.R.E.
©2007 ViTAL Economy, Inc. 43 Globalization hits Manufacturing in Illinois Manufacturing sector in Illinois declined from 30% of jobs in 1970 to 12% (2006), due to: m Increased automation requires less human labor m Difficulty finding skilled young workers Source: sciencejobs.com, Insider Article Manufacturing represents only 10% of jobs in the Southern Illinois region now Net Result: traditional manufacturing is no longer a target area for growth and jobs Manufacturing Employment as a % of IL Economy: 1.04 Transformation of U.S. Economy
©2007 ViTAL Economy, Inc. 44 Manufacturing Job Loss in IL Was Worse 1.04 Transformation of U.S. Economy Illinois: Underachiever in Job Growth Illinois: Overachiever in Job Loss IL lost 1.86 manufacturing jobs for every job lost by RMW (Rest of the Mid-West) between IL lost 1.86 manufacturing jobs for every job lost by RMW (Rest of the Mid-West) between
©2007 ViTAL Economy, Inc. 45 U.S. Holds a Globalization Productivity Advantage The U.S. leads all countries in the absolute level of labor productivity, both per hour and per employee The increased productivity performance in the manufacturing sector causes optimism for the sectors ability to adjust to rising levels of competition KBE innovations create advanced manufacturing leaders offering higher wage U.S based jobs A 31% productivity advantage of the U.S. economy over OECD* members accounts for 3/4s of the per capita income difference Source: Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers, Transformation of U.S. Economy *OECD = Organization of Economic Co-operation and Development
©2007 ViTAL Economy, Inc. 46 Yet Advanced Manufacturing Remains a U.S. Cornerstone The manufacturing sector continues to account for 14% of the U.S. GDP and 11% of the total U.S. employment. BEA analysis: Every $1 of final demand spent for a manufactured good generates $0.55 of GDP in the manufacturing sector and $0.45 of GDP in the non-manufacturing sector From 1977 to 2002 productivity in the overall economy increased 53%; while manufacturing sector productivity rose by 109% The manufacturing sector continues to account for 14% of the U.S. GDP and 11% of the total U.S. employment. BEA analysis: Every $1 of final demand spent for a manufactured good generates $0.55 of GDP in the manufacturing sector and $0.45 of GDP in the non-manufacturing sector From 1977 to 2002 productivity in the overall economy increased 53%; while manufacturing sector productivity rose by 109% How does the U.S. compete? Manufacturing Industry Facts Rising productivity is the key to maintaining U.S. competitiveness in manufacturing Innovation holds the key to productivity Rising productivity is the key to maintaining U.S. competitiveness in manufacturing Innovation holds the key to productivity A nations standard of living in the long term depends on its ability to attain a high and rising level of productivity in the industries in which its firms compete.** **Source: Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers, Transformation of U.S. Economy
©2007 ViTAL Economy, Inc. 47 Declining Impact of Agriculture Jobs Productivity led to resource and agricultural job losses throughout the 1900s Farm jobs were reduced to less than 1% of all U.S. jobs in the 1980s Reasons include: m Productivity gains (doing more with fewer workers) m Consolidation of farms Net result: traditional, commodity- based agriculture will not lead job growth or recovery The future lies in value-added agriculture U.S. Resource Jobs Declined Steadily as % of all jobs U.S. Farm Jobs Declined to less than 1% of all jobs in the 1980s Source: BEA Note: Resource Jobs includes farming, forestry, hunting and fishing 1.04 Transformation of U.S. Economy
©2007 ViTAL Economy, Inc Transformation of U.S. Economy New Forms of Ag = Value-Added Opportunities Biotech-science refers to lab-based techniques developing biological research, that will supply goods and services for use by humans, such as: Recombinant DNA Tissue cultures-based processes Biotech combines disciplines like genetics, molecular biology, biochemistry, embryology, cell biology, & seed hybridization Linked to practical disciplines like chemical engineering, information technology, nano bio-technology and robotics The U.S. biotechnology industry includes approximately 1,000 companies with combined annual revenue close to $50 billion Typical bio-agriculture companies are small, averaging 30 employees Bio-agriculture attracts venture-capital funding SIU is a leader in these sciences and is actively transferring this research to new business start ups Source: ViTAL Economy
©2007 ViTAL Economy, Inc. 49 U.S. Economy Growing in Value-Added Services % of the workforce was in Agriculture 37% the workforce was in Agriculture 1.5% of the workforce was in Agriculture % of the workforce was in Services 26% of the workforce was in Services 82% of the workforce was in Services Source: Richard W. Fisher, President, Federal Reserve Bank of Dallas, May, 2007 Our per capita wealth has grown as we've moved up the value-added ladder. Most high paying jobs are in services engineers, scientists, computer systems analysts, stockbrokers, professors, doctors, lawyers, dentists, CPAs, entertainers and other service providers, to say nothing of the mega- compensation paid to hedge fund managers and financial engineers.… 1.04 Transformation of U.S. Economy
©2007 ViTAL Economy, Inc. 50 Service Exports: a Continuing Success Story While the U.S. runs a trade- deficit on Goods, Services continue to be an export success story U.S. service exports are growing rapidly. Between 2005 and 2006, U.S. service exports increased 12% Service exports include: m Travel m Transportation (cargo) m Royalties and fees m Consulting The majority of service exports are to Europe (40%), Asia-Pacific (27%), Latin America (17%), and Canada (10%) Service Exports 2006 U.S. Has Strong Service Surplus Source: BEA 1.04 Transformation of U.S. Economy
©2007 ViTAL Economy, Inc. 51 Shift from Industrial to Service Economies 1970 ($ Billions current dollars) 2006 ($ Billions current dollars) Representation of Total GDP (%) 1970 – 2006 Trend Gross Domestic Product (GDP) $62,931$589,598 Natural Resources$1,818$3,7612.9% - 0.6% Construction$3,111$28,0414.9% - 4.8% Manufacturing$18,176$77, % % Wholesale Trade$4,992$42,2847.9% - 7.2% Retail trade$6,148$33,8749.8% - 5.7% F.I.R.E.**$9,247$132, % % Services**$13,210$214, % % Government$6,230$56,8239.9% - 9.6% Source: Bureau of Economic Analysis Notes: Services sector includes health and education F.I.R.E. = Finance, Insurance, and Real Estate Illinois GDP by Industry 1.04 Transformation of U.S. Economy **F.I.R.E. and Services represent the sectors for high wage KBE jobs
©2007 ViTAL Economy, Inc. 52 Breaking News Headlines 21 st Century Economies Create Jobs Differently Job growth in an economy is directly related to the percentage of your economy thats globally based Economic Growth Is Global 4.8% growth forecast for the Global economy 1.9% growth forecast for the U.S. economy - Business Week October 29th, 2007 U.S. Mega Companies Are Leading Globalization Mega-U.S. companies are chasing global opportunities because the most growth is there U.S. is leading globalization, not following it Off-shoring has been driven by U.S. companies not by foreign competitors 100% of Budweiser's profit gains in the third quarter came from sales in other countries -International Monetary Fund, World Economic Outlook, Oct Transformation of U.S. Economy Connectivity enables companies of any size to access these growth markets
©2007 ViTAL Economy, Inc. 53 This will be the 20th consecutive quarter in which foreign earnings of U.S. groups have grown at a double-digit clip; in fact, among the S&P 500, overseas profits are growing twice the rate of domestic operations profits - Bank of America U.S. Company Profits $149B in 18 countries; up 68% in 3 years U.S. Company Profits $149B in 18 countries; up 68% in 3 years Successful SMEs are doing the same thing 1.04 Transformation of U.S. Economy Source: National Federation of Independent Business, Sept 07 Article; and Small Business Administration Note: SBA defines Small Business as companies with up to 50 employees Fortune 500: Chasing Growing Global Markets Small business** exporters account for nearly 30% of total U.S. exports, which will approach $1 trillion in 2007 From 2000 to 2006, the number of small businesses doing exports jumped by 228%
©2007 ViTAL Economy, Inc. 54 Transformation of U.S. Economy: Implications SI manufacturing employment has declined for 20+ years. Agriculture employment is also decreasing due to: m Increasing average farm size m Productivity gains m Loss of Agricultural land m High rail rates for agricultural goods has reduced competitiveness Regional and state policies as well as ED strategies need to more realistically reflect the growth of KBE firms and creative class employment in the economic growth sectors of F.I.R.E. and Services Manufacturing and agriculture strategies need to be focused on value-added rather than commodity-based SI has substantial and unrealized opportunity in the global economy 1.04 Transformation of U.S. Economy The Transformation of U.S. Economy continues Southern Illinois as a whole has, in effect, been impacted by, but has not actively participated in these profound shifts!
©2007 ViTAL Economy, Inc. 55 Transformation of U.S. Economy: Opportunities Leverage the significant workforce development resources of SI to develop the Region into a global KBE workforce hub from the Heartland of America to the World Leverage SIs long growing season into value-added agriculture, bio-ag, etc. applying Dixon Springs and SIUs research & technology and its plant stress zone reputation Develop KBE opportunities in existing SI industries mining, bio-agriculture, waste water management, safety, advanced manufacturing, energy, etc. Connect the healthcare sector into a comprehensive regional economic development strategy to achieve significant KBE job growth Harvest & leverage asset mapping info to create sustainable new SI growth sectors Examples of successes in Southern Illinois: m Crownline Boats, Inc. 150 dealers in US, Canada, Europe, South America, Russia and Australia m DBT America in Carrier Mills Major Manufacturer and Re-builder of Mining Equipment m Dippin Dots Asia, Middle, East, Europe, Latin America, South America, Oceania 1.04 Transformation of U.S. Economy "There is no magic formula to get the Illinois economy moving again. The key lies in thousands of decisions made by individual firms and workers that can make the state more competitive. * "In the modern, highly competitive world economy, few advantages last forever. The only way to succeed in the modern economy is to constantly change to respond to competitive forces. * "There is no magic formula to get the Illinois economy moving again. The key lies in thousands of decisions made by individual firms and workers that can make the state more competitive. * "In the modern, highly competitive world economy, few advantages last forever. The only way to succeed in the modern economy is to constantly change to respond to competitive forces. * *Source: The Illinois Report, 2007
©2007 ViTAL Economy, Inc. 56 Chapter 1: State, National & Global Trends 1.05 Livable Communities & Age of Choice As our economy continues to transform and businesses shift toward capitalizing on their knowledge-components, workers are also changing their loyalties and the basis for their lifestyle decisions. These are folks who practice: live where you want, work where you live
©2007 ViTAL Economy, Inc. 57 Livable Communities & The Age of Choice: Overview High skilled workers are choosing active Urban or recreational Rural lifestyle fleeing the blighted suburbs and cities in search of cleaner, greener, smaller, safer and more neighborly communities Trends to watch include: m High skilled workers are choosing active Urban or recreational Rural lifestyle. Over the last 10 years many rural counties have reversed decades of population decline m More and more companies are embracing virtual teams collaborating across the globe fostered by connectivity and other supporting technologies Employees are telling employers where they will live and work in the age of choice m Emerging KBE firms are prioritizing location decisions based on quality of life characteristics that are attractive and welcoming of the creative class workforce m As the baby boom generation begins to retire ( ), a significant influx of urban retirees moving to rural communities is expected 1.05 Livable Communities & Age of Choice I have seen the critical role that the arts play in stimulating creativity and developing vital livable communities Paul G. Allen, Co-founder of Microsoft I have seen the critical role that the arts play in stimulating creativity and developing vital livable communities Paul G. Allen, Co-founder of Microsoft Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 58 Rural America is Coming Back From 1990 to 2000, the population of non-metro counties in the U.S. increased by 10% why? m The lower cost of living, the proximity to natural resources such as lakes and mountains and a less stressful quality of life m A significant attraction to many Americans and recent immigrants m While some of these recent arrivals to rural America are retired, most of them are still of working age many bring wealth and a desire to remain intellectually engaged Increased geographic flexibility for many workers, largely as a result of improved technology, has also allowed many people to move or build second homes in rural areas that are close to desirable recreation areas 1.05 Livable Communities & Age of Choice Source USDA Briefing Room Report, Economic Research Service
©2007 ViTAL Economy, Inc. 59 Livable Communities: Portals to Most Cherished Places Livable Communities offer an attractive package that makes them a community- of-choice: m Pristine environment, community appearance & proximity to natural beauty & cultural amenities m High quality, relevant education and high quality healthcare m Safe & uncongested streets, building code & zoning that enhance property value m Networks of like-minded thinkers which support a climate of innovation Rural counties that had high levels of natural amenities – a mild climate, varied topography or access to surface water – averaged a 120% increase in population from 1970 to 1996 m Whereas rural areas that offered few natural amenities averaged only a 1% increase in population during the same period m Rural regions that lost population in the 1990s were mostly regions dependent on agriculture or mining (and have not leveraged their natural assets) 1.05 Livable Communities & Age of Choice States with strong environmental policies have enjoyed more economic growth than those with weak ones Bank of America study States that do the most to protect their natural resources also wind up with the strongest economies and the best jobs Institute for Southern Studies Report States with strong environmental policies have enjoyed more economic growth than those with weak ones Bank of America study States that do the most to protect their natural resources also wind up with the strongest economies and the best jobs Institute for Southern Studies Report
©2007 ViTAL Economy, Inc. 60 Curb Appeal is Critical Choosing a community is like buying a house; if you dont like what you see from your car, you wont get out m Curb appeal refers to the desirability of a community and a region when seen from the curb, from the outside m You cannot get the spouses of desired KBE workers to move to communities that do not have curb appeal Just think about what it feels like when you drive into towns leading the way, including Elizabethtown, Steeleville, Albion, Vienna, Metropolis, Red Bud, Fairfield they act as gateways to SIs Garden of The Gods 20% or less of SI counties, municipalities and townships have any form of planning, zoning or building codes or permits. Some national firms are now telling their employees not to buy homes in these communities to avoid resale problems What do visitors see when they visit Southern Illinois? 1.05 Livable Communities & Age of Choice
©2007 ViTAL Economy, Inc. 61 Arts & Culture: Strong Attraction Potential for KBE Workers Case Study Key Elements of Success Design – Identify what makes the community unique and appealing both to its residents and potential visitors Adaptation rather than Replication – Success does not come from a cookie cutter approach, but rather identifying uniqueness, assessing existing programs and looking to the communities strengths and weaknesses Involve Artists and Other Professionals – most successful revitalization programs are were developed by artists, art entrepreneurs, business owners and creative professionals Establish Partnerships – the arts have the ability to create unique and new partnerships in the community with greater impact Use Available Resources – under utilized or abandoned buildings, factories and historic structures become creatively woven into a revitalized area Community Involvement – revitalization projects with the greatest chance for success are ones that target the local community and tourists Design – Identify what makes the community unique and appealing both to its residents and potential visitors Adaptation rather than Replication – Success does not come from a cookie cutter approach, but rather identifying uniqueness, assessing existing programs and looking to the communities strengths and weaknesses Involve Artists and Other Professionals – most successful revitalization programs are were developed by artists, art entrepreneurs, business owners and creative professionals Establish Partnerships – the arts have the ability to create unique and new partnerships in the community with greater impact Use Available Resources – under utilized or abandoned buildings, factories and historic structures become creatively woven into a revitalized area Community Involvement – revitalization projects with the greatest chance for success are ones that target the local community and tourists 1.05 Livable Communities & Age of Choice Rock Island, Ill. pop. 38,714 Began with a small startup grant to construct 4x8 displays for juried Phantom Art Gallery in the windows of empty storefronts in downtown The Phantom Art Gallery increased traffic in the downtown area, valuation of the downtown and utilized the arts as a tool for revitalization The first festival produced by The District was Ya Maka My Weekend, held in the summer of 1992 with only six weeks of planning Vacant store fronts have been filled, long dormant upper floors have been transformed into loft apartments, and more than 60 new businesses have opened The District has propelled Downtown Rock Island from worst to first. In 1990, Rock Island was perceived as having the worst downtown in the Quad Cities and in 2000, 2002, and 2005 it was perceived as having the most active Rock Island, Ill. pop. 38,714 Began with a small startup grant to construct 4x8 displays for juried Phantom Art Gallery in the windows of empty storefronts in downtown The Phantom Art Gallery increased traffic in the downtown area, valuation of the downtown and utilized the arts as a tool for revitalization The first festival produced by The District was Ya Maka My Weekend, held in the summer of 1992 with only six weeks of planning Vacant store fronts have been filled, long dormant upper floors have been transformed into loft apartments, and more than 60 new businesses have opened The District has propelled Downtown Rock Island from worst to first. In 1990, Rock Island was perceived as having the worst downtown in the Quad Cities and in 2000, 2002, and 2005 it was perceived as having the most active This example is a proof of concept to the VE principles underlying Connect SI
©2007 ViTAL Economy, Inc. 62 Leveraging Arts & Culture in Livable Communities LocalNon-Local 61%39% $19.53$40.19 Source: Arts and Economic Prosperity III, Livable Communities & Age of Choice Arts and Culture Audience Spending Avg: $27.79 per person, per event +28% U.S. Non-Profit Arts and Culture Industry
©2007 ViTAL Economy, Inc. 63 Most counties have less than 1% of their employment tied to the arts Source: Amber Waves, 2007 Rural Counties Are Arts Magnets Rural communities as arts magnets demonstrates their ability to attract and retain creative talent related to the initiatives promoting rural cultural tourism A primary component to creating rural arts magnets is the regions ability to retain college educated workers 1.05 Livable Communities & Age of Choice
©2007 ViTAL Economy, Inc. 64 Source: William H. Frey analysis of 2000 U.S. Census Livable Communities Practice Green Economics Purchase products that have been produced using recycled materials Apply sustainable building designs to help reduce the consumption of non- renewable resources, minimizing waste and creating healthy environments Utilize environmentally friendly service contractors for activities such as hazardous material handling and waste management Development and implementation of cost effective waste prevention and recycling programs including waste collection, reuse strategies and disposal of excess and depreciated inventories Promote markets for locally grown food…will be $7 billion market by 2011 Develop innovation strategies that grow new green KBE businesses Buy and lease environmentally friendly vehicles that use renewable fuel sources and have a lower overall consumption Business Week 2007: Green equals Profits; Green equals Economic Growth 1.05 Livable Communities & Age of Choice
©2007 ViTAL Economy, Inc. 65 Livable Communities & Age of Choice: Implications KBE and other high wage earners have a CHOICE were to: #1-live and #2- work m Communities that proactively seek to become prime locations for these folks will benefit the most Standards and improvements to one community or neighborhood is not enough to be considered a Livable Community m Joining forces across a region is essential to muster the necessary resources & critical mass needed to become a true Livable Community SI has thus far missed the rural revival m Rural areas with natural amenities, recreational opportunities and/or quality of life advantages are seeing significant population growth (2000 Census Analysis) An active arts and culture character is a primary part of a Livable Community with benefits including the attraction of visitors and new investment m Community events and festivals highlighting unique local artisans and culture are hot and relatively a simple way to differentiate a community Unless Southern Illinois has CURB APPEAL it will decay as the U.S. transient population looks for a better life for both work and active retirement Unless Southern Illinois has CURB APPEAL it will decay as the U.S. transient population looks for a better life for both work and active retirement 1.05 Livable Communities & Age of Choice
©2007 ViTAL Economy, Inc. 66 Livable Communities & Age of Choice: Opportunities Southern Illinois has all of the attributes & assets to become a premier Livable Community to do so, it will require: m Creating the linkage between quality of life and economic growth by adopting strategies that build upon its natural and cultural resources m Relying increasingly upon the attractiveness of your natural setting rather than only on extraction of raw materials for commodity markets m Adopting polices and initiatives that preserve the scenic, ecological and historical assets of a region m Pursuing an economic development strategy that is broader than the traditional tourism base to include high skilled – KBE workers A Livable Community strategy is paramount to retaining the age group In the interim, SI must capitalize on existing indigenous resources to become a major tourist and retirement destination: m Shawnee National Forest, many parks, lakes, rivers, wine-trails, bike-trails, golf-trails, historic/cultural assets, arts centers & museums, artifacts, civil war history m Outdoor hunting, boating, fishing, birding, biking, state & local fairs/festivals, wine & golf trails m University & Community Colleges, speakers forum, significant performing arts resources m Major college sports, minor league baseball m Attractive climate Successful towns that are already applying Livable principles on a local scale include, but are not limited to: Elizabethtown, Steeleville, Vienna, Fairfield, Albion, Red Bud, … Livable Communities & Age of Choice
©2007 ViTAL Economy, Inc. 67 Chapter 1: State, National & Global Trends 1.06 Manpower & Immigration Southern Illinois "Garden of the Gods" As the global, national and local economies shift, there is a significant and rapidly growing gap between workforce supply & demand skill sets as well as sheer number. This is both an enormous challenge and an opportunity for Southern Illinois!
©2007 ViTAL Economy, Inc. 68 Manpower & Immigration Overview Growth of regional economies will be more negatively impacted by long-term manpower and immigration trends than the Ten Flatteners regional economy strategies must deal with these trends or economic growth will slow further Workforce Trends to watch: m By 2010 there will be 150 million (M) jobs in the U.S. with only 140M people to fill them hence the 10M worker shortage m U.S. workforce grew at rate of 30% in 1970s, at 12% in 1990s, now slowing to 3% and leveling off by 2010 m Ever increasing need for skilled workers U.S. businesses are requiring higher levels of education, but workforce is projected to have declining skills m 34% of adult workers in U.S. now have a bachelors degree or better, up from 29% ten years ago however, percentage of year olds with a bachelors degree or better has actually fallen in the last ten years m Since 1970, 90% of the growth in the U.S. workforce has been filled by non-U.S.- born workers m Human Capital is replacing Physical and Financial Capital as the most important capital resource 1.06 Manpower & Immigration Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 69 Talent Supply/Demand Disconnect Source: Global Manpower Report, 2005 Number of people of available/required by skill level $/hour & skills Supply of workers Demand for workers Men Women Pronounced over- supply of low-skilled labor Lack of resources creates tension on the high-skills market Over-supply of low-skills resources creates unemployment Developed Economies Labor Market 1.06 Manpower & Immigration There is an oversupply of low-skill workers and shortage of higher skilled workers
©2007 ViTAL Economy, Inc. 70 Aging Workforce Effect on U.S. Since June of 2006 an average of 15,600 workers retire everyday m Versus 300 per day in 1972 m Number has grown 6-fold since 1991 (2,600/day) Aging Baby Boomers 77 million workers due to retire by 2010 Boomers make up about 33% of U.S. workforce today Through 2021 there will be no increase in native-born workers in the prime age category of year olds any growth in the labor force will come from older workers and immigrants By 2010, age cohort in workforce declines by 19%…those typically moving into upper management 50% of the federal civilian workforce is eligible to retire by 2011 As the U.S. workforce grows older and ultimately retires, the loss of institutional knowledge will be immeasurable Source: Conference Board and Forbes, Aspen Institute, National Governors Association, BLS; AFT 1.06 Manpower & Immigration
©2007 ViTAL Economy, Inc. 71 U.S. Losing Competition for Skilled Immigrants The new international labor market: OECD countries compete for the worlds most skilled immigrants, people with a university degree or more education or training m In 2000, the U.S. had 12.5 million immigrants with a high school education or higher, the highest total in the OECD m But measured by net brain gain, skilled immigrants versus skilled expatriates compared to working age population, Australia and Canada out compete the U.S. For example, a high proportion of Australian doctors are now foreign born m And the U.S. is increasingly restricting young graduate student entries 1.06 Manpower & Immigration Net Brain Gain, 2000 U.S. = Half of Australia and Canada Note: Net Brain Gain is foreign skilled workers minus skilled expatriates as a % of working age population Source: Docquier & Marfouk from David Bartlett, U.S. Immigration Policy in Global Perspective
©2007 ViTAL Economy, Inc. 72 Manpower & Immigration: Implications U.S. not producing or retaining workforce necessary for growth m Regional economies who welcome non-U.S.-born workers will be better positioned to benefit from these trends m U.S. not effectively leveraging its strong workforce development assets to positively respond to trends m Educational attainment not keeping pace with job trend requirements m U.S. supplying workers with qualifications that address declining demand for low skill jobs rather than serving the expanding demand for higher skill workers Any region that can successfully produce a globally competitive workforce, will secure the ultimate competitive advantage for the next three decades m Training and education are a key workforce priority m Skills gap range from basic (literacy, numeracy) to complex (computer sciences & application knowledge) The U.S. economy will require an influx of immigrants to meet industry demands or the economy will atrophy as a consequence m Many of these workforce immigrants will require training due to lower levels of education and skills m This will require a multi-cultural understanding and management skills m Regional economies who welcome non-U.S.-born workers will be better positioned to benefit from these trends 1.06 Manpower & Immigration
©2007 ViTAL Economy, Inc. 73 Manpower & Immigration: Opportunities Position SI as a national workforce development center for addressing the ten million skilled worker shortfall by 2010 Leverage 60+ years of experience at SIU with over 100 cultures to create an attractive environment for retaining and growing immigrant workforce Improve workforce development value chain alignment and strategies (K-12, Higher Education, Workforce Development Centers, and industry etc.) Establish measurable strategic goals for raising educational attainment levels of SI and SWI within next 10 years and link this with economic development initiatives to gain traction & funding Embrace workers in their 50s and 60s now through creative approaches that move them from a mindset of wanting freedom from work to a desire for the freedom to work Promote inclusiveness by tapping into underemployed and unemployed non-traditional labor sources Reverse the brain drain of year olds in SI and tap into the thousands of SIU International students who would like to stay in SI, but see no opportunity Emphasize KBE skill focus of current and future workforce 1.06 Manpower & Immigration In the next two years CHINA will graduate more MBAs than the U.S. currently has enrolled students in all our colleges today - USA Today In the next two years CHINA will graduate more MBAs than the U.S. currently has enrolled students in all our colleges today - USA Today
©2007 ViTAL Economy, Inc. 74 Chapter 1: State, National & Global Trends 1.07 Aging Population Southern Illinois "Garden of the Gods" There is a coming tidal wave of retirees as Baby Boomers turn 65. Those communities that position themselves as an attractive retirement setting with all the commensurate amenities will capture a big share of this future reality.
©2007 ViTAL Economy, Inc. 75 Aging Population: Overview In addition to the significant impact that aging has on the U.S. workforce shown in the previous Sub-Chapter 1.06, these same shifts will create enormous challenges as well as opportunities for communities across the country Trends to watch include: m As noted in Section 1.06: Since June of 2006 an average of 15,600 workers retire everyday Versus 300 per day in 1972 Number has grown 6-fold since 1991 (2,600/day) Aging Baby Boomers 77 million workers due to retire between 2010 and 2030 m Retirees are attracted to warmer climates with active-lifestyle amenities and lower cost-of-living m Retirees are also more attracted to graduated-care facilities, ranging from independent- to assisted-living with a variety of supportive healthcare and other services all under one roof m An increasing number of retirement-age folks are electing to stay employed (full-time or part- time), in part to continue receiving healthcare benefits and supplemental income m Over the next ten years, for the first time in U.S. history, population growth will be driven not by increase in birth rate, but by a decrease in mortality rate m Baby Boomers spend more than any other age group on travel, recreation and personal care products 1.07 Aging Population Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 76 From Birth to Retirement 1.07 Aging Population
©2007 ViTAL Economy, Inc. 77 Some Midwest Counties are Retirement Destinations Retiree-age newcomers to non-metro areas trend to be better educated, wealthier, and more likely to be married They tend to relocate in non- metro areas adjacent to large cities with services Rural Counties are Losing or Gaining 65+ population Counties with over 18% 65+ years old population, 2000 Some Midwest counties are retirement destinations 1.07 Aging Population
©2007 ViTAL Economy, Inc. 78 Source: William H. Frey analysis of 2000 U.S. Census Other States Vying for Seniors Nevada's elderly population grew by more than 70% during the 1990s Senior growth in Alaska, Arizona, New Mexico, Hawaii, Utah and Colorado all exceeded 25% Florida, South Carolina, Texas, North Carolina and Georgia all experienced senior growth rates during the 90s of 19% or greater These states are attractive to people of retirement age because of their wide array of amenities, such as warmer climates and lower living costs Many states in the South have made concerted efforts to lure seniors who, at least in their immediate post-retirement years, tend to contribute much more to the local economies and tax bases than they cost m Many well-off yuppie elderly years old have considerable disposable income, good health and remain in married-couple households 1.07 Aging Population
©2007 ViTAL Economy, Inc : Baby Boomers Turning 65 in IL & SI 2010 is the year Baby Boomers start turning 65 representing the end of the Great Depression The population 65+ has declined since 1990, but will now begin to quickly increase SIs 65+ population is about 6% higher than IL as a whole SI may see an out-migration of the 65+ population due to a lack of services available that this segment demands Proportion of Population Represented by 65+ Age Segment Source: U.S. Census Bureau 1.07 Aging Population
©2007 ViTAL Economy, Inc. 80 How Retirees Impact the Economy (1 of 2) 77 million Americans were 50 or older (28% of the U.S. population) June 2006 Source: mynextphase.com: Retirement Facts & Trends 1.07 Aging Population Seniors represent a disproportionately high % of purchases: Taking advantage of this economic windfall requires a region to craft specific senior-living economic strategies Taking advantage of this economic windfall requires a region to craft specific senior-living economic strategies
©2007 ViTAL Economy, Inc. 81 How Retirees Impact the Economy (1 of 2) Starting in 2010: m Boomers have 70% of the nation's net-worth and control 50% of all household discretionary spending m They will spend $2 trillion annually on consumer goods and services m Adults ages 45+ will out spend younger adults by $1 trillion annually Boomers have much more education than prior generations equals much higher earning power m Will have a continued attachment to the workforce during their retirement years Boomers have been more mobile all of their life, 60+ population migration may increase from 4.5% to 20% m Boomers have a strong preference for small rural communities offering intergenerational social and recreational activities m Rural areas with retirement communities grew 16% in 1980's versus 4% for all other rural areas m Rural retirement destinations versus all rural areas between increased median household income 4.2% vs 0.6% Source: "How the Retirement of the Baby Boomers Will Affect You, Part II, BBRED Georgia Southern University 1.07 Aging Population
©2007 ViTAL Economy, Inc. 82 Senior Trends Growing trend of seniors moving to retirement communities affiliated with colleges m For many people, living on or near a campus is better than a condo on the fifth green m Senior housing communities of the future will have majority of residents with higher education degrees m They will seek communities with college or universities offering life-long learning programs Affluent seniors, the Baby Boomer Generation, will soon inherit the largest transfer of Generational Wealth m The Silent Generation, aged 74-84, will soon pass on their wealth (est. $71 trillion) to the Boomers Visionary communities are already crafting senior living strategies to attract affluent seniors 1.07 Aging Population Source: Threshold Development, Retirement Living Information Center and The Great American Wealth Transfer...Fact or Fiction? The Sharpe Group 2007
©2007 ViTAL Economy, Inc. 83 Future Housing for Retirees Results from the 2004 Del Webb Baby Boomer Survey: Fast Facts About Housing m 36% will move or plan to move when they become empty nesters; one- third of whom will move more than 3 hrs away m When they retire, 55% say they will move; 51% of whom more than 3 hrs away m 26% will consider purchasing a home in an age-qualified Active Adult Community (versus 51% unsure and 24% who said no) Of those purchasing a home, 30% prefer an Urban location, 29% want a community that maximizes local natural benefits; 22% like an active adult community located within a multi-generational development Boomers are more than twice as likely as those aged to prefer an Active Adult Community that is part of a multi-generational neighborhood Source: mynextphase.com: Retirement Facts & Trends 1.07 Aging Population
©2007 ViTAL Economy, Inc. 84 Big Shifts in Senior Living Preferences Mar-Aug 07 Survey sponsored by ERA Research; conducted by Opinion Research m 75% of 50+ men & women: want to be near family when considering their next move m 20% are thinking about moving in next 5 years; 65% prefer a single family home m 70% of those considering an active adult lifestyle community: being near friends & family was a priority m 6% (versus 2% last year) would consider moving to an active adult community National Investment Center for Seniors Housing & Care Industry 2007 Edition of the National Housing Survey of Adults Age 55+ m 12% (versus 7% in 1998) indicated they lived in housing** planned for 55+ age group m 19% of 75+ years of age households lived in age qualified communities in 2007 m 37% of 60+households (versus 18% in 1998) were willing to consider age qualified housing m 9% of 60+ households (versus 4% in 1998) had decided to move to an age qualified property in the future **Age-qualified housing refers to active adult communities, independent living, assisted living, continuing care retirement communities (CCRCs), 55+ apartments and rent-subsidized housing 1.07 Aging Population
©2007 ViTAL Economy, Inc. 85 Aging Population: Implications The aging population will create new needs and pressures for nutrition, healthcare, and housing on a vast scale m Communities must prepare for the onslaught m Those communities that proactively position themselves and offer a combined package of life-style, reasonable cost-of-living, attractive facilities and other amenities will benefit from an influx of wealth and community revitalization Communities with growing % of elderly population need to have a proactive strategy with this population to provide these services & related infrastructure: m Arts & Culture m Wealth management services m Retail services m Recreation amenities for active seniors m Tourism m Independent living through graduated care m Lifelong education m Catering to families with children & grandchildren (visiting & living) 1.07 Aging Population
©2007 ViTAL Economy, Inc. 86 Aging Population: Opportunities SI amenity & location assets are of keen interest to 30% of 77 million Baby Boomers m SI land costs and underdeveloped land areas offer opportunities for senior living communities m Emerging opportunities for high-end RV developments and active mature tourists m Active lifestyle amenities of golf, fishing, hiking, birding across SI will receive more support The purchasing power of future seniors is an opportunity for many SI business sectors m Wealth management services and real estate development will expand m Lifelong learning, performing and creative arts sectors will be in demand m Boutique shopping villages and unique restaurant venues will be desired Aging, financially-independent retirees will have major implications for healthcare m Large increase in demand for specialty medical services for aging populations m Opportunities to incubate and test new services, medicines and devices for aging population m Expanded and changed critical skills requirements for professionals and para-professionals Communities with pro-active senior living strategies benefit financially m Communities that end up reacting to senior living trends suffer financially m Now is the time for SI to get in front of and benefit from this on coming economic tsunami Every day, for the next 12 years: 18,000 USA workers will retire - U.S. News & World Report 1.07 Aging Population
©2007 ViTAL Economy, Inc. 87 The southern 16 counties are only getting 1.5% of Illinois tourism revenue, yet have 2.9% of the population (SI has 3.3%) and most of the Tourism assets! With over 11 million people within a 4- hour drive of SI, there is a huge opportunity to capture 2-to-3 times more tourism dollars. Chapter 1: State, National & Global Trends 1.08 Tourism Southern Illinois Garden of the Gods
©2007 ViTAL Economy, Inc. 88 Tourism Overview An aging & more mobile population travels more for experience-based pleasure Trends to watch for include: m Adventure: Half of U.S. adults have taken an adventure tourism trip in the last five years 31 million adults engaged in hard adventure activities: whitewater rafting & mountain biking m Educational Travel: The learning aspect of travel is important to U.S. travelers, with 20% (30.2 million adults) having taken an educational trip to learn or improve a skill, sport or hobby in the past three years m The Internet & online services are very popular with travelers, who tend to be quite computer savvy 65% of the 98.3 million travelers used the Internet to make travel plans in 2004 m National/State Park Travel: American travelers love the great outdoors 40 % of U.S. adults in 2003 have visited a national park at least once while on a trip of 50 miles or more away from home in the past five years m Historical Places/Museums are popular attractions for travelers within the U.S. 58% of U.S. adult travelers included an historic activity or event on a trip during the past year: 84.7 million U.S. adults Their households generated million person-trips including a visit to historical places or museums in % of past-year travelers say they visited a designated historic site, such as a building, landmark, home, or monument during their trip; 28% visited a designated historic community or town 1.08 Tourism Sources: Varied (see the rest of this Section)
©2007 ViTAL Economy, Inc. 89 Tourism Trends & Impact 1.08 Tourism Trends: More local car trips two-days from home 58% of adult travelers trips will include historical and educational site visit 65% will book trips on line 23% of Boomers seek adventure trips 55% of group travelers are going to family reunions or functions Tourism spending will increase 15% from 2006 to 2010 to $821 billion 89% of travelers will be under 55 years old Impact: 7.5 million Jobs in travel industry in the U.S. $700B will be spent in 2008 Great Lakes region overnight stays to increase 3.5 to 4.3% annually Non profit Arts and cultural activities generate $166.2 billion/year in revenue Arts employs 5.7 million in full-time jobs Arts events often return % on investment costs to local cities Source: Tourism Industry Association; Arts & Prosperity II
©2007 ViTAL Economy, Inc. 90 New Kinds of Group Travel Median spending for group gatherings is $1,800 (not including corporate meetings) On average, 19 individuals attend a gathering and that event typically lasts 3.5 days 55% of group travelers are traveling for a family reunion or function Younger respondents (21-34) are more likely to plan friend reunions, school group/class reunions, bachelor/bachelorette parties, and concerts or other entertainment/spectator sport events Travelers making up the groups and meetings segment include family reunions, sports outings (ski, golf, tennis, etc.), friends' reunions (mancations, girlfriend getaways, fraternity/sorority, etc.), weddings, association/community groups, religious events and corporate meetings Source: PhoCusWright, Inc. Dec Tourism
©2007 ViTAL Economy, Inc. 91 The Tourism Market is Global 1.08 Tourism Source: World Tourism Organization U.S. #1 Destination for Spending, 2006 (by Country of Origin) Leisure, Recreation & Holidays 51% Visiting Family and Relatives (VFR) 27% Business 16% Other 6% Leisure and Business Travel Increasing; VFR Declining in Share World Tourism to Double by 2020: Annual international tourism arrivals (000s) 6.5% AAGR Average Annual Growth Rate
©2007 ViTAL Economy, Inc. 92 International Visitors = High Spend Rates: Tourism Revenue Opportunity European Visitors: 45% visit historical sites 27% visit small towns 27% see art galleries & museums 24% tour countryside European Visitors: 45% visit historical sites 27% visit small towns 27% see art galleries & museums 24% tour countryside The U.S. receives almost 50 million international tourist visits per year: The U.S. receives almost 50 million international tourist visits per year: projected to increase 20% in five years Average Canadian visitor spends $695 / trip Total visits to U.S. = 15 million Average German visitor spends $2,200/ trip Total visits = 1.4 million Average Japanese visitor spends $2,900/ trip Total visits = 3.9 million Average U.K. visitor spends $2,500/ trip Total visits = 4.3 million 1.08 Tourism
©2007 ViTAL Economy, Inc. f = forecast Billions Source: Travel Industry Association; U.S. Department of Commerce, Office of Travel & Tourism Industries; Global Insight All Tourism Spending in U.S. to Increase 51% Over 10 Years 1.08 Tourism
©2007 ViTAL Economy, Inc. 94 The demographics of adults booking online show high disposable income and an active age range Demographic Profile of Adults Who Book Travel on the Internet (24.7 million U.S. Adults) GENDER Male60% Female40% HOUSEHOLD INCOME Under $50,00032% $50,000 - $74,99927% $75,000 - $99,99917% $100,000+24% Average Income$89,100 AGE % % 55+11% Source: Travelers Use of the Internet, 2000 Edition Travel Industry Association of America U.S. median household income was $46,326 in % of the travelers are under 55 years old The Tourism Customer 1.08 Tourism
©2007 ViTAL Economy, Inc. 95 Tourism Impacts: SI Growth Potential Tourism is big business in the U.S. m 7.5M jobs are generated by travel m Travelers spend $700B annually m Travel generated a $7.2B trade surplus in 2006 The SI tourism industry has far less impact than its U.S. and IL impacts Annual spending per employee m U.S.: $93,000 m IL: $87,000 m SI: $73,000 The U.S. to SI spending gap is $20,000, or 27% Annual Spending by Tourists Per Tourism Job, 2006 SI behind U.S. and IL Source: TIA U.S. Economic Impact, 2006 Expenditures$70B Employment7.5 Million jobs Payroll$17B Trade Surplus$7.B Increased Spending per employee significant tourism growth opportunity Increased Spending per employee significant tourism growth opportunity 1.08 Tourism
©2007 ViTAL Economy, Inc. 96 Location, Location, Location…. What does it mean? m Most vacations are now short proximity and ease of access is key m Nearby centers include: Indianapolis, IN St. Louis, MO Memphis, TN Louisville, KY Nashville, TN Grey Area Shows 4-hour driving time from Harrisburg Population within 4-hour drive: 11,303,789 Grey Area Shows 4-hour driving time from Harrisburg Population within 4-hour drive: 11,303,789 Potential Gateway To region Source: Map Point and Federal Aviation Administration 1.08 Tourism
©2007 ViTAL Economy, Inc. 97 Online Bookings Surpasses Off-Line Bookings in % of all U.S booking will be done on the Internet in 2007 U.S represented 33% of total online and offline bookings (North America, Western Europe, Asia Pacific), but 60% of all online bookings Hotels are the fasting growing online segment, surpassing airline, which had been the fastest prior to 2006 Be aware of Travel 2.0 the industrys use of Web 2.0 practices will empower the online consumer; tools will include: m Tagging m Social content m Social networking m Blogging m Virtual communities people point to as examples of Web 2.0 Source: PhoCusWright, Inc. Dec Tourism
©2007 ViTAL Economy, Inc. 98 Arts & Culture Economic Impact Full-Time Equivalent Jobs5.7 million Household Income$104.2 billion Local Government Tax Revenues$7.9 billion State Government Tax Revenues$9.1 billion Federal Income Tax Revenues$12.6 billion Source: Arts & Economic Prosperity III: The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences $166.2 billion in total economic activity has a significant national impact 1.08 Tourism Focusing on Arts & Culture gives SI a double win tourism revenues and helping build a more attractive Climate of Innovation Focusing on Arts & Culture gives SI a double win tourism revenues and helping build a more attractive Climate of Innovation
©2007 ViTAL Economy, Inc. 99 Recent results of San Jose CA festivals in 2006 Arts & Culture Economic Impact 1.08 Tourism
©2007 ViTAL Economy, Inc. 100 Trails = Recreational Tourism Heritage Rail Trail County Park 21 miles in length running from the Mason Dixon Line to the York, Pennsylvania Historic District 64% of the users were from York County, with a third of the users travel more that 20mi to use the trail Biking is the predominate form of recreation on the trail, 80% 72% stated that hard goods, mostly biking related, were purchased in the area in the past year ($367 average spending) 2/3 state that they purchased soft goods during each use ($8.33) 2001 annual usage 247,000 with a population of York County, 381,000 Expenditures related to trail activities = $90 million 21 miles in length running from the Mason Dixon Line to the York, Pennsylvania Historic District 64% of the users were from York County, with a third of the users travel more that 20mi to use the trail Biking is the predominate form of recreation on the trail, 80% 72% stated that hard goods, mostly biking related, were purchased in the area in the past year ($367 average spending) 2/3 state that they purchased soft goods during each use ($8.33) 2001 annual usage 247,000 with a population of York County, 381,000 Expenditures related to trail activities = $90 million Virginia Creeper Trail 34-mile trail near Damascus, Virginia. Damascus is know as Trail Town, USA with the convergence of five major trails touching the Jefferson National Forest and Mount Rogers National Recreation Area Winter visitation projections = 24,000 and Summer visitations projections = 106, ,400 person trips per year 85% of all visits are by day users, 45% of the users are non-local The average distance traveled to utilize the trail was 154mi. Non-local day users expenditures per trip = $103 Non-local overnight users expenditures = $120 Total economic impact: Day users = $23,600/per 1000 trips. Overnight users $114,400/per 1000 trips 34-mile trail near Damascus, Virginia. Damascus is know as Trail Town, USA with the convergence of five major trails touching the Jefferson National Forest and Mount Rogers National Recreation Area Winter visitation projections = 24,000 and Summer visitations projections = 106, ,400 person trips per year 85% of all visits are by day users, 45% of the users are non-local The average distance traveled to utilize the trail was 154mi. Non-local day users expenditures per trip = $103 Non-local overnight users expenditures = $120 Total economic impact: Day users = $23,600/per 1000 trips. Overnight users $114,400/per 1000 trips Source: National Trails Partnership Nature trails and biking paths can be major attractions to areas resulting in economic benefits 1.08 Tourism
©2007 ViTAL Economy, Inc. 101 Growth SectorsRatingAssessment Rationale Heritage Tourism SI is a historic region but lacks a name (e.g. Gettysburg) which attracts national attention Festival Tourism The State Fair and festivals in the region are developed but are individual community focused Hard Outdoor Adventure Attractive to Generation-Xers; mountain biking the only hard adventure opportunity. Soft Outdoor Adventure SI offers a wide range of soft outdoor adventures now – hiking, camping, birding Wine & Culinary SI has a growing wine and culinary sector, but lacks national recognition Hunting and Fishing Region offers a wide variety of hunting and fishing experiences, including Sparta Shooting Complex and Rend Lake SI Tourism Growth Sectors: Assessment Source: InterVISTAS 1.08 Tourism = Weak to None = Improving = Average = Good = Strong
©2007 ViTAL Economy, Inc. 102 InfrastructureRatingAssessment Rationale Regional Internet Portal No easily discovered, one-stop portal for regional tourism information and bookings exists Accommodations Limited number of rooms, beds and campsites with infrastructure in SI, predominant in North- South AttractionsFew attractions with recognition outside the region Transportation Lack of scheduled air travel into region inhibits national/international tourism potential Workforce Small tourism workforce with relatively low pay. Relatively little 4-season business Food Services Local wineries, a few award winning BBQ & specialty restaurants offer culinary destinations SI Tourism Infrastructure: Assessment Source: InterVISTAS 1.08 Tourism
©2007 ViTAL Economy, Inc. 103 SI Tourism Opportunity Projections: 1.Overall SI tourism industry increases by $300- $400M/year 2.SI tourism employment reaches Illinois state levels of 4.4% of total employment = 9,121 employment with an increase of over 3,500 3.SI tourism expenditures per job reach Illinois state levels of $87,000 per job Projections: 1.Overall SI tourism industry increases by $300- $400M/year 2.SI tourism employment reaches Illinois state levels of 4.4% of total employment = 9,121 employment with an increase of over 3,500 3.SI tourism expenditures per job reach Illinois state levels of $87,000 per job Expenditure CategoriesNew Facilities and Business Opportunities Transportation50+ transportation companies, major increase in air-traffic, 100s of charters LodgingEstimate thirteen 80-room hotels Food Service25+ restaurants and specialty food service outlets Entertainment35+ venues General Retail25+ retail outlets, especially specialty goods Other Business100s of businesses will experience growth and expansion opportunities Specific SI Tourism Opportunities SI Tourism Expenditures 1.08 Tourism
©2007 ViTAL Economy, Inc. 104 Tourism: Implications Visitors are seeking new and adventurous/educational experiences largely within the U.S.; foreign travel to the U.S. is also growing Niche markets like birding, culinary travelers, mountain bikers, and other theme-based packages are high growth markets Communities/regions with user-friendly and integrated online presence have a competitive advantage over those that do not Numerous tourism regions are branding themselves in a unique fashion only the ones that deliver authentic experiences that lives up to the brand, will achieve long-term benefits Major investment needed in tourism infrastructure and customer service resources, such as regional airports, new hotels, restaurants, etc., to support increased overnight-tourists Rural economies successful at growing their tourism business move to a four-season industry with packages lifestyle offerings 1.08 Tourism
©2007 ViTAL Economy, Inc. 105 Tourism: Opportunities Catering to international visitors seeking quality experiences, accommodations and meals Integrated theme packages across the 20 counties that leverages the history, culture, mild-climate, and natural beauty Access greater overnight stays Southern Illinois already has several notable successes: m Wine Trail m B&B Association in Southeast m Encampment at Ft. Massac m Bocce ball in Herrin m World Shooting Complex m Gold Trails 1.08 Tourism TIA projected new tourism business areas m Generation-Xers & Millennials m Travelers with disabilities m Girlfriend getaways m Mancations m Destination weddings m Procreation vacations m Babymoons m Medical/life-enhancement travel m Voluntourism m Pet travel m Space tourism m Culinary travel m Higher-education travel
©2007 ViTAL Economy, Inc. 106 Chapter 1: State, National & Global Trends 1.09 Logistics, Transportation & Distribution Southern Illinois "Garden of the Gods" As more and more global opportunities open up, logistics, transportation and distribution increase in importance Southern Illinois is truly at the crossroads of virtually all modalities.
©2007 ViTAL Economy, Inc. 107 Logistics, Transportation & Distribution: Overview Globalization and the Ten Flatteners open substantial doorways Trends to watch for include: m Logistics and transportation is an exploding global market opportunity due to shifts in supply-chain management m Work has begun on doubling the capacity of the Panama Canal this $5.5B project will provide access to wider ships to the East Coast and Texas/Louisiana harbors to feed the Trans-Mexican-Canadian superhighway with Chinese goods m Due to capacity constraints, security risks and weather vulnerability at North American coastal ports, trans-loading/intermodal facilities enable the effective use of smaller ships via inland waterways m The NAFTA Super-highway is a venture unlike any previous highway construction project it is actually a daisy chain of dozens of corridors and coordinated projects that are expected to stretch out for several decades, cost $100s billions and end up radically reconfiguring not only the physical landscape of these U.S., but our political and economic landscapes as well Kelly Taylor, 8/06 New American 1.09 Logistics, Transportation & Distribution Sources: Varied (see the rest of this Section); US Department of Commerce, Menlo Worldwide, Plunkett Research, Ltd.
©2007 ViTAL Economy, Inc. 108 Key Transportation Trends Transportation is one of the world's largest industries sectors range from taxis to trucks to airplanes, trains, ships, barges, pipelines, warehouses and logistics services In 2006, the U.S. Transportation Industry was about $1.6 trillion m Includes for-hire and not for-hire sectors, support & repair m Transportation directly employs about 4.5 million Americans >10% of U.S. economy In the U.S. alone, total freight shipment volumes are expected to increase by 70% between 1998 and 2020 Texas A&M University, analyzed traffic patterns and delays in 85 U.S. major metropolitan areas m Total annual cost of traffic congestion in these cities was $63 billion m 3.7 billion hours of traffic delay and 2.3 billion gallons of fuel consumed by delays Well-positioned rural regions have a strategic advantage in becoming a traffic-free hub Well-positioned rural regions have a strategic advantage in becoming a traffic-free hub 1.09 Logistics, Transportation & Distribution Source: U.S. Department of Transportation
©2007 ViTAL Economy, Inc. 109 The World and Southern Illinois: Rail From a regional network … … to a North American one SI is now the center of a rail network stretching to the Pacific, Atlantic and Gulf of Mexico 1.09 Logistics, Transportation & Distribution When originally built in 1850s, its goal was to connect Chicago with the Mississippi Modern rail is truly trans- continental, triangulating major seaports
©2007 ViTAL Economy, Inc. 110 U.S. Sea Container Traffic:Base of Globalization Six-fold increase in U.S. container traffic since 1980 By 2010, containerization will be 50% greater than 2005 rates and by 2020, they will more than double This indicates strong growth in international trade Container traffic already exceeds port and rail carrier capacity Source: Cambridge Systematics 1.09 Logistics, Transportation & Distribution Over 10 million TEUs (20 foot-equivalent-units), are annually shipped back to Asia empty a significant opportunity for SI to fill
©2007 ViTAL Economy, Inc. 111 Container-On-Barge via Inland Waterways Increasing sea container numbers, lack of U.S. truckers, cost of fuel among the factors driving containers to barges This creates SI Mississippi and Ohio River terminal opportunities Container on barge is developing on the Mississippi (Houston-Memphis) and will expand m Barges are less expensive because a barge can move 45 full-sized sea containers These rivers have been key transportation systems for over 300 years A ton of cargo can be moved 514 miles by barge on a gallon of fuel as compared to moving that same ton only 60 miles by truck or 202 miles by train Source: Transportation for Illinois Coalition Press Release, Investment needed in Upper Mississippi-Illinois waterway for economic growth and jobs. September 15, Logistics, Transportation & Distribution SI centrally located on the Mississippi & Ohio River Systems
©2007 ViTAL Economy, Inc. 112 The Rhine as a Comparison Rhine River container traffic increased from 10,000 units in 1975 to 2.3 million units in 2003 Container barges travel as far as Switzerland Cost-of-labor favors barge over truck; albeit somewhat slower Like the Mississippi, the Rhine stretches from ocean ports to the Continents interior The Swiss Rhine Container Terminal 1.09 Logistics, Transportation & Distribution
©2007 ViTAL Economy, Inc. 113 SI Airports have capacity to accept large, jet aircraft & air-taxi service Two major SI airports located near interstate highway and rail junctions, create the possibility of intermodal freight Source: airnav.com SI Has Significant Aviation Infrastructure Southern Illinois aviation infrastructure includes: m Three airports with instrument landing systems and runways over 6,000 ft m Nationally acknowledged SIU School of Transportation Including Aviation Management and Technology m Planned new Transportation Education Centre (TEC) at Southern Illinois Airport m U.S. Transportation Command logistics specialist pool at Scott Air Force Base, an SI neighbor major information exhaust opportunity Airport Largest Runway ILS (Instrument Landing System) Airframe/ Power Plant Services Scheduled Passenger Services Mt. Vernon6500 x 150 ftYES Not now Southern Illinois6500 x 100 ftYES Not now Williamson County8000 x 150 ftYES 1.09 Logistics, Transportation & Distribution
©2007 ViTAL Economy, Inc. 114 Warehousing & Distribution: Trade Growth Area Transportation and warehousing continues to grow, supporting international trade m Between 2004 and 2014, the U.S. economy will add half a million transportation jobs The number of distribution centers is increasing A typical center has over 200,000 square feet, part of an international chain, focused on key market sectors, and offers value-added services Distribution Centre services include: m Pick & pack m Consolidation m Customer system order processing m Returns processing m Quality inspection m Assembly m Damaged returns management m Exporting packing & order processing m Bar code processing m Labeling m EDI services m Kit assembly m Sub-assembly m Build to order m Facility management m Transportation management SI is situated in the population centre of the U.S., near where FedEx and UPS both decided to establish their national hubs Distribution is an investment opportunity 1.09 Logistics, Transportation & Distribution Source: U.S. Department of Transportation
©2007 ViTAL Economy, Inc. 115 Logistics: Unmet Opportunity Growth of U.S. population for 2006 = 0.9% California, Texas, Florida contained most of the fastest growing centers in the U.S. Several centers within a days drive of SI included in 50 fastest-growing centers for at growth rates of 12% to 98% (e.g., Red Stars) Source: U.S. Census Bureau and Map Point Note: Map shows calculated 8 hour driving time from SI Illinois in Relationship to Nearby 50 Fastest Growing U.S. Cities 1.09 Logistics, Transportation & Distribution
©2007 ViTAL Economy, Inc. 116 Logistics, Transportation & Distribution: Implications Dramatic reductions in shipping costs via containerization has enabled globalization of manufacturing Distribution is conducted close to end markets Southern Illinois is near the population center of the U.S. m 124 milion people reachable within 12-hour drive Distribution requires good rail and truck connections m Trade and distribution is projected to grow rapidly m Will grow rapidly in the Midwest because of its central location Southern Illinois sits on the ultimate U.S. logistics sweet-spot, the intersection of major North-South and East-West trade routes: m Will these bypass SI or will the Region be a substantial player? m Through CN (was Canadian Northern RR), SI can potentially interact with three U.S. and two Canadian coasts SI aviation assets have the potential of serving as a niche market player within a mid-America Intermodal Logistics strategy 1.09 Logistics, Transportation & Distribution
©2007 ViTAL Economy, Inc. 117 Logistics, Transportation & Distribution: Opportunities Globalization has increased importance of transportation and logistics SI is currently below national and state averages CN has transformed the Illinois Central from a North-South operation to a strong East-West orientation serving three North American coasts via one railroad m SI global reach potential has significantly increased SI has strategic geographic location especially to Eastern and Central U.S. m Distribution centers favor center-of-population location m Multimodal transport: Interstate/Rail/Barge Opportunities: m For multimodal/transload facilities address 10 million TEU/year East-West deficit m To attract distribution centers m Range in complexity from simple distribution, to assembly and customization m Explore niche-market opportunities for aviation assets With the dramatic increase in the cost of fuel: m Waterborne traffic becoming increasingly more attractive m Key to keeping Illinois grains competitive in the world market m Inland waterways re-opening as a major logics solution for East-West port congestion 1.09 Logistics, Transportation & Distribution m SI infrastructure contains HUB facilities for ALL forms of transportation and distribution
©2007 ViTAL Economy, Inc. 118 Chapter 1: State, National & Global Trends 1.10 Energy With global demand for energy ever on the rise, and renewable/alternative energy sources playing an increasing but still minor role, U.S. coal especially clean-coal becomes increasingly important. Southern Illinois "Garden of the Gods"
©2007 ViTAL Economy, Inc. 119 Energy Overview The Worlds and U.S. appetites for energy continues to grow in all forms, and without a major technological breakthrough, carbon based sources will continue to supply the vast majority of raw material Trends to watch include: m 70% of world energy demand is specifically tied to economic growth in developing countries m If the price of crude oil stabilizes at $75 or greater, new technologies and alternative sources of energy will emerge and impact markets m U.S pubic policy decisions have the ability to influence markets quickly and direct R&D investments m Regions that can balance their consumption of resources with economic growth will have a competitive advantage in the 21 st century economy m U.S. coal demand production grew only 5.4% between 2000 & 2005; while prices went up 32.5% 1.10 Energy Source: EIA (Energy Information Administration)
©2007 ViTAL Economy, Inc. 120 Projected World Energy Consumption in Quadrillion BTUs Global energy demand is projected to increase over 50% by 2030, an average annual growth rate of 1.6% m 70% of the increase coming from developing countries with China alone accounting for 30% Fossil fuels will remain the dominate fuel source by 2030, 83% of the increase by 2030 The worlds growing hunger for energy will require massive capital investment; $20 trillion by 2030 (2005 dollars) m Power sector will require 56% of the capital investment cost m Over one half of the energy investment will be in developing countries Source: World Energy Outlook 2006 One quadrillion BTUs is equivalent to two million barrels oil per day 1.10 Energy Global Energy Demand Ever Increasing Coal will see the largest increase in demand primarily for electricity production China and India will account for 80% of the demand
©2007 ViTAL Economy, Inc. 121 Source: Global Energy Network Institute & Exxon/Mobil 1.10 Energy How Global Energy Demand is Being Met Although use of alternative energy sources are growing dramatically, coal and other fossil fuels continue to dominate
©2007 ViTAL Economy, Inc. 122 Liquid Energy Fuels Growth: 950% in 30 years Source: Business Week, October 29, 2007; Energy Information Administration Unconventional liquid fuels will help compensate for an expected shortfall in ordinary oil Millions of Barrels Oil Equivalent/Day History Projected 1.10 Energy SI has the opportunity to play a key role in coal-to-liquid and biofuels Growth Coal-to- Liquid +138% BioFuels+66% Heavy Crude+65% Canadian Oil Sands +260%
©2007 ViTAL Economy, Inc. 123 U.S. = 51% increase in consumption = 17% of world total China = 131% increase in consumption = 47% of world total India = 88% increase in consumption = 8% of world total Rest of the World = 38% increase in consumption = 37% of world total Projected Coal Consumption: Next 25 Years 1.10 Energy 74% Increase World-Wide Source: National Mining Association
©2007 ViTAL Economy, Inc. 124 Source: Energy Information Administration, Annual Energy Outlook Energy U.S. Demand for Electricity Keeps Growing Sector Demand Growth 39% increase in the Residential Sector 17% increase in the Industrial Sector 63% increase in the Commercial Sector
©2007 ViTAL Economy, Inc. 125 CoalNuclearNatural GasRenewablesPetroleum %19% 9%3% %15%16%9%3% Coal-fired power plants (including utilities, independent power producers, and end-use combined heat & power) continue to supply most U.S. electricity through 2030 Source: Energy Information Administration, Annual Energy Outlook Energy Coals Role in Electricity Generation Increasing
©2007 ViTAL Economy, Inc. 126 Alternative Energy is Creating Ag Opportunities Product / Ingredient Product / Ingredient Ethanol/Corn Bio-diesel/ Soybean Bio-diesel/ Soybean Wind U.S. Plants Owned By Farmers U.S. Plants Owned By Farmers 70% In rural areas 70% In rural areas 40% 35% Projected New Jobs by 2015 Projected New Jobs by ,879 39,100 12,500 Projected GDP Increase Projected GDP Increase n/a $46 billion $24 billion Even though renewable energy will be playing a relatively minor role over the next several decades, the opportunity for SI is still significant agriculture, fuel production, distribution Source: Business Week, Renewable Fuels Assoc., LECG, American Wind Energy Assn 1.10 Energy
©2007 ViTAL Economy, Inc. 127 The Real Price of Corn Current price of U.S. corn is not even close in real dollars to the price in the 1970s Recent price increase is still not close to the returns needed to provide farmers with an adequate income without government subsidies June 1, 2007 the U.S. ethanol industry had 120 active plants Capacity of 6mm gallons/year 6.4mm gallons of capacity under construction 2009 prediction – 1.3% of U.S. corn crop will be used for ethanol Impressive Ethanol Production Corn: Expanding as a Consumer Products Staple & Transportation Fuel Corn Production to Meet New Demands Corn has become a staple in a variety of products: Soda sweetener Additive in animal feed Dextrose in jams & jellies High fructose corn syrup New technology has raised yield to meet rising demands 1.10 Energy
©2007 ViTAL Economy, Inc. 128 CleanTech is Attracting Venture Capital (VC) Investment United Nations Environment Program Headline: Investors Flock to Renewable Energy and Efficiency Technologies; Transactions Leap to Record $100 Billion in 2006 with $71 Billion into companies and new sector opportunities 1.10 Energy Global Investment in Renewable Energy by Technology, 2006 Source: SEFI, New Energy Finance Global Investment in Renewable Energy % +43% $ Billions
©2007 ViTAL Economy, Inc Energy Energy: Implications (1 of 2) Demand for sustainable and non sustainable energy is increasing in the U.S. For strategic reasons, the U.S. would prefer to source more energy within the U.S. m Coal represents continued economic opportunity m New coal opportunities are related to new technology and knowledge based enterprises (KBEs) m The new industry is knowledge intensive and require workers with knowledge skills m Alternative Energy offers Agriculture opportunity and jobs New technology in bio-fuels could increase yield per bushel
©2007 ViTAL Economy, Inc Energy Energy: Implications (2 of 2) Breaking News: Clean-Coal has a long way to go to overcome its past dirty image m Maine still battling acid-rain m Number of states have continued to reject coal-energy generation projects m Potentially offsetting the above: Clean-Coal technology is receiving major investment Bolstered by continued high cost per barrel for oil Breakthroughs could open the doors wide for existing Southern Illinois coal extraction, transportation & labor Breaking News: Ethanol in Illinois not keeping up with demand: m Ethanol plant construction has stalled in Illinois; 38 permits issued since 2006 with only five plants under construction m Primary challenge facing new ethanol plants is the increasing cost of construction, raising concerns about investor return on investment SIs energy strategy should include processing of the raw material in the region, not competing in the commodity markets specifically in the area of transportation fuels - RA interview
©2007 ViTAL Economy, Inc Energy Energy: Opportunities Given the demand and cost of energy, opportunities exist for oil, methane, coal, ethanol, as well as coal gasification & CO 2 sequestering SI has the potential to develop coal, oil & gas, and agriculture product related energy Opportunities relate to mining, agriculture and manufacturing m Coal opportunities are related to new technology and knowledge based enterprises (KBEs) e.g., export coal processing & safety knowledge to China & India m Even coal demand is projected to grow m At SIU, the region has educational resources which specialize in alternative energy development m Rail and marine access can support large energy developments SI has had a long history of contribution & knowledge-base from the Electric Coops m Collaborating with other extractors & generators will help implement a Regional Energy Strategy SI has coal reserves totaling an estimated 181 billion short tons enough to electrify the eastern half of U.S. for 80 years - U.S. Dept of Interior
©2007 ViTAL Economy, Inc Energy Energy: Opportunities The future will not focus on traditional energy, but rather alternatives uses and sources SI has a variety of assets that support a diversified energy strategy, opportunities exist for oil, methane, coal, ethanol, as well as coal gasification & CO 2 sequestering m A diversified energy strategy will allow SI to have greater control over their future to better temper energy cost cycles SI has the potential to link its energy assets with its transportation and logistics assets to develop transportation fuels and technologies m Processing proximity to raw materials such as coal and corn or cellulosic materials supports feasibility Leverage the energy knowledge infrastructure and asset base m Coal opportunities related to new technology and knowledge based enterprises (KBEs) e.g., export coal processing & safety knowledge to China & India m At SIU, the region has educational resources which specialize in alternative energy development; Clean Coal Research Center, National Ethanol Research Center m Create a Southern Illinois University Energy Technology Center of Excellence SI has had a long history of contribution & knowledge-base from the Electric Coops m Collaborating with other extractors & generators will help implement a Regional Energy Strategy Major energy projects such as FutureGen and Prairie State will have significant economic impact and will expand the regions energy knowledge base
©2007 ViTAL Economy, Inc. 133 Chapter 1: State, National & Global Trends 1.11 Conclusions Southern Illinois "Garden of the Gods"
©2007 ViTAL Economy, Inc. 134 Chapter 1: Conclusions SI has assets to connect with economic trends and their related implications and opportunities m Include the regions natural setting and recreational opportunities, existing universities and colleges, and geographic location m Challenges for the region: lack of clear Pan-regional leadership Skilled human resources Financing Internet infrastructure (improving) 1.11 Conclusions
©2007 ViTAL Economy, Inc. 135 Trends, Implications & Opportunities (1 of 4) TrendsImplicationsOpportunities Globalization: The World is Flat SI is competing with savvy country economic strategies Business competition is much more intimate Increase flow of business capital to international growing markets The world economic growth rate is 4 times the rate of SI – go get it SI can leverage its central location and inter-model transportation assets to become a logistics service center Utilize the ten flatteners to create a collaborative regional economic development strategy Broadband Connectivity & eCommerce Broadband capacity and connectivity is a must have infrastructure to compete On-line retail sales have a direct impact on rural Main Street America Broadband allows SI to take advantage of the ten flatteners Internet sales and distribution A region wide broadband infrastructure strategy Apply best practice connectivity applications to improve efficiencies Global R&D collaborations KBE: Innovation and Knowledge Drive Jobs and Wealth Creation 90% of all new jobs will be created by companies of 50 employees or less Innovation and commercialization of knowledge is key KBEs: work where they live rather than living where they work Link SIU research to business incubator, expertise and capital Green technologies Homeland security response and services Mining & safety-related technologies Life sciences, plant and animal 1.11 Conclusions
©2007 ViTAL Economy, Inc. 136 Trends, Implications & Opportunities (2 of 4) TrendsImplicationsOpportunities Transformation of the U.S. Economy SI manufacturing job base has declined for 20+years Commodity production will be replaced with knowledge based enterprises U.S. companies will need to be nimble and adjust to the global economy and pursue growing markets KBE potential in mining technologies, bio-agriculture, waste water management, safety, advanced manufacturing, energy, etc. Leverage the workforce development resources to create a world class KBE workforce Livable Communities Jobs migrating to attractive smaller communities Boomers retiring moving to rural small communities, Recreation and natural environment is a priority Recreational services and products, tourism, attractive communities Senior living strategies KBE creation and attraction Visual and creative arts Global Workforce Shortage and Immigration 2010 there will be a 10 million worker shortage in the U.S. Need for smarter workers Since 1970, 90% of the growth in the U.S. workforce has been filled by immigrant workers Regions competitiveness will be at risk due to lack of workforce Transform SI into the corporate casting agent for the 21 st century Leverage over 60 years of SIU with students from over 100 cultures Embrace workers in their 50s and 60s create a climate of freedom to work Conclusions
©2007 ViTAL Economy, Inc. 137 TrendsImplicationsOpportunities Aging Population 15,600 workers retire everyday, 77 million workers due to retire by 2010 Increased demands for nutrition, healthcare and housing requirements Consumer markets will follow the baby boomers generation Healthcare Products and Services Senior Living Nutraceuticals ¾s of the countries wealth is residing with active adults desiring many of the attributes of SI Active Tourism Visitors to the U.S. seek unique, historic, cultural visits Resources needed to support language, customs and dietary requirements of international travelers Shorter trips within 4 hours of home Niche markets: Eco, culture and adventure tourism SIU international student population linked with tourism Recreational tourism focusing on SI unique qualities Growing Logistics and Transportation Movement of goods and services is far easier than moving people Logistics and distribution will continue to grow with imports from China and India Mfg jobs will continue to shrink Distribution is close to end markets SI is in a prime geographic location to seize the logistics and distribution markets With in ever increasing cost of fuel waterborne transportation is attractive; marine transportation services Trends, Implications & Opportunities (3 of 4) 1.11 Conclusions
©2007 ViTAL Economy, Inc. 138 TrendsImplicationsOpportunities Energy Demand Energy costs will rise with increased demand especially in the U.S. Alternative energy will receive policy support and increasingly in demand Coal as a fuel source and clean coal technologies will have strong demand Coal will have to fight the a dirty image Coal mining Clean coal technologies Regional energy strategies Alternative energy innovations Transportation fuels sources Sustainable Communities Attention on global warning and pollution, Concern about healthy foods and the growth of locally produced products Access to water is a strategic advantage Carbon offsetting (growing trees) in rural regions, Locally grown organic foods Nutraceuticals, Alternative green energy Regional recycling businesses Trends, Implications & Opportunities (4 of 4) 1.11 Conclusions
©2007 ViTAL Economy, Inc. 139 Potential SI Jobs by Sector (1 of 2) Global growth opens up opportunities to expand SI economy beyond its traditional growth rate 10 million U.S. worker shortage is an opportunity for SI workforce development resources Growth in services exports enable SI to move away from uncompetitive legacy economic activities Global growth opens up opportunities to expand SI economy beyond its traditional growth rate 10 million U.S. worker shortage is an opportunity for SI workforce development resources Growth in services exports enable SI to move away from uncompetitive legacy economic activities ICT* investments contribute 33% to U.S. productivity growth…this validates importance of NP-COI SIs 64% increase in broadband access can better leverage six-fold increase in e-commerce activity 4 of 5** factors in rural KBE growth are SI strengths need to be leveraged for SI economic growth Livable community assets present in SI are an attraction asset for KBE, Senior Living and Tourism Alternative energy, global warming and greening of society is creating innovation opportunities ICT* investments contribute 33% to U.S. productivity growth…this validates importance of NP-COI SIs 64% increase in broadband access can better leverage six-fold increase in e-commerce activity 4 of 5** factors in rural KBE growth are SI strengths need to be leveraged for SI economic growth Livable community assets present in SI are an attraction asset for KBE, Senior Living and Tourism Alternative energy, global warming and greening of society is creating innovation opportunities See: RA Chapter 1ICT = Information & Communication Technology **Five Factors are: High Quality Workforce College or Universities Local Amenities Transportation Infrastructure Size KBE 8,023 New Jobs KBE 8,023 New Jobs Global Workforce Opportunities 18,750 New Jobs Global Workforce Opportunities 18,750 New Jobs 1.11 Conclusions
©2007 ViTAL Economy, Inc. 140 Potential SI Jobs by Sector (2 of 2) Climate of Economic Opportunity = an additional 10,210 new jobs NEW GRAND TOTAL = 50,789 Jobs (vs. 27,298 Jobs Feb 07) Climate of Economic Opportunity = an additional 10,210 new jobs NEW GRAND TOTAL = 50,789 Jobs (vs. 27,298 Jobs Feb 07) See: RA Chapter 1 77 million retiring baby boomers present an affluent senior living growth opportunity for SI Preferred tourism growth sectors indicate SI is positioned for accelerated tourism growth SI energy assets and knowledge are in the sweet spot of energy priorities for growth Significant transportation labor shortages are moving transportation and distribution centers from the coast to the center of North America. SI location and logistics assets position it for growth Senior Living 3,676 New Jobs Senior Living 3,676 New Jobs Energy & Mining 5,680 New Jobs Energy & Mining 5,680 New Jobs Tourism 4,450 New Jobs Tourism 4,450 New Jobs Log/Trans//Dist 1,675 New Jobs Log/Trans//Dist 1,675 New Jobs 1.11 Conclusions
©2007 ViTAL Economy, Inc. 141 Carpe Diem Seize the Day! Opportunity is just opportunity, unless you cease it, then it becomes reward 1.11 Conclusions A changing economy impacts the way we live, work, learn, govern and connect We cant run a 21st century business, community or government on 20th Century rules A changing economy impacts the way we live, work, learn, govern and connect We cant run a 21st century business, community or government on 20th Century rules The Reason for Action
©2007 ViTAL Economy, Inc. 1 Southern Illinois: Garden of the Gods Readiness Assessment Chapter 3: Enabling Environment Revised February 15, 2008 CONNECT.
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