Can Tech Rescue America's Big Cities?

Posted by: Michael Arndt on August 19, 2009

Many times being big and diverse with business is a good thing for a city. It buffers the local economy from industry-specific slowdowns, and it gives people more options for careers. Fred Hoch lives and works in big and diverse Chicago, but sometimes he wonders if the city would be better off if it were more like San Diego or Austin—smaller places defined by a growth industry like biotech or semiconductors.

(This isn’t just about Chicago, btw. Commodity cities across the U.S. might find a lesson here.)

Hoch is president of the Illinois Technology Assn. (ITA), and through a facility called TechNexus, he’s doing his part to create a mini-Silicon Valley in Chicago. He walked me through TechNexus the other day. It’s a good start, and Hoch deserves more support and recognition than he’s been getting. The 2016 Olympics shouldn’t be the city’s only economic redevelopment plan.

I feel awful to say this, but it also seems so puny. TechNexus occupies one 22,000-sq.-ft. floor on a high-rise across the street from the building formerly known as the Sears Tower. It offers high-speed wireless Internet and telephone connections, conference rooms, and the other things that startups require (plus a view). More than two dozen companies have some presence on the floor, ranging from a single desk to a suite.

But I recall touring a business incubator at the University of Florida in Gainesville a couple of years back. As I wrote here, it had 40,000 square feet, 19 wet labs for biotech startups, $1 million in equipment, a dozen tenants, and alums that had outgrown their first home. And, for Pete’s sake, it was in Gainesville.

Hoch argues that TechNexus isn't only an incubator. He prefers to call it a "clubhouse." Any of the ITA's hundreds of members can swing through, and he says many often do, to see what startups might be intriguing as an investment, supplier or acquisition, or to provide mentoring. That includes IBM, Microsoft, Google, and other tech giants with sizable offices in Chicago. In an average week, he says, 300 to 400 people ride the elevator up for a visit.

A few of the Chicago-based tenants seem to have potential, such as CohesiveFT, which custom-builds crowd-sourced operating software for businesses; ArtistData, which handles new and old media placement for musicians; and GeeYee, which goes beyond key-word searches to find opinions in social media and the blogosphere.

Chicago's big problem—and this applies to most other major cities as well—has never really been a lack of tech smarties, however. Netscape, which invented the Web browser, was begun at the University of Illinois. Two of YouTube's three founders were also Illinois computer science grads. And the founding CEO of biotech giant Amgen had been a VP of research at Abbott Labs.

It's also not a lack of heft. Altogether, Hoch points out, Chicago has more tech employees than Austin. The state ranks seventh in high-tech jobs, according to a recent study.

So why isn't Chicago, or New York or Los Angeles, for that matter, seen as a tech capital? In smaller cities, tech can define the place because it's so important to the local economy. But in the country's largest urban centers, tech is just one of many industries, among hospitality, health care, finance, manufacturing, etc. Its impact is diluted.

There's a mindset to deal with, too. Tech may be fundamental in virtually every big-city industry, but IT workers at Kraft Foods, say, or Sears would almost never describe themselves as working in the tech sector. "Technology defines Austin," says Hoch. "Technology does not define Chicago."

Hoch is trying his darndest to change that. I wish him luck. Perception often becomes reality.

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Reader Comments

Roy G. Biv

August 20, 2009 10:54 AM

Silicon Valley (and the surrounding San Francisco Bay Area) came together as THE tech capital because of the confluence of special circumstance not easy to duplicate.

1. The defense and aerospace industry, including NASA.
2. Two world class universities -- Stanford and Berkeley
3. The rush of Hippies and future Boomers from around the world wanting to make a difference.
4. Lovely weather.
5. A scenic location.
6. An environment of willingness to take chances; to change the world. (Those types of people come to a seismically active region; fearless)
7. A vibe in the area of constant change. (It was not only the center of the Hippie and New Age revolution, but the place that the environmental movement began, as well as the Biotech revolution began. Most importantly, the PC was born here, then the Internet technology, (and now the Smart Smartphone). You see why it is hard to duplicate the environment

If a city wants to become another SV, then you have to change your VALUES to something higher. Values like tolerance, innovation, free thinking, non-money orientation (that ironically brings tons of it), and creativity. They have taken up that mantle somewhat in Bangalore, India because they know fully what was involved, what values were needed. As Indians started almost one third of all Silicon Valley companies while they were here. They were pioneers for coming here, and now they take it home with them, deservedly so.

Few people are pioneers. We mostly follow the herd. Innovative, original thinkers and doers are rare. In the San Francisco Bay Area, not matter how much fun is poked at people here, is saturated with such people. They really want to make a difference in the world.

The confluence of these forces is hard to duplicate. But there are new values and infinite possibilities. A city or region would have to look deep down (and within) to see what it is made up of, really believes in. LA has been mostly about the surface, though there are pockets of technology. NY has talented and innovative people, though it is too mired in making it and money. If they (along with Chicago) get in tune with the emerging needs of society and become real pioneers, then unthought of things can be developed. Silicon Valley is after all in one sense an incubator of a new way of doing business. It can be duplicated, but will only be successful if local, heretofore, unthought of values and approaches are added to the mix. That requires a leap away from the old ways. Who is ready to take up that challenge?

riskybusiness

August 20, 2009 04:35 PM

Hey RedOrangeYellow...the Valley also has a lot of problems. And problems they didn't used to have. I think the issue is a far more overarching one - risk aversion.

Risk aversion controls the minds of investors, including VC's. VC's are even flakier than a guy off the street -notwithstanding the image some have. And risk aversion is why America is no longer a nation of pioneers, or innovators.

The recent financial collapse was in many ways the result of attempts to mitigate risk by converting it to instruments.

American's want their insurance, and their insurance and safety, and their guarantees, and their insurance, and their government guaranteed insurance.

James Scott

August 22, 2009 09:46 AM

The main point of Chicago and other major cities is to provide an outlet for different interests to meet.Also the diverse markets allow Chicago to prosper even if one of them fails.Whereas if there was a depression in the Technology Market it would reflect in the economy of Silicon Valley wouldnt it?That brings us to the point.Such single market oriented cities are important for development and will remain so.But big and diverse cities like Chicago are required will be the ones who drive growth during a depression in one of their primary sectors.

Eduardo Pérez

August 22, 2009 02:23 PM


The actual context is the state of California is going down, the financial crisis, in the universities the good professors and students are leaving the state, The model that is in this article could be a good option for the future

Mr Pepper

August 23, 2009 09:50 AM

I must agree with Roy G. Biv, and the reason for this are the numerous comparision with societies and cultures the world over. Static dumbed down societies like the Arab and Moselem world, for example find it impossible to innovate. Rigid societies with the overhang of authoritianism, like South America, also find it hard. Innovation, since Ancient Greece, requires and needs free thinkers who are ready to take risks, calculated considered risks, and to have and enjouy a lifestyle that fosters a growing mind(-space) since thinking and living are really one and the same thing for innovators. The great thing about the future is that as long as there is freedom and the chance to have a go, and avoid the creep of vested interests, then there is where the winners will arise. The USA will bounce back because it can, and it will. China will not set the tone, China will follow. Trust me on this. I speak and think in Greek, and I know the riddles of the world.

Doug

August 23, 2009 06:31 PM

Los Angeles needs (more) large, business incubator complexes. Los Angeles area (like Silicon Valley) also includes world class technological research universities, eg., Cal Tech, UCLA, USC, etc. which can support these incubators. (Also, near-by UCSD, UCI, UCSB, Harvey Mudd.)

Mayor, City Council, County government, business organizations, universities -- what do you think??? Please post your comments, suggestions and ideas.

Margaret Plett, Illinois Technology Association

August 26, 2009 01:55 PM

Thanks for the great post Michael. We’re excited about what we’re doing here at the Illinois Technology Association (ITA) and TechNexus and it’s great to get national attention. I think I understand why you said the TechNexus seemed “puny”. Compared to university or government funded endeavors it IS smaller. One of the interesting things about our facility is that it does not take any government funds or public funds. Just like the ITA, TechNexus is 100% funded by Chicagoland entrepreneurs.

It’s the organic, nearly grassroots, nature of this clubhouse that makes it an interesting story. And, only two years into the endeavor – we’re proud that our facility serves nearly 3,500 technology companies in Illinois with employees who attend some of the over 180 events we offer each year in our 25,000 sq. ft. facility.

Innovative efforts don’t need to be measured by size as much as result. The story at the TechNexus is that we’re creating a community of innovators – tying together talent, ideas, and resources so that innovation begets innovation in a chain reaction that we get to witness here on a regular basis. Many businesses have been founded in our facility and some have been identified as innovators. In fact, this year’s Chicago Innovation Awards (www.chicagoinnovationawards.com) have recognized 15 ITA members (including the TechNexus facility) as finalists this year!

Tom Churchwell--Midwest Venture Partners

August 26, 2009 02:15 PM

Perception of reality is better if you can see the whole picture. Rather than perceiving Fred and ITA’s activities as “puny,” one should view them as part of a large, varied, but reasonably well coordinated network of activities and facilities in Chicago.
In addition to TechNexus, there are well populated incubators/accelerators at the former G. D. Searle facility in nearby Skokie, IIT, Northwestern, University of Illinois at Chicago and others.
ITA’s entrepreneurial focus is supplemented and complemented by very active entrepreneurial support/mentoring programs at Chicagoland Entrepreneurial Center, IBio, Illinois Technology Development Alliance, the Illinois Venture Capital Association, TiE Midwest and others.
Each of the major universities maintains an active entrepreneurial education program and a well trained tech transfer staff.
There are half a dozen early stage VCs in the city and an equal number of active angel groups.
Current estimates are that there are a couple of thousand bio and tech start-ups in the metropolitan area.
Not so puny, just harder to see in such a big city.

Ted Feierstein, First Analysis

August 28, 2009 10:24 AM

Changing fundamentals bode well for the emergence of technology-enabled business services (TEBS or ‘BPO2.0’) companies in areas traditionally not recognized as tech hotbeds, especially large metropolitan areas full of traditional businesses such as Chicago. The combination of new technologies such as platform-as-a-service/cloud computing (dramatically reducing technology company start-up costs), desire of end-users to outsource non-core functions to take out material cost while enhancing operations and their desire for whole solutions, and the maturity and accessibility of the cost effective off-shoring marketplace, combine to create an environment ripe for new company formation. The core requirement for these companies is less technology genius than it is deep domain expertise and existing customer relationships, attributes found in abundance in metro Chicago companies such as Abbott, Boeing Accenture, Allstate, Aon, CBOE and many others.

Take Evanston-based The Optimé Group. Optimé solves the problem of inefficient nurse (the scarce and expensive resource in acute care providers largely responsible for the ‘customer experience’) deployment strategies in acute care hospitals by combining process re-engineering, advanced mathematical optimization and demand planning delivered as a web-based platform. Here’s the kicker, rather than simply selling this as a SaaS suite of applications, Optimé brilliantly takes over the nurse staffing office and puts its logisticians (this is what nurse scheduling is) in the hospital, thus providing Chief Nursing Officers, clinical by nature, with left-brained analysts at her beck and call. The net is a savings of 3%-6% of nurse spend which goes right to the operating income line and happier nurses and, by extension, more satisfied patients; the ole ‘better, cheaper, faster’. The founders are an optimization expert, trained by applying his craft to such Midwest staples as manufacturers and logistics/distribution companies and an ex CNO for a large Midwestern healthcare system. The applications are developed off-shore along with the data cleansing and analytics, all at a fraction of US cost.

The ‘non-coasts’ are full of such companies combing people, process, technology, outsourcing and off-shoring to solve important problems in big emergent markets. Expect a bumper crop of BPO2.0 companies emerging from Chicago and other traditional cites over the next ten years. These solutions will become the heart of what today is traditional enterprise solutions.

Dan Levine

October 8, 2009 04:59 PM

I think nowadays "tech" is too narrow a term; implying cutting edge innovation in start up companies. Right now, some of the most exciting economic development opportunities are in areas like advanced manufacturing- which is high tech that produces something physical. I do a lot of consulting work with commercial banks- these are best described as technology companies that happen to use financial instruments to generate revenue. My point is- economic development is moving way up the professional skill set regardless of industry classification- it is all about applied technology and developing new technologies. If you're interested in this stuff- I write a lot about economic development topics in my blog:
http://publicpolicydialogue.blogspot.com

charles brooks

December 26, 2009 06:26 AM

Having been a part of the Online Universal Work Marketing team for 4 months now, I’m thankful for my fellow team members who have patiently shown me the ropes along the way and made me feel welcome

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What comes next? The BusinessWeek Innovation and Design team of Michael Arndt and Helen Walters chronicle new tools for creativity and collaboration, innovation case studies in both the corporate and social sectors, and the new ideas that have the power to change the way things have always been done.

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