High-Tech Firms Look Beyond The Buildings

A strong educational infrastructure and diversity are important factors when New Economy companies decide where to site their new facilities.

By: Ken Krizner, Managing Editor Expansion Management

EnVirtue Biotechnologies typifies a high-tech company on the move these days. The company, which develops and adapts advanced technologies for solving environmental problems, moved in January from San Francisco to Winchester, Va.

There were practical reasons for the move, of course. The company wanted to be close to federal government agencies and environmental activist groups it deals with on an ongoing basis. And the low cost of living in Winchester, compared with San Francisco, will reduce the company’s overhead costs by close to 70 percent.

But there are other reasons, as well — reasons that many high-tech or knowledge-based companies consider when relocating or expanding their operations.

EnVirtue wanted to be in a location where it could ally itself with secondary and post-secondary educational institutions; it wanted diversity, both in occupation and experience; and it wanted a high quality of life away from a metropolitan area. Winchester is about 50 miles from Washington and 135 miles from Richmond, Va.

Now that EnVirtue has relocated, it is establishing a relationship with a local school of pharmacy because the company will need pharmacists in the future, and there is discussions about Craig Downs, company president, giving lectures and setting up laboratories on biotechnology at several area high schools.

“When students read a textbook, it’s facts and information, and they don’t care,” Downs said. “But if students actually see what kind of jobs are out there, and what we’re really doing, its puts a new spin on what we’re doing. There’s value to what the students are learning.”

Downs is comfortable enough with the education system in the region that he is willing to hire students right out of high school or community colleges with strong chemistry and biological backgrounds to fill out the work force. Plus, the company will also be able to hire employees with master’s degrees that have worked in the industry for at least three to five years.

“The community has reached out and helped us open doors to bring those kind of people into our company,” Downs said. “This would never have happened in California.”

Creating a High-Tech Haven

EnVirtue will initially create 12 jobs in a 2,500 square feet facility in Winchester through a $1.5 million investment. That might seem small but small can turn into large in just a few years. The company hopes to create more jobs, as well as subsidiary companies, in the months and years ahead.

Remember, Redmond, Wash., was just a suburb of Seattle 30 years ago. Today, the city is at the center of the high-tech universe and a household name throughout the world thanks to its most famous business resident—Microsoft.

There isn’t a city across the United States that hasn’t at one time or another dreamt about being the next Redmond. A company with an idea that revolutionizes the world settles in your community and brings with it a plethora of ancillary businesses. Within just a few years, every benchmark — household income, cost of living, the tax base, education, quality of life, etc. — is on the rise for that community.

Suddenly, communities find themselves in the enviable position of having prospective companies come to them for expansion projects, rather than the communities reaching out to attract companies.

While it may be difficult to attract the next Microsoft, it is possible for communities to attract different types of companies and industries that have come to represent the New Economy. High tech is evolving into knowledge-based industries, encompassing different disciplines that range from software development to advance technologies to biotechnology and life sciences.

What Attracts High Tech Companies?

But before communities go searching for attract these companies, they must first have the fundamentals in place.

“You have to create a foundation for talent,” said Leslie Parks, a San Jose, Calif.,-based consultant. “You have to foster an atmosphere in that foundation that produces top talent.”

That means a high-quality education system, beginning with kindergarten through 12th grade and continuing on to two- and four-year colleges and universities.

“A community must have an educated work force,” maintains Dan Rogers, president of Rogers Consulting in Austin, Texas. “First and foremost, this is what companies are going to look at. If you don’t have an educated work force, you’re going to be eliminated right away.”

One constant in all technology- and knowledge-based regions is the connection to colleges and universities.

The knowledge-based industries in Phoenix and Tucson, Ariz., draw on the University of Arizona, Arizona State University and Northern Arizona University.

“University research provides the technological advances that drive growth in every industry,” said John D. Haeger, president of Northern Arizona University.

An extensive study is underway to assess the competitive advantages of technology research at each of the three institutions. The aim is to examine existing and emerging research and development strengths at all three universities.

“Having a thorough accounting of what we already do well and what we might do better over the next decade will make it easier to make the tough funding decision we’re facing in the short term,” Haeger pointed out.

The more than 140 companies of Research Triangle Park, a 7,000-acre research and development site in North Carolina, depend heavily on Duke University, the University of North Carolina and North Carolina State University.

The Virginia Biotechnology Research Park in Richmond draws on medical science research at Virginia Commonwealth University and the Medical College of Virginia Hospitals.

The Park is home to more than 40 biotechnology, bioscience and related companies and research institutions.

Dell Computer, Motorola and IBM are three of the top four private-sector employers (nearly 30,000 combined) in the Austin, Texas, area. Austin is also home to the University of Texas.

“There is a built-in research and development department if there is a quality university in the area,” Rogers said.

Many universities are taking the step of creating their own technology parks, where companies can come in and work in their laboratories. It could cost a university millions of dollars to establish such a park, but the potential payoff is worth the investment, Rogers stressed.

“Universities get grant money, companies can be the end user of the research, and students get real-life experience,” he noted.

Diversity and Contrast

A century ago, it was common for employees of a steel factory in Pittsburgh or automobile manufacturing plant in Detroit to live in the same neighborhood, not far from their workplaces. The workplace was a bond for these workers and their families, who were often immigrants, and that translated into a sense of community.

Likewise, knowledge-based industry employees today seek similar living environments and quality of life issues. A major reason why is because high-tech workers represent numerous nationalities, all with their distinct customs and traditions. It’s an important point to remember for communities wanting to attract these workers.

“These workers want diversity and contrast,” Parks said. “Communities have to create a cultural infrastructure that appeals to them.”

Knowledge-based companies will measure communities against New Economy factors. What percentage of households have Internet and computer usage; what percentage of the work force are science and engineers; what are the linkages to educational institutions in the community; what kind of quality-of-life amenities are in a community.

“A community has to support the greatest diversity of lifestyles,” said consultant Kate McEnroe, based in Atlanta. “Or else, you’ll have little chance to land a knowledge-based company.”

Most importantly, perhaps, these workers don’t mind not being in the middle of large metropolitan areas.

Fargo, N.D., has combined its out-of-the-way location, a quality educational system, from kindergarten through college, and a high quality of life to establish itself as a high-tech destination.

Part of this was because of the success of homegrown Great Plains Software, which was built on providing software solutions for business. The company (which has since been sold to Microsoft and renamed Microsoft Business Solutions) became so successful that many smaller software companies moved to Fargo, and larger companies also became enamored with the area.

Agriculture giant Cargill Inc. moved its accounting center to Fargo in the mid-1990s. Navigation Technologies Inc., a maker of digital maps, consolidated its production operations in Fargo in 2001, shutting down a facility in Sunnyvale, Calif., in the process. Technical support firm SEI Information Technology Inc. has doubled its Fargo work force during the past two years to more than 275.

One Cluster at a Time

Because high tech is such a broad term that carriers a number of definitions, consultants say that communities should target a specific niche within the high-tech world. Then, build an infrastructure that will attract companies in that niche.

Tucson is an example of how the cluster approach can work.

In 1992, Tucson was dubbed "Optics Valley" and the Arizona Optics Industry Association (AOIA) was founded. The nonprofit organization works to bring together optics-related businesses and fostering growth in the optics industry.

Optics technology is used for more than just eyeglasses and telescopes. The technology is also utilized in fiber optic telecommunications, missile guidance systems, data storage and medical imaging.

A decade later, Arizona has more than 187 optics firms with more than 7,000 jobs, 66 percent of which are located in the Tucson area. Optics industry companies work closely with the University of Arizona’s Optical Sciences Center, the largest comprehensive academic optics institute in the world, and Pima County Community College, which offers optics programs designed for direct employment.

“Future success stories will be communities that just don’t advertise themselves as places to locate a high-tech business,” McEnroe said. “They will do a better job identifying a specific niche within the high-tech world and promote that niche.”

—Ken Krizner is managing editor of Expansion Management magazine. He can be reached at [email protected].

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