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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JULY 19, 2001 TRENDS Small Towns, Big Successes Some of the most obscure corners of the country -- tiny towns in Utah, for example -- are nurturing some of the fastest-growing companies
While many efforts to pinpoint the locations of high-growth companies study only high-population metropolitan regions, the NCOE took another tack and combed through census data that lists annual employment at every company in every county in the country. It was specifically looking for companies where employment grew by 15% or more per year between 1992 and 1997, or where the workforces at least doubled over the same period. Nationwide, fewer than 5% of companies meet that criteria. Though the statistics are four years old because of the reliance on census data, Patrick Von Bargen, the NCOE's executive director, says the time lag is beside the point. "It's worth looking at these numbers," he says, because they describe, "the hardcore underpinnings of a region: Is it a region that supports solid-growth companies?" The NCOE found concentrations of high-growth outfits in localities of every size -- even those with populations below 150,000. The message for entrepreneurs: You don't have to locate in the big city to make it big. The message for communities: If you're searching for a boom-town model, ignore places like San Jose and concentrate on your own backyard. PICKING WINNERS. That's what the NCOE has been telling the many mayors and economic-development officials who have been calling since July 11, when the study was released, to ask how they can transform their localities into one of the next high-growth success stories. "Every state is trying to be the next biotech center," says Von Bargen. "Well, guess what? They can't be." Each of the country's 394 regions -- labor-market areas, as defined by the census -- has at least a handful of high-growth companies, Von Bargen says. "What we say to community leaders is: You need to find out who these fast-growth companies are -- typically a lot of these companies, because of their size, are below the radar screen of economic-development people." So what should mayors do? Von Bargen lays it out this way: "Talk to the CEOs, talk to the entrepreneurs...get a hands-on view of what's going on at this level of the economy. Are these companies building on the strengths of the region? What are you doing to improve on the strengths or to fix the problems?" Some economic-development officials are asking those same questions and more, says Jeff Finkle, president of the International Economic Development Council, which is based in Washington, D.C. "The goal is to find as many startups as possible, figure out which ones have economic viability, and give them what they need to grow." RED TIDE. Smaller outfits also generate the most new jobs. In the last decade, "our job growth in Utah has occurred 100% in small businesses," says Rod Linton, head of the Utah governor's technology initiative in the state's Community and Economic Development Dept. In the NCOE's color-coded map of the U.S., the regions with the highest percentage of fast-growth companies are shown in red. Utah has more territory -- roughly 75% -- in the red zone than any other state. Why? Linton and others cite a host of probable reasons, beginning with Utah's high ranking amongst states with the best-educated residents. Then there are the strong computer-technology departments in the state's universities, and the fact that most of Utah is very well-wired, with broadband access for much of the population. Salt Lake City, for example, boasts the country's highest rate of personal-computer ownership. Other factors also work in Utah's favor. For decades, the state had a strong high-tech base. The Defense Dept. had big operations there in the '70s, which spawned strong companies in the '80s and launched a trend that became even more pronounced in the entrepreneurial '90s. Some examples: Novell is located in Utah, as is Iomega Corp. and Micron Technologies, which is planning a new plant. Intel, headquartered in Santa Clara, Calif., has plans to build an R&D facility in the state. DYNAMIC EQUILIBRIUM. Utah's balance between big and small companies constitutes "a healthy ecosystem," according to Linton, who explains that such a mix helps to spread the risk. If Novell, say, lays off workers, as it did this year, or sells its WordPerfect operations to a Canadian company, as it did in the mid-'90s, other companies remain to take up the slack. "When this happens," says Linton, "a number of people who have lost their employment, but are eager to stay in the region, start their own companies." Relying solely on a major employer is "a recipe for disaster," warns Von Bargen. "We know that, over time, big companies don't grow -- they lay off people. We far prefer to see regions that create an environment for new companies to grow rather than to try to get the next big plant." In creating that kind of environment, Utah also has a couple of strengths outside the technical arena. Many observers cite the Mormon Church's influence as something that has helped build a reputation for honesty, industry, and a pioneering spirit conducive to entrepreneurship. The big-city companies that do business with Saffire, a video-game software designer in American Fork, Utah, "like our attitudes out here," says Lane Kiriyama, director of business development. "People are hardworking, have integrity. You find that in abundance with so many businesses out here." Saffire, which helped put Utah in the map's red zone, was founded in 1993 by two Brigham Young University graduates and today has 130 employees, Kiriyama said. TOMORROW'S WORKFORCE. One feature that's attractive to many high-tech, New Economy workers but is missing in Utah is population diversity. The state is 90% Caucasian, and 76% of its residents live in family households, much higher percentages than in New York, Austin, and many Silicon Valley communities. As a whole, the country is 75% white and 68% of people live in family households. One reason that Utah's lack of diversity might not be holding it back is that the birthrate is well above the national average. In other words, rather than relying on newcomers, Utah generates its own supply of tomorrow's highly educated workers. A likely factor in Utah'S success nurturing successful companies is something that doesn't show up on most "how to succeed in business" lists: Many officials in its Community & Economic Development Dept. are businesspeople, not career bureaucrats. Working in the department "is viewed as public service," says Linton, who co-founded Iomega Corp., a storage-software manufacturer, in Roy, Utah, in 1980. "Nearly all of the program managers here have come out of the business community," says Linton, who plans on someday returning to entrepreneurship. "We're here not to make big bucks but to share what we've learned over the years with the state." Given Utah's success, other states are likely to be listening in.   By Theresa Forsman in New York Edited by Robin J. Phillips  | | |
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