Innovation in Chicago– what to do!

I am going to scream if one more person tells me that Chicago is a good and affordable place to live as a response to my attempt to start a conversation about what we need to do to improve Chicago’s chances of remaining a world-class city as we progress through the 21st century.  And while I agree livability/affordability should be part of the discussion, they are not sufficient to attract and retain the talent necessary to ensure Chicago’s future as an economic powerhouse, i.e. we need to do more than expect that livability will do the trick.  We need todo a lot more, and that means aggressively taking the steps that will ensure a prosperous future for the City and its residents.  We have a choice between creating a virtuous cycle of improvement or being pulled down through a downward spiral of neglect—too harsh, I think not.

I know that there are people working on the problem, but as far as I can tell, based on the initiatives I have been able to identify, they lack Daniel Burnham’s (the architect of the City’s lakefront) ambition for the city. He said, “Make no little plans; they have no magic to stir men’s blood and probably will themselves not be realized. Make big plans; aim high inhope and work, remembering that a noble, logical diagram once recorded will not die.”

And, we will continue to lose out to other cities for investment (yes, I am talking about Amazon’s second headquarters) if we don’t get serious about making the investment in transforming the city from what it is to what it could be.

While I don’t like benchmarking—it indicates that you are setting goals that have already been achieved by others, let me share some statistics:

• Loss of Population—the city lost population in 2015, 2016 and 2017. We lost our “2^nd city” status to Los Angeles in the 1980s and we are about to lose our number 3 position to Houston.

• Real Estate Prices—According to Clear Capital, Chicago housing prices have risen almost 54% since the bottom of the market in 2012.  That puts Chicago in 41^st place.  Housing prices figure large in to the claim that Chicago is an affordable place to live.  I assert that markets tend to signal desirability and Chicago is 36^th on the list of the top 100 metro areas as measured by home price.  The top10 are:
  • San Jose*, CA
  • SanFrancisco^*, CA
  • LosAngeles^*, CA
  • SantaRosa^*, CA
  • Oxnard,CA
  • SanDiego, CA
  • Honolulu,HI
  • NewYork, NY- NJ
  • Seattle^*WA
  • Boston^*MA

And, I don’t think that it is an accident that the top 10 list is loaded with metro areas that are considered centers of innovation (asterisked)and Chicago is not on that list. Affordability and value are two different things and cheap isn’t always a good thing.  I would be a lot more optimistic regarding Chicago’s future if the housing market was more robust and that isn’t because I own property in the City.

• GDPgrowth vs. other Cities—Of the top 10 cities, by GDP, Chicago ranked 7^th in terms of GDP growth between 2012 and 2017. And Business Insider ranks Chicago 36th (based on unemployment rate,average weekly wage, job growth rate, GDP per capita, and GDP growth rate) in a list of 40 in June of this year.
• VC investment vs other Cities—And finally, the Chicago metropolitan area ranks 13^th (using Bloomberg’s accounting of U.S. venture capital investment by city) out of twenty when you look at VC investment as a percentage of GDP.  This doesn’t speak well for Chicago’s ability to attract the next generation of businesses that would have continued to fuel the Chicago area’s growth.  To that point, Pat Allin, one of the co-founders of Textura, has repeatedly stated that one of the biggest challenges in raising money (and eventually going public) for Textura was investors and the capital markets disbelief that Chicago could produce an innovative technology company like Textura. And the most skeptical were institutional investors in Chicago!!

While I know that some might accuse me of picking the statistics and presenting them in the most unflattering way, I did not.  My goal here was not to produce a statistical abstract, but to show trends and I thinkI have.  And for those of you who thought I am playing dirty with the numbers, I didn’t get into the human nightmare that Chicago has with gun violence.  So, trust me if I wanted to paint things in the worst light possible there were other avenues I could have taken.  The numbers may not be perfect, but that isn’t the point. The point was to get your attention and highlight some obvious problems.

Now that I have motivated my contention that Chicago is not positioning itself well for the future, let’s take a look at what we can do.  First, we need a plan.  Why do we need a plan?

• If you don’t have a plan that by my definition includes a description of where you are and where you want to be, the chances of your getting to where you want to be are small.
• You can waste a lot of time and energy working hard doing busy work that really doesn’t get you any closer to where you want tobe.  I have seen this happen too many times.  People mistake activity (being busy) for making progress.  And, without a plan, especially for an endeavor as complex as this one, the chances that the effort will be inefficient and maybe even counterproductive as large.
• A plan forces you to identify where you are,define where you are going and most importantly identify the concrete steps you need to take to get from where you are to where you want to be.

As part of the planning process there are five things we need to do:

• Get the city’s political, business and academic leadership to agree that we aren’t where we need to be and that a significant effort (read investment) will be needed to get us there.  While I believe that at least a portion of Chicago’s leadership understands we have a problem, they haven’t acknowledged its size and scope and haven’t deployed the resources necessary to deal with it.
• We need to act as a community.  Years ago, I interviewed for the CIO position at the FBI.  During my interview with the director, I expressed some concern about FBI CIO’s relationship with the CIO for Homeland Security and was told: “don’t worry about him, we can do what we want.  I knew then that the job would have been a lot more challenging than I had thought it might be.

There are a number of great institutions in the City.  They have gotten and (largely) stayed great operating independently.  That won’t work this time.  If we are to succeed, we all succeed together or we all fail together.  The ecosystem is too important to success in the innovation landscape.  While Silicon Valley might have happened organically and through the separate efforts of individual contributors, that is unlikely to happen again and no one disagrees that the longevity of the Silicon Valley is due to the ecosystem, something that we desperately need to build—or we won’t attract the best and the brightest and the capital to keep the great institutions (read the Universities) and the city itself great.

• Develop a vision.  What would Chicago look like if it were a world leader in technology innovation.  The vision is a reasonably detailed description of what success looks like.  Chicago has many strengths, it also has some weaknesses.  A good vision: 1) plays to the strengths; 2) seeks to reduce or eliminate weaknesses that matter, i.e. can have a negative impact on our chances for success; and 3) avoids weaknesses that aren’t relevant and by definition can only hurt.  As such, the vision will define a future that not only positions Chicago as an innovation leader but differentiates it in ways that make it uniquely attractive to high-value startups that are seeking a robust place thrive.
• Develop a gap analysis.  How does today’s world differ from a world where Chicago is the place to be for technology innovation?  This helps to define the plan that gets us from where we are to where we need to be.
• Identify what things need to happen to eliminate the gap and develop a plan which by definition includes:
  • Identifying the deliverables that will transform Chicago into the innovation capital we know it can be.
  • Laying out in order the steps necessary to transform Chicago from what it is today into what we want it to be;
  • Identifying, acquiring and deploying their sources necessary to accomplish the plan.
• Put an organization in place and provide it with the resources to accomplish the steps outlined in this post and the ongoing activities that are necessary to maintain and strengthen the competitive posture we are building.  The organization needs to be capable of dealing with a variety of activities:
  • Strategic
    • Building a consensus.
    • Developing and executing on a strategic innovation plan.
    • Identifying fundamental infrastructure and education needs and getting agreement on importance and urgency
  • Tactical
    • Coordinating a very diverse set of interests and organizations.
    • Working with government, business, and educational institutions to ensure that infrastructure and education initiatives are funded and implemented
    • Identifying opportunities and executing on them

As such it will need competence and staffing in a variety of functions:

• Executive—it will need strong leadership capable both developing a vision and dealing with Chicago’s very strong and diverse leaders to get that vision accepted and implemented.
• Finance—all of this is going to cost a lot of money. The money must be managed. Finance must also be capable of assisting marketing/sales in the preparation of proposals which will include financial commitments from the City, the State and all of the participants. Sound financial analysis of these deals is key to setting and meeting expectations.
• Operations—these folks will help to execute on the promises that the City makes to attract and retain businesses.  This includes helping with things as mundane as facilitating the process of finding space for startups and as large as working with investors who have agreed to billion-dollar real estate developments necessary to the City’s ongoing ability to properly house both the people and businesses as the city grows.  If done right, the operations folks will make sure the issues associated with bringing large numbers of businesses to Chicago are thought through in advance and we aren’t caught off balance and surprised by the demands of businesses that want to move to or startup in Chicago.
• Marketing/Sales—somegrowth will be organic, other growth will take deft sales and marketing efforts.  And, make no mistake about it,we will need a crack marketing and sales effort to: 1) reposition, i.e. build demand; and then 2) sell the city because other cities are winning this fight and they are doing it, at least partially, with better sales and marketing.
• Stakeholder Engagement—while part of this function might normally fall under marketing,the vast number of constituencies that have a stake in the success of this initiative demand a separate function.  Stakeholder Engagement’s responsibility is to make sure that we understand the needs of the constituencies (communities within and around the city, businesses, academic institutions, etc.) and makes sure that they are actively engaged and involved as the initiative moves forward.

Why all this effort?  I believe that we are behind the eightball.  We aren’t recognizing the seriousness of the situation, nor is there a sense of urgency.  I feel like I am having déjà vu.  In the early 1990s, I remember telling an executive at the First National Bank of Chicago that Citibank was going to eat their lunch.  That banker had no clue.  And, the situation ended up worse than I expected.  Chicago doesn’t have a banking industry anymore—not one of the top 20 banks in the U.S. is based in Chicago anymore.  I don’t want to do another “I told you so” twenty years from now.  So,let’s get our act together and actively support Chicago as a center for business and innovation. 

I am suggesting that we be ambitious—remember Daniel Burnham, “big plans.” I am not suggesting that we be the Silicon Valley of the Midwest.  I am suggesting that we imagine the next stage of development and bypass those trying to copy what already is.  Champions don’t “benchmark”. Benchmarking others sets you up to follow those that you are benchmarking.  Champions set their own goals and then strive to beat them.  That is how you become“number one”.  So, let’s take this postas a starting point, as a reason to argue and disagree, but also a reason to start the productive journey whose objective is to make Chicago what it can be.

Copyright 2018 Howard Niden

— you can find this (days earlier) and other posts at www.niden.com

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