Week of January 15, 2001
  Special Report
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A SITE SELECTION ONLINE EXCLUSIVE
Labor, Speed and Business Clustering: Speakers Address Challenges at Alabama Business Conference


KAPALUA BAY, MAUI, HAWAII -- Knowing the difference between a diamond and a pyramid:

L to R: Charland, Bell, LyneThat skill, simple as it sounds, can be a major determinant in how successful companies are in finding the right workers, as well as in how successful area organizations are in training them, Bill Charland told the fifth annual Alabama Business Conference at the Mercedes Championships.

"Pyramid workers tend to be loyal and regimented job-huggers. Diamond workers are more inclined to be job-hoppers whose loyalties run more to their professions [and] their own careers," said Charland, senior fellow with the New American Workplace at the Denver-based Center for the New West.

Many high-skill diamond workers are clustering to form new economic epicenters, explained Michael Bell, a research director in Gartner Group's research advisory services division. Areas that promote clustering, not sprawl, will increasingly dominate business location, he explained. "By 2006, the economic cluster model will be recognized by public-sector leadership worldwide as the preferred strategy for attracting and retaining knowledge-based enterprises," he contended.

Such business-location changes will unfold at unprecedented speeds, explained Jack Lyne, Site Selection executive editor of interactive publishing.

"Real estate has traditionally been a methodical, slow-moving process," said Lyne. "But real estate today is often faced with going 80 mph down Hana Highway" - the legendary, twisting Maui road with a staggering total of 57 one-lane bridges. "That's a crazy way to drive, but sometimes it's the way real estate players have to drive."

Mike Bell, Gartner Group Bill Charland, New American Workplace at the Center for the New West Jack Lyne, Site Selection


ABOVE LEFT: "By 2006, the economic cluster model will be recognized by public-sector leadership worldwide as the preferred strategy for attracting and retaining knowledge-based enterprises," Bell said, citing Gartner Group research.
ABOVE CENTER: "Building a competitive work force means more than short-term solutions - cannibalizing other employees and scrambling for workers," Charland explained.
ABOVE RIGHT: "For many projects, it's no longer occupancy costs that are driving the wagon; it's time," Lyne contended.


'Virtual Integration' Shuffles the Deck

Addressing an Alabama Business Conference session sponsored by Site Selection, Bell, Charland and Lyne looked at three key business-location elements: business clustering, labor and speed.

Bell, a former president of the International Development Research Council, tackled the clustering piece in his speech, "A Tale of Two Cities: How Communities Are Repositioning Themselves in the Connected Economy."

Changing business structures, particularly by the rise of the virtually integrated business model, are altering area development strategies, Bell said. Virtually integrated enterprises like Cisco Systems encompass a huge, boundary-less web of networked customers, business partners, suppliers and industry networks. "The IT-enabled value chain is logically, not physically defined," Bell explained.

Paralleling the virtually integrated model is some forward-thinking communities' shift in strategy "from sprawl to clustering," Bell said. He cited Michael Porter's definition of clustering: "geographic concentrations of interconnected companies and institutions in a particular field [that] encompass an array of linked industries and other entities important to competition."

Those areas that have embraced clustering have rejected old-line sprawl strategies that promoted "hollowing of the core, growth by accretion, minimal synergies and minimal shared vision," Bell explained. In contrast, clustering strategies promote "a regional focus, revitalization of the core, growth by renewal, maximum synergy and maximum shared vision," he explained.

Clustering provides broad business benefits, Bell explained. New businesses, for example, face lower entry barriers and have ready access to skills and resources. Proximity to competitors also promotes innovation, facilitating faster learning with partners and lower-cost experimentation, Bell said. And clustering enhances productivity by providing better access to suppliers, specialized information and institutional resources, he added.


'Multimedia Gulch' and 'Silicon Alley'

Bell examined two high-profile clusters: San Francisco's "Multimedia Gulch" and New York's "Silicon Alley."

"It's fascinating how similar those two areas' success factors are," he noted. Both areas have sprung to life through their strengths in leadership, infrastructure, incentives and livability, Bell said.

That "visionary" leadership has promoted "a regional vs. city orientation" with a "focus on the region's core competencies - its clusters - vs. new industries," he said.

In New York, Bell explained, progressive governmental incentives helped promote clustering and revitalization.

"New York in the 1980s was frankly a disaster," he recalled. "One joke during that time went, 'How do you get a New York developer out of a tree? Cut the rope.' Another one went, 'What's the difference between a pigeon and a New York developer? The pigeon can still made a deposit on a new Mercedes.' "

Successful clusters, said Bell, are highly livable environments with "a sense of place" that includes "24-hour communities, social amenities like cafes and galleries, a culture of innovation, and mixed-use that includes residential. . . . A lot of today's most desirable workers first decide where they want to live before they look at who they want to work for."

Bell categorized four types of high-tech clusters:

  • "Urban boutiques" like Boston and Austin, Texas;
  • "Nerdistans" like Research Triangle Park, and Irvine and San Fernando, Calif., "edge cities that are close to airports and to the suburbs' lower-cost housing";
  • "Techopolises, large areas stretching as far as 100 miles (160 km.), such as Fairfax County, Va., and Maryland's I-270 corridor," and
  • "Valhallas", including Golden Colo., and Roy, Utah, "which has the highest per-capita ratio of domain names because of the area's cluster of metaphysicists."

Huntsville, Ala., "which has over 16,000 miles (25,600 km.) of fiber-optic cable" is emerging as a strong location cluster, Bell said. "Alabama is at the threshold of leveraging that opportunity."


Charland: All Workers Not Equal

Labor is the engine that makes such business clusters hum. All employees' values, however, are not created equal, said Charland, author of six workplace-focused books and a frequent contributor to The Christian Science Monitor.

"Changing values motivate two very different types of workers," he said. "People have grown up in two fundamentally different kinds of work environments, traditional pyramid-like organizations and diamond-shaped organizations."

"Pyramid organizations reward highly specialized skills," he continued. "You become very good at very little. That's a problem when the jobs go away."

In contrast, diamond-shaped organizations, "reward skilled generalists" and feature "hybrid jobs that combine both hands-on and heads-on skills," Charland said.

The laid-off masses from the dot-com shakeout "are not traumatized," he said by way of example. "They believe that there's another dot-com coming and they expect to migrate during their careers."

Diamond workers even have an entirely different argot, Charland explained: Their industry is "a space"; their jobs are "one side of a transaction"; their rewards are "the buzz" of building something new; and their greatest fears are of being "siloed," stuck in some isolated specialty, "in the box" and "out of the buzz."

"Building a competitive work force means more than short-term solutions - cannibalizing other employees and scrambling for workers," said Charland. "The secret is to adopt a long-term strategy of recruiting, retaining and retraining key employees."

Bill Charland, Linda PaulmenoWith pyramid workers, the focus needs to be on retraining, Charland advised. With diamond workers, the focus should be on recruitment and retention. The factors that get and keep diamond workers are "cutting-edge technology, composite careers, compatible cultures (both at work and away from work) and continuous education," he explained.

"Historically, the word 'employment' meant 'involvement,' " Charland concluded. "That remains our challenge."


ABOVE: Charland chatted after the session with Linda Paulmeno, a member of the site selection team that picked Mercedes' Vance, Ala., site and company's first employee to locate in Alabama.


'Deals Must Be Done Faster and Faster'

Lyne outlined the speed challenges facing the real estate industry.

"Once upon a time, conventional wisdom had it that it took 16 to 24 months to bring a new facility online. That's totally out the window," he said. "I remember something once told me by an executive with Julien J. Studley, which handles most of Microsoft's U.S. portfolio: 'Microsoft looks at the cost of not having real estate online,' he said. 'Microsoft wants deals done faster and faster, because it looks at real estate as enhancing its ability to make money, not as an additional cost.'

"That's the story in a nutshell," Lyne continued. "For many projects, it's no longer occupancy costs that are driving the wagon; it's time."

Lyne cited a number of case studies that exhibited extraordinary speed, including:

  • Sprint PCS, which built a 90,000-sq.-ft. (8,100-sq.-m.), 1,000-employee call center in Rio Rancho, N.M., in 89 days.
  • Dell Computer, which built its first Nashville plant, a 300,000-sq.-ft. (27,000-sq.-m.) facility, in 62 days and built 1 million sq. ft (90,000 sq. m.) in its first year on the Tennessee site.
  • Cisco Systems, which brought one new building online in San Jose for 19 consecutive months in 1998-99. "They didn't know they were going to grow that fast, so they began by lettering the buildings," Lyne said. "Then they realized they were going to run out of letters, so they had to replace them with numbers."
  • Bellagio, which hired 9,600 Las Vegas employees in 24 weeks, "a feat that Norman Schwarzkopf compared to moving a military operation around the globe," Lyne noted.


Much Higher Expectations for Service Providers

Such blazing speeds are placing much higher expectations not only on real estate executives, but also on their array of service providers.

Said Lyne, "One high-level consultant recently told me about a pretty well-known high-tech company that first contacted him only about a week before it needed to give its board a headquarters-location recommendation. And their headquarters lease was expiring in only a few months."

Dell Computer's real estate operation also underscores how the service-provider bar is rising, Lyne said. Dell, for example, often requires on-the-spot bids from architects and contractors. "Dell also generally avoids using large, national real estate service providers, whom it considers too slow and too expensive," he added.

Economic development arms are feeling the speed heat, too. But many are responding with distinction, Lyne explained.

For example, Virginia officials' efforts in expediting project approvals enabled AOL to get its critical headquarters plan okayed only five months after it was submitted. Similarly, Alabama's expedited assistance to Honda at its Lincoln, Ala., site will enable the automaker to open in late 2001, beating original projections by four to five months.

Despite today's speed pressures, the Internet-Age disintermediation of real estate middlemen that many predicted isn't happening, Lyne contended.

"That prediction has largely turned out to be a myth," he said. "What's happened in the Internet Age is that the premium has gone up on middlemen's value-added services. So the more skilled players will likely become even more active and important. It's the lower-end middlemen, the ones who never added significant value, who will likely perish."

But the Internet-Age speed battles are far from over, Lyne cautioned.

"Sir Winston Churchill said during the Battle of Britain, 'This is not the beginning of the end. It is the end of the beginning.' And I think that's where we all are in dealing with the ever-increasing speeds in business-location processes."

The following presentations are available online as PowerPoint® documents. To view them, click the desired title below:

THE DIAMOND DRILL: In-Depth Solutions to Workforce Needs
by William Charland [1,646 KB]

THE SPEED IMPERATIVE: Life in the Site-Selection Fast Lane
by Jack Lyne [75 KB]

The Microsoft® PowerPoint® plug-in must be installed on your computer system.
Don't have it? Click the graphic at right to visit the PowerPoint® website.


Related Article: “Mercedes Goes to Maui: Company Officials Outline Alabama Success”

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