Several trends are changing the way local economic development organizations move forward into 2019.
John Lummus, Executive Director of Upstate Alliance, a regional economic development group, highlighted the changes at a recent Greer City Council meeting last Tuesday.
“I feel that Greer has done really well and has taken advantage of a lot of things that we do in our organization,” Lummus said. “We’re for the business development group that’s out there, and we bring the projects back to the cities and the counties, and they’re the ones that are actually landing the projects. Reno (Deaton)’s actually doing the real work.
“Economic Development isn’t the same as it was 25 years ago when BMW announced it was coming here,” he said. “Manufacturing has changed. The world economy is changing.”
As home to nearly 500 firms from 34 different countries, the Upstate is part of that world economy.
“That means things are changing for us too,” Lummus said. “In the past, the Upstate Alliance has come to you with reports of what’s already happened, but today, we’re presenting data about what we project will happen, what we expect the next 50 years will look like.”
From research to relationship building, the Upstate Alliance collaborates with public and private partners across 10 Upstate counties in order to leverage opportunities for growth in key industries, including automotive, aerospace, advanced materials and bioscience.
“We’re seeing new opportunities for communities in our region that we want you to know about because we believe your community will leave money and jobs on the table if we don’t respond to three major disruptive trends,” Lummus said.
The first major trend is a change in the size of projects.
“Economic development success used to hinge on attracting large manufactures, bring in a big company, bring in lots of jobs, huge win, but fewer big opportunities will exist over the next five years,” Lummus said. “That’s true here in the Upstate, and it’s true in every part of the U.S.”
“Major projects are down 50 percent over the last ten years, not just here but nationwide,” he said. “For us, projects that bring more than 50 jobs or over one million dollars in investment have declined. Meanwhile, middle market firms are where we find the growth.”
Middle market firms are defined as those having between 10 and 100 million in gross revenue each year.
“Mid-sized companies have created the most new job growth, 72 percent of new jobs in the U.S.,” Lummus said. “When we look back at the last 20 years, we saw something else: 86 percent of jobs created in South Carolina were by firms that are already here.”
“This is where we see the best opportunities, attracting more mid-size and small firms and helping your community expand existing companies,” he said.
For an example, Lummus described the possibility of a small technology firm relocating to the community.
“They come here to support one of the big manufacturing sectors; automotive is an obvious one here for Greer,” Lummus said. “This small firm adds to your economy quickly. They don’t need a big infrastructure investment. They don’t require a large scaled workforce you aren’t able to provide, but they do hire local support staff for local services.”
“They use a bank, an attorney, a local CPA,” he said. “They buy our rent office space; they eat in our restaurants, shop with your merchants, and support your local community projects.”
The example continued with this firm attracting other small firms or other companies that want to collaborate.
“Those new small firms also come to your community, providing the same advantages without carrying that old economic development burdens,” Lummus said. “You start to see how this disruptive trend can become a beneficial one in many ways.”
“Small and mid-sized firms can bring money and jobs,” he said. “To take advantage of it, first we had to recognize the opportunity and now we have to build support, reward our economic development teams for pursuing these smaller but valuable projects and tell these economic development success stories in a way that gets people excited.”
The second major trend is a growing demand for innovation.
“The second disruptive trend we see goes hand in hand with the first one because trend number two is a growing demand for innovation,” Lummus said. “When economic development is tied to manufacturing, you may worry about what innovation means.”
“Maybe you worry it’s a code word for automation which will mean a reduction in hiring, but if we don’t embrace innovation, if we equate innovation with fewer jobs, we’re not going to attract new companies, so to respond to this second disruptive trend, our strategy at the Upstate Alliance is to be an innovation connector,” he said. “Here’s why innovation is critical to our plans. Our data shows that on average it took five employees in 2015 to produce one million of manufactured goods. Back in 1980, the same amount of production took 25 employees.”
Tasks performed by robots are expected to increase from 10 to 25 percent in the next 10 years.
“With automation, external sources and services are more important,” Lummus said. “Local labor costs matter less. That’s a big change for us to embrace because—as you all know—labor cost has been a way we’ve sold companies on coming here.”
“Now, manufacturers want to go where service firms and talent are available,” he said. “We can take what we’ve learned from automotive and build on it. We’re in a great position to become innovation specialists in aerospace and advanced materials too.”
Advanced materials is a broad category, including nanotechnology, new fabrics and carbon fibers.
“An advanced materials focus helps our region take advantage of work being done by Milliken and companies and automotive and aerospace,” Lummus said. “For all of us, the key to making the most of this trend is to embrace it, not view it as the end of manufacturing jobs, but it’s the key to building a strong regional economy.”
The third major trend is the expanding role of the Upstate in the world market.
“As you know, we first attracted foreign companies to our region for the low cost of doing business here; then, we built infrastructure,” Lummus said. “We learned how to work in a global market. We’ve perfected our exporting processes.”
“Now, 25 years later, we’re a great base for exporting as you see with BMW exporting 70 percent of the cars that they make in that facility,” he said. “There are new ways for us to take better advantage of that and strong reasons to build our participation in the world market.”
The share of jobs from foreign countries in the Upstate is twice the national average.
“Our region’s economic development success has made us unique in the United States,” Lummus said. “We have a great platform for attracting even more foreign companies to the Upstate and a distinct advantage because of our established success.”
“Bringing more foreign direct investment to our region will still be a top priority, but data shows us another way to take advantage of our connections to the global market place,” he said. “Wealth around the world is growing.”
From 2015 to 2020, more than 80 percent of global economic growth is projected to occur outside of the United States.
“This new and growing middle class will have spending power its never had before,” Lummus said. “Everything we’ve done to bring foreign companies to the Upstate puts us in a great position to help companies here, to connect and adapt to the global market.”
“At the Upstate Alliance, we can help our own growing companies find new customers by connecting them with export training, international commerce trips and more that will help them get connected to global markets,” he said. “One example of how exporting can drive economic development is Aran Packaging.”
Aran, an Israeli company, selected Greer for its first American facility in 2015, and the Greer-Aran facility makes bags used in packaging for products such as fruits, vegetables, dairy, wine and water. The company invested six million dollars and created 63 new jobs in Greer. Today, bags made in Greer are used across North America and Latin America.
“The Aran story is a great example of foreign direct investment and the power of exporting,” Lummus said. “Our other opportunity—attracting even more foreign direct investment—is tied to this important concept: marketing ourselves as a region.”
“We need to remember how the world understands us,” he said. “Even in the United States, people call us the Carolinas because they’re not sure what’s north and what’s south. Now, place yourself in the shoes of executives halfway across the world; they don’t know Greenville from Greer, Spartanburg from Seneca; they see us as a region.
For economic development, we’re stronger when we work together as a region to market ourselves to them.”
Being even better at telling the Upstate’s regional story is one way Upstate Alliance will take advantage of the opportunity to bring even more foreign direct investment to the Upstate.
“Twenty-five years ago, getting one German manufacturer here was huge,” Lummus said. “Now, we’re at nearly 500 firms from 34 different countries and counting. Our connection to the world is more important than it’s ever been.Our ability to tap into new markets through exporting is a big opportunity, and our proven ability to work together as a region is one of our great strengths.”
“Three major trends and so much information, Upstate leaders reshaped the state’s economy 50 years ago by embracing change; that’s why our region has had a strong plan, one reason your community has had such great success,” he said. “We’re sharing our findings because we want you to see the changes that are coming and understand the rationale for how we’re working at the Upstate Alliance. We also hope these trends will spark your ideas for new ways to approach economic development, and that these trends will provide new opportunities for us all. Let’s grow together today.”