Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 24, 1994 TAG: 9404260003
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: By DWAYNE YANCEY STAFF WRITER NOTE: Above
DATELINE: LENGTH: Long
WHEN FiberCom Inc., one of Roanoke's most prominent high-tech companies, spun off a subsidiary this winter to design the equivalent of traffic equipment for the much-touted information highway, it was no ordinary business development.
Here was a homegrown company announcing a plunge into the burgeoning world of commercial computer networks.
But the new company - and the new $60,000- to $70,000-a-year jobs that will go with it - won't be in Roanoke.
Instead, NetEdge will set up shop this spring in Raleigh, N.C., home of the fabled Research Triangle.
Why?
Because the engineers the company needed to hire wouldn't move to Roanoke, FiberCom co-founder Al Bender says.
The turn-off obviously wasn't the valley's beauty, its low of cost of living and its low crime rate.
The nature of the valley's economy was.
``Technology people are looking to live in a high-technology area, so they can change jobs without moving,'' Bender says. ``There are 1,000 software companies in the Raleigh area. In Roanoke, there are probably ten.''
That's not enough to assure engineers they can live here and still move up - or move around - in their volatile profession, Bender says.
Among the senior engineers the company has recruited? ``One hundred percent declined.'' Even for what Bender calls ``footloose'' junior engineers, FiberCom has resorted to hiring a headhunting firm - which drives up the company's cost of doing business in Roanoke.
``By the time you pay the headhunter and the moving expenses, it costs $20,000 to $50,000 more per employee. You hire ten people" - as NetEdge plans to do - "and that's half a million dollars. In Raleigh, we just ran an ad in the local paper and got hundreds of responses.''
FiberCom's decision to locate NetEdge in Raleigh hardly made the same ripple in the Western Virginia economy as Gardner-Denver's decision to move its Roanoke plant to Texas, or the lay-offs at the Radford Arsenal that accompanied the end of the Cold War, or First Union's takeover of Dominion Bank.
The valley will only lose 15 existing jobs in the deal - the engineers being transferred to Raleigh to join in the subsidiary's start-up.
What the Roanoke Valley really lost can't be measured, at least right now - all the future jobs that might be created if and when the venture takes off.
For NetEdge, the move to Raleigh is a business decision, Bender says. For the Roanoke Valley, it's a warning sign.
At a time when the region's citizens say they want more high-wage jobs and the national emphasis is on the growth industries, NetEdge represents the kind of jobs many people are talking up:
High-wage jobs in a clean, high-growth field.
Not just good jobs, but the good jobs of the future.
This isn't the only example of those types of jobs slipping through Western Virginia's grasp.
In Blacksburg, Brian McConnell runs a two-person company called Commonwealth Multimedia, which programs telephone systems across the country. He's not looking to hire more employees, so recruitment isn't an issue for him. Nevertheless, he's decided to move to Atlanta for much the same reason that NetEdge is going to Raleigh - to be near similar companies.
``A lot of money is made by someone saying `I have a client who needs this done, I don't do it, but I know you do,'" McConnell says. "It's all water-cooler stuff and I don't have that anywhere in Southwest Virginia, while in Atlanta, there are a lot of people in our line of work.''
From a strict accounting of jobs lost, Western Virginia will miss McConnell's company even less than it will miss NetEdge. But both companies illustrate the same point:
Western Virginia doesn't have the critical mass of technology jobs to become a magnet to attract even more.
``It's a Catch-22,'' Bender admits. ``You can't get 'em because you don't have 'em.''
The point is echoed by economic forecasters who have studied the plight of cities the size of Roanoke in a global marketplace - and the phenomenon of similar industries clustering together, be it auto-makers in Detroit, computer-makers in Silicon Valley or furniture-makers along U.S. 220 from Roanoke to High Point, N.C.
``Industries do tend to move together," says Harry Dent Jr., a California-based economic forecaster. "So if they don't see other computer companies there, they'll judge the labor pool by the companies they do see, and that's a big determinant in information technologies,'' a field that constitutes a big chunk of those sought-after jobs of the future.
To some extent, this is a function of population. Bigger cities are going to have a bigger and broader base of employers - so it's only natural that Raleigh can beat out Roanoke for a computer networking company and that Atlanta wins out over Blacksburg for a telephone system programmer.
But this raises perhaps the most troubling question of all: Is the Roanoke Valley too small to create the high-wage jobs of the future?
Why cities our size might boom ...
The short answer is no. ``Size doesn't matter,'' Radford University economist Michael Hayes says. ``What does matter is what you do with it.''
The consensus is that smaller cities such as Roanoke can create high-wage jobs if they do the right things or have the right attributes. Namely, a highly skilled workforce, good transportation links to major cities, a wonderful quality of life, a university that conducts research in high-growth fields, plus an economic development strategy that aggressively targets specific niches in the economy.
The long answer is, well, longer.
A well publicized school of thought says smaller cities will be the boom towns of the next decade, that high-wage jobs will flee big cities and flock to smaller ones. A whole library shelf of books on the market even predicts this trend. At a fundamental level, they're all based on the same premise - big cities are becoming a rotten place to live.
``The smart people are getting out,'' Dent says. ``Some people are staying put. A lot of the high-line lawyers will stay in [because they need to be near the major corporate headquarters]. Instead, it's going to be the small companies of 50 to 100 people that will relocate to Roanoke or Provo, Utah.''
There were signs of such a migration during the 1970s, when a short-lived ``back to the land'' movement reversed a century-long population drain in many rural areas and gave rise to predictions that a small-town and small-city boom was at hand.
They didn't pan out.
The Roanoke Valley is as good an example as any. Population growth that had hummed along close to a national rate in the low teens slammed on the brakes here during the 1980s, inching up by just 2 percent during the decade. That may be fine with no-growthers. But even pollyannas would be forced to admit this is bad news: The valley's median income continued to fall, relative to the national average, as high-wage industrial jobs disappeared and weren't replaced.
Now, the forecasters tell us, the big city-to-small city migration is beginning again, and is here to stay. The reason this time isn't sentimentality; it's computers and fax machines.
These futurists say modern telecommunications make it possible to live in one place and work somewhere else long-distance - via computer.
``The computer revolution is allowing telecommuting,'' Dent says. ``From 1990 to 1994, the number of telecommuters in this country went from 4.7 million to 8 million. It almost doubled in four years. I see that continuing to double ... This is a 60-year cycle and it's just starting.''
The predicted result: If telecommuters don't have to live in stinking, crowded, expensive, mean-spirited big cities, many of them won't. They'll move wherever they want to. In theory, in the future someone could stay at home in New River and still climb the corporate ladder in New York.
This won't be just individual computer-tappers (and their jobs) migrating to smaller communities, Dent predicts. Whole companies that can do business by computer - or which rely on highly skilled workers who simply won't stand for the hassles of big-city living any more - will pick up and move.
In fact, says David Heenan, the CEO of a Hawaii-based conglomerate and the author of ``The New Corporate Frontier,'' they already are.
``The new corporate frontiers are typically about 200,000 in population and 50 miles beyond a major metropolitan area,'' he says.
That description fits the Roanoke Valley (population 225,000 and about 100 miles from Greensboro, N.C., the closest metro area) to a T.
It also fits many cities in the Rocky Mountains.
For now, that's where most frequently cited small-time boom towns are: Provo, Utah and Boise, Idaho, have emerged as unlikely computer capitals. Coeur d'Alene, Idaho and Reno, Nev., have become major manufacturing centers. Even smaller places have made a name as corporate headquarters for high-tech ventures.
``These are places in the middle of nowhere,'' Dent says.
But job-wise, they're becoming somewhere, thanks to businesses - and people - fleeing crowded and expensive California.
Utah created jobs faster than any other state in the country last year; its employment increased almost 5 percent compared to a national rate of just under 2 percent. Nevada came in second. From a wage standpoint, these are good jobs, too. Nevada saw personal incomes rise 9 percent last year, nearly twice the national average. Just behind were Utah, New Mexico, Arizona and Colorado. Since 1991, economic growth in the Rockies as a whole has measured 5 percent, compared to 1 percent nationally.
For these new wave entrepreneurs, the major lure is lifestyle - the Rockies' open spaces vs. California's gridlock.
``I know people who live in Park City, Utah and fly into L.A. once a week or once a month to meet with the lawyers and the venture capitalists,'' Dent says. ``If you can do that, why not? You can get a house two or three times bigger than you would in a bigger city, a clean community, nice schools.''
Roanoke knows a little about how technology can give a smaller community an advantage over more populous and expensive ones. When First Union took over First American Bank, it transferred 250 of that bank's back-office jobs from Northern Virginia to Roanoke, because the costs were cheaper here.
Until now, though, it's usually been the lower-paid jobs that technology has helped move to smaller cities. In the Rockies, it's the higher-paid jobs that are moving from California.
While this small-city boom is largely a Rockies phenomenon now, it won't stay that way for long, the forecasters say. Most social trends, be they rollerblades or personal computers, start on the West Coast and work their way east. Eventually, the futurists say, the same thing will happen on the East Coast, and the exodus of high-wage companies fleeing the big cities will wash over the Blue Ridge, as well.
Dent, in fact, touted Roanoke by name in a recent issue of his newsletter. ``Roanoke looks to me like an undiscovered location,'' he says, because it's close enough to the busy Boston-to-Charlotte corridor to be competitive but far enough away to avoid congestion. ``Roanoke is one of those cities sitting there sleeping.''
Sounds great, if you want to live here, but be able to choose from a wider range of jobs than exist now. And judging from Roanoke College's annual Roanoke Valley Poll, that's what folks here want most of all: In 1992, 70 percent of those surveyed said the region's biggest problem was a lack of job opportunities. In 1993, two-thirds said the region's economic growth has been too slow.
``It'll be like the Roaring '20s," Dent says. "Most people are not expecting this. Most towns are not expecting this. Most businesses are not expecting this.'' But, he declares, ``it'll happen.''
There's just one tiny flaw in this rosy scenario for Western Virginia:
It may be wrong.
Maybe not completely wrong, but certainly not true for every city.
``Journalistic authors are turning out books at a rate of two a year, breathing hope into small towns and middle-sized cities in America,'' says Ray Bromley, an urban planning professor at the University of Albany in New York. ``But they never use any meaningful data. They pick up a few examples and say `wow, look at what's happening in Boise, Idaho or Billings, Montana.'''
Just because Boise and Billings are attracting high-wage jobs, he says, doesn't necessarily mean that Butte or Boulder will follow - much less the region from Bedford to Blacksburg.
``For every one of those cities where something is happening, there are 100 where nothing is happening,'' Bromley says.
That's why it's important to read the fine print in these predictions:
``There are only about 200 to 300 communities like this around the country than can play this game,'' Heenan says.
Is Roanoke one?
It depends, the futurists say. Just having a nice place to live isn't enough. ``Quality of life,'' says Bob Hines, an Ohio-based economic development adviser, ``is vastly overrated as a magnet.''
Instead, these forecasters say, the key is how well Roanoke can forge closer economic ties with Virginia Tech, how well it can devise a strategy for attracting new businesses - and then how well it can carry out that strategy.
... And why they might not
The first thing to keep in mind, these skeptics say, is that the Blue Ridge won't automatically go through the same small-city, high-tech boom that the Rockies are.
The reason: They've got California; we don't.
Many businesses see California as too crowded, too expensive, too hard to do business in. In response, Dent says, many small cities in the Rockies have based their economic development strategy on raiding California for high-tech companies in much the way that the South once ``raided'' factory jobs from the North. Then, the sales pitch to management was non-union vs. union labor; now it's the Rockies' scenery vs. California's stress.
The catch for Roanoke, says Hines, is ``you don't have California next to you that's driving people out.''
On the East Coast, Hines says, businesses are still migrating from North to South, and occasionally Roanoke snags some of them, such as Transkrit, a business forms manufacturer that in 1993 moved its headquarters from suburban New York.
For the most part, Roanoke hasn't been part of the SunBelt boom that has turned the cities along I-95 and I-85 into economic hot spots. ``Unfortunately,'' Bromley says, ``the thing about Roanoke is it's a free-standing area and too far from Washington or Raleigh-Durham to directly participate in the growth of that area, so you end up in a dilemma of sorts. You're in the middle of everywhere, but you're actually in the middle of nowhere.''
Economically speaking, that might be a good thing someday. But so far, the region has not yet seen many businesses get fed up with the congested I-95 corridor and jump across the mountains to the I-81 corridor - which would be the East Coast equivalent of companies moving from California to the Rockies.
The Rockies are different from the Blue Ridge in another way, too: Demographics. Their population is younger and growing rapidly; ours is older and not growing much.
So which comes first, the jobs or the people who fill them? Bob Wurmstedt of the Center for the New West, a Denver-based think tank that studies the region's economy, thinks the latter. The Rockies' population is growing faster than any other region of the country. ``This is a place where people like to live, so people with skills move here and then try to find something to do,'' Wurmstedt says. As a result, he says, many Rockies cities boast what he calls a ``young and highly skilled workforce.''
In Colorado, almost 29 percent of the adults over age 25 have graduated from college - third highest in the nation, behind only the Ivy League states of Connecticut and Massachusetts. In the Roanoke and New River valleys, less than 18 percent of those adults have a college diploma.
The upshot, Dent says, is that high-tech companies in the Rockies usually don't encounter the labor pool questions that FiberCom did when it tried to hire software engineers in Roanoke.
Finally, the Rockies enjoy another job-recruitment advantage the Roanoke Valley lacks: A tourism economy.
``People visit and say `wouldn't this be a nice place to live and move my computer company?''' Dent says. That's why the first Rockies communities to boom were resort towns. And now the Rockies' high-tech economy is spilling over to other cities with less tourist trade.
``It's often that way,'' says Jack Lessinger, a retired University of Washington economist and author of "Penturbia." ``Migration is preceded by tourism.''
Sound familiar? It should. That was the rationale Explore Park founder Bern Ewert used to make the case for the Roanoke Valley building a major tourist attraction. The point, he said, wasn't to attract tourists for tourists' sake, but to attract them as a way to put Roanoke's name on the world's economic development map.
The two T's: Tech and targeting
The bottom line seems to be: Don't bet too heavily on the Rockies analogy, at least for now.
There are mid-sized cities in other parts of the country that are cited for their ability to attract high-wage jobs, Heenan points out, such as Madison, Wisc., and Portland, Maine.
They all share certain characteristics, and here's where Roanoke Valley leaders - and the voters who put them in office - might want to take careful notes.
The first thing these cities have in common, Heenan says, is a major university.
In an economy where brain power is replacing muscle power, universities - and the research they do and the companies that research spins off - are becoming the industrial parks of the information age. Separate studies in recent years by Washington urban consultant David Rusk and Marshall University President Wade Gilley make the same point: The small- and medium-sized cities that do best economically are the ones with universities.
That's why many Roanoke Valley leaders are keen to forge closer links with Virginia Tech, whether it's a highway that will make Blacksburg quicker to reach or a Hotel Roanoke conference center that would allow Tech to sponsor high-tech academic meetings here.
``If anyone is creating the tools to do high-value production in Virginia today, it's Virginia Tech,'' says John Accordino, an urban policy analyst at Virginia Commonwealth University. ``They are critical for you.''
Bromley, the University of Albany urban planning analyst who is critical of the small-cities-are-about-to-boom scenario, puts it this way: ``The only trump card you have is Virginia Tech.''
Problem is, Tech is 40 miles away - close, but maybe not close enough, some economic development experts say.
Heenan suggests the Roanoke Valley put more emphasis on not just getting Tech to hold conferences here, but to build a satellite campus here.
The second thing that successful mid-sized cities often have in common, say those who study America's cities, is their economic development strategy: They target specific types of industries.
This all goes back to the original point: Size doesn't matter. ``It's the content that matters,'' says Carlton Schwab, a spokesman for PHH Fantus, a Chicago-based corporate relocation firm. Specifically, the content of the labor pool - and the employer mix.
By specializing in certain industries, Schwab says, a smaller city can develop a critical mass that can act as a magnet of sorts for companies just like them - and their suppliers. Create such a cluster of industries and you'll not only have more jobs, but also a broader range of job options within that field, he says.
Schwab says one of the best examples of a city ``targeting'' certain industries is Indianapolis. ``Fifteen years ago, it was really struggling,'' he says. ``People called it India-no-place. But Indianapolis decided its potential was to be a transportation center. So they expanded their airport, they started recruiting Japanese auto-related employers. . . Now if you drive from Indianapolis to Louisville, all the little towns through there have non-union, Japanese auto-related employers.''
And in 1991 Indianapolis won a fierce bidding contest to land the new United Airlines maintenance facility, which is expected to create 6,500 jobs.
Closer to home, community leaders in Spartanburg, S.C., set out two decades ago to target German manufacturers - and have been so successful that locals now jokingly refer to the region's main highway as ``the Autobahn.'' Spartanburg's most recent acquisition: The German car-maker BMW.
`It doesn't happen automatically'
Communities in Western Virginia have only recently begun to carve out such specific economic niches, though.
``There are conflicting philosophies,'' Accordino says. ``Some people don't think you should target at all. They think you should just keep taxes low and the roads good and companies will come.'' That's been the prevailing philosophy in Virginia for many years, he says.
The key, agree those who promote targeting, is to pick the right target.
Cities usually can't create something out of nothing, Accordino says; they must build on what they've already got.
``What you need is an anchor to bring in the first wave,'' Heenan says.
How do you know what that anchor is? There are lots of industries already here: Which ones should the region concentrate on?
``You really just run your city like a business,'' Dent suggests. First, a community needs a cold-blooded study of where it fits in the global marketplace - and where it doesn't. ``The real issue,'' Accordino says, ``is figuring out which particular industries are likely to benefit from locating there.'' And then go after them.
The idea is not only to go after industries that would have some reason to locate there, but also industries in hot fields.
Sometimes, though, a place just gets lucky.
Take Hickory, N.C., which Charlotte urban consultant Michael Gallis cites as prime example of a small city carving out a market niche in a high-tech field.
In the 1950s, Hickory somehow became a leading center for conventional copper-cable manufacturers. In time, those firms evolved into fiber-optic cable manufacturers. Now, Gallis says, Hickory (pop. 30,000) is ``the nation's leading center of fiber-optic manufacturing.''
For those not in the know, fiber optics are the tar and gravel of the information highway.
Among Hickory's jewels: The headquarters of Alcatel and Seicor, two of the nation's big-name fiber-optic makers.
Being home to cable manufacturers may have been Hickory's dumb luck, but it's an advantage the community is trying to capitalize on through smart marketing. Its economic development agency is hiring a full-time recruiter to do nothing but try to persuade other telecommunications companies that Hickory is the place they need to be.
By contrast, the Roanoke Valley Economic Development Partnership isn't as focused. About three years ago, the valley's economic developers sat down and identified six types of industries where the region already has a cluster of sorts that it could build on - data processing, distribution, rubber and plastics, industrial machinery and equipment, transportation equipment, and electronics.
Each also has a selling point behind it, says Beth Doughty, the partnership's executive director. For data processing, the costs are cheaper here. For distribution, the valley is at the midpoint of the East Coast. For rubber and plastics, which require lots of energy, the electricity rates are low. For the other three, there is the necessary talent, built up over the years at the valley's large employers that have been down-sizing, such as the railroad, or disappearing altogether, such as Gardner-Denver.
That kind of approach is only a start, says Hayes, the Radford University economist. He contends the region should be more specific about the types of industries it's trying to attract.
In addition to targeting specific industries, Dent and Gallis say, the region should also target specific cities - in effect, try to duplicate the Rockies' raid of California by approaching companies in the I-95 and I-85 corridor and persuade them to move or expand their operations to Western Virginia.
Hayes says one selling point Western Virginia should push is the Blacksburg Electronic Village, a plan to connect every household in town with the global computer system known as the Internet.
``When that hits, it'll be big,'' Hayes says. ``The Blacksburg Electronic Village is a model [for telecommuting]. D.C. is the place we would pull from most. People who can work in Washington can come out here and commute to their jobs by computer. And of course, they'll spend their paycheck here.''
Regardless of what industries the region targets, though, don't expect immediate results, Heenan says. ``It's an incremental approach. We're talking about 10 years to let the strategy unfold and attract a nucleus of companies and all of a sudden you wake up and you're an Austin, Texas, or a Fort Collins, Colorado.''
In the meantime, he says, ``you have to sell like hell. You have to market yourself.''
Some believe the Roanoke Valley may have to market itself harder than other places. The Rockies conjure up images of snow-capped peaks straight out of the Coors beer commercials. Say ``the Blue Ridge'' and some people think, well, Appalachia.
``You think coal mines,'' Dent says. ``Western Virginia would not the the first place yuppies would go to."
And it's those yuppies who are running many of the high-tech companies that Dent says the region should be going after.
The main point, the economic forecasters agree, is that if a community wants more high-wage jobs, it must do something to attract them.
As Heenan describes the coming small-city boom: ``It doesn't happen automatically.''
And it may not happen at all, Accordino warns. `It's not true that Roanoke's size at the moment necessarily consigns it to a bad future, to the economic dustbin of history,'' he says. However, ``the jury is still out on how many places like Roanoke can carve out niches.''
Some will, some won't.
``It's part,'' he says, ``of the uncertainty that surrounds a place like Roanoke.
by CNB