Detroit Visions 2: The Economic Competitiveness Landscape, Now
In this economy, cities and their metro areas are competing all the time, against cities around the country and around the world. To be competitive in the national and global marketplace, they need to be places to where talent and capital are attracted.
There are numerous listings of city livability and competitiveness, mainly pitched to executives and HR managers wondering where to expand next and where would be easiest to attract new employees. Mercer’s Quality of Living Rankings (Vienna as #1) and the Economist Intelligence Unit’s Most Livable Cities (Melbourne as #1) are focused on liveability and quality of life. On the other side of the equation, the AT Kearney Global Cities Index and the Mori Foundation Global Power City Index (both have London and New York in #1 and #2, respectively) prioritize economic strength and reach.
But from the point of view of local officials, who can’t change their national public policy and entire economic structure, what kinds of strategies make sense? It helps to look at where companies are choosing to invest.
Increasingly, urban centers are winning out over suburban campus settings. While this trend has been going on for a while now for executive headquarters (see Chicago), it is now proving true for technology and engineering companies. One of the most notable corporate relocations announced this year was General Electric (GE), who will be moving from suburban Connecticut to the Seaport District in Boston (see rendering above).
GE explained that it as their business becomes more focused on technology and the “industrial internet”, they want to be immersed within a vibrant innovation ecosystem. As their CEO Jeff Immelt explained, “I want people that are down in the Seaport, I want them to walk out of our office every day and be terrified… I want to be in the sea of ideas so paranoia reigns supreme. To look out the window and see deer running across, … I don’t care about [that].”
But stepping back: what does competitiveness actually mean for a regional economy? And how should our leaders cultivate it?
Essentially, regions need to offer compelling value propositions for the types of companies considering that city. And that means that regions must invest to meet basic expectations for transplants, and build on the strategic advantages that the city already possesses.
For talented people who are geographically mobile, city-regions generally need to offer a differentiated, authentic metropolitan experience with high-quality urban and suburban living options.
For highly-mobile companies, cities need to offer the resources for growth and cultivation of their business, including deep and diverse labor markets, transportation infrastructure for customers and logistics, and importantly, a critical mass of supporting and related firms.
Cities are now tending to converge on certain urban amenities, which comprise a basic barrier to entry for competitiveness on the global market: a mix of new and old housing, cultural venues, a variety of restaurants, bars, and breweries, and many transportation options, including public transit and bicycling. But at the same time, cities need to provide unique markers of place, and a compelling narrative for what the city is all about.
Detroit’s Increasing Competitiveness
On these metrics, Detroit has some elements of competitiveness, given its long history, deep brand identity and mindshare domestically and internationally, and an exciting food scene. But in many ways, that currently adds up to an intriguing and edgy tourist destination.
While the region generally offers high suburban quality of life, Detroit’s urban neighborhoods are often not considered an option for many people, although that is starting to change for young professionals, as districts like Midtown, Corktown, and West Village offer more amenities and new housing options.
Overall, though, the city still needs to catch up in terms of basic elements of urban livability, including school quality, public safety, and a broad mix of retail stores.
However, the other way of looking at a city’s competitiveness is whether, as a company, it is necessary for you to have an outpost there. Aaron Renn, a noted urban analyst, calls this quality being “a necessary city”, explaining that these are places that “you can’t help but visit or deal with when doing business globally because of their popularity or their specific industry.”
So while Detroit does not rank highly in the conventional global city/liveable city indices noted at the start of this article, it is nonetheless essential if you are doing business in the auto industry:
“One intriguing finding is that some places not conventionally viewed as global cities nevertheless are in a sense necessary global cities in select global industries. Take Detroit and the auto industry. The major global equipment manufacturers are widely dispersed, but when you look at leading global parts suppliers, they virtually all have their North American headquarters in Detroit — including the German, Japanese and Korean ones. Among them are companies like Robert Bosch, Denso, Yazaki and Hyundai Mobis. If you’re in the auto industry in America, you have to deal with Detroit. Unsurprisingly, Detroit boasts several nonstop flights to key Asian destinations.”
One of the advantages of this concentration is that nowhere else in the world has such a concentration of automotive talent. In Europe, automakers are spread out around Germany and France. In Japan, automakers are divided roughly equally between Tokyo and Nagoya. But in the US, while factories are spread out around the country, most engineering facilities are in Metropolitan Detroit.
You can see this just by looking at Google Maps. Here is a sampling of clusters around Metro Detroit:
These are obviously suburban office and R&D clusters, with some light manufacturing, depending on the business. These are already efficient economic units, operating a tight-knit landscape of OEMs, Tier 1, Tier 2, and Tier 3 suppliers across the metro area.
But unfortunately, given the design of suburbia, they are not exactly conducive to spontaneous interactions and the generation of new ideas (see the Street View from Brembo’s offices below). Given their standardized designs, they could easily be replicated anywhere else (that is, if everyone decided to leave at once).
And this is why two developments are very interesting from an economic competitiveness point of view, serving to more deeply root these suppliers into the historic community.
As part of the National Network for Manufacturing Innovation, it was announced that Detroit would be the home for Lightweight Innovations for Tomorrow (LIFT). Mayor Mike Duggan, at the eleventh hour, was able to relocate the facility from suburban Canton (similar to the landscape above) to historic Corktown, near downtown Detroit, a neighborhood undergoing rapid reinvestment. There are other underutilized industrial spaces immediately around the research facility for any ideas that may be spun off.
The other major announcement was that Lear Corporation (a Tier 1 automotive supplier focused on seating and electrical systems), while keeping its headquarters in suburban Southfield, would open a new innovation center right in downtown Detroit. It opened this month.
With these investments back into the core of Detroit, the auto industry has a chance to re-establish roots in a dynamic urban ecosystem, the kind mentioned by GE that is conducive to industrial innovation. At the same time, the Woodward Avenue corridor from Downtown to New Center has a growing and more diverse set of businesses, from Shinola (the bicycle and fashion brand) to the start-ups at NextEnergy. The Detroit Creative Corridor Center is helping to bring together the wealth of design entrepreneurs that exist in the district. And Wayne State University brings an academic presence and critical mass to the neighborhood, which is now one of the strongest in the city. While at an earlier stage, the Woodward corridor has the potential to be a strong innovation district, combining artistic and engineering talent with small-scale prototyping and manufacturing. Fostering relationships that are at the core of the new economy.
So while Detroit is still behind on some aspects of competitiveness, we should also recognize the strengths of engineering/design talent that are already here. To build on these, regional leaders should work to strengthen connections across our business community, and catch up on the basics of urban livability, like diverse urban neighborhoods and basic public transit, that would encourage more talent to move here. At the same time, the region must look at this period as a chance to prepare the industry for the next stage in mobility innovation.