Apr 24, 2017
How To Know If You’re In A Day 1 City
Pittsburgh, The Playbook For Building A Great City
Amazon Founder and CEO, Jeff Bezos, released his annual shareholder letter a few days ago. Bezos attached a copy of his 1997 shareholder letter that still holds relevance today. Within the letter, Bezos states that companies should either be Day 1 or Day 2 companies. CNBC’s Anita Balakrishnan shares Bezo’s explanation of Amazon’s philosophy and the difference between Day 1 and Day 2 companies:
Bezos compares “Day 1” companies — companies that are at the beginning of their potential — with “Day 2” companies. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Bezos’ approach should not just be a lesson to all companies, but also cities. Cities, much like internet companies such as Amazon, can be susceptible to a state in which things do not change, move, or progress. This can often occur unknowingly by simply being dictated by the process instead of the outcomes. Customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making are essential to staying in Day 1.
A city that we, humble ventures, recently visited (and were blown away by) that encompasses all of these characteristics is Pittsburgh. Below are some eye-opening insights into how Pittsburgh has come to be a high collision environment and Day 1 city:
True Customer Obsession
“Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.”- Bezos
The customer in Pittsburgh’s perspective are the high-growth tech startups and employees that live in the cultural districts across the city. Pittsburgh has an incredible pool of talent coming out of Carnegie Mellon University, the University of Pittsburgh and other academic institutions that are attracting startups to launch and scale their businesses.
Startups are also being conceptualized on campus, too. Companies like reCAPTCHA and Duolingo were birthed out of Carnegie Mellon University by professors in the nation’s top-ranked computer science program. But there are also young startups outside the university system that have decided to build in Pittsburgh like Ikos and SQWAD.
Pittsburgh has garnered attention as one of the top cities for techies to relocate due to the popular food scene, livability and Pennsylvania’s tax incentives. Also, the average rent in Pittsburgh is $899 per month. Pittsburgh is creating a welcoming atmosphere for entrepreneurs without negatively impacting them with the high cost of living like we’re seeing in coastal cities.
Resist Proxies
“As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2.”- Bezos
Pittsburgh isn’t focused on if it’s following the right process. Pittsburgh is dedicated to outcomes and continuous reinvention. Often referred to as “Steel City” for more than 300 steel-related businesses, Pittsburgh has led in the manufacturing of aluminum, glass, shipbuilding, petroleum, foods, sports, transportation, computing, autos, and electronics. The city and its people have undergone great shifts of change and evolve through deindustrialization in the 1980s that many cities have yet to recover from. Today, Google, Apple, Bosch, Facebook, Uber, Nokia, Autodesk, and IBM are among 1,600 technology firms generating $20.7 billion in annual Pittsburgh payrolls.
“Pittsburgh has been diversifying its economic base for more than 20 years and our universities have been a major driver of that activity,” says Lynette Horrell, Managing Partner of the Pittsburgh Office, Ernst & Young, LLP.
Embrace External Trends
“The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.”- Bezos
Pittsburgh is an open and embracing community when it comes to adopting new technology. Facebook is opening an Oculus research office in Pittsburgh and Uber opened a division for researching self-driving cars. Steve Case, CEO of Revolution Team, has taken notice on the Rise of the Rest Tour saying, “Leveraging its strengths in engineering and robotics, Steel town is fast becoming startup town and we’re enthusiastic about its future.” Pittsburgh’s continued willingness to adopt new technologies can only help increase their growth of an economy.
High-Velocity Decision Making
“The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business — plus a high-velocity decision-making environment is more fun too.”- Bezos
We met many stakeholders in top-level positions making an impact during our brief stay. In Pittsburgh, the decision makers know that speed matters. This may be largely due to their extensive technical expertise as well as representing very diverse and cultural backgrounds. Accelerators and incubators like Project Olympus, AlphaLab, AlphaLab Gear, Innovation Institute and Innovation Works are keeping the energy and dynamism of a Day 1 city. The human capital is lending to strong influence on financial investments. VCs invested $550.3 million in 2014 and 2015, a jump from $351.2 million in 2012 and 2013, according to Pittsburgh Post-Gazette.
Admittedly, we were surprised by what we saw in Pittsburgh and plan to return very soon. If the city/region you live and work in is slowing down and on the verge of irrelevance, then it’s probably a Day 2 city. Pittsburgh, frequently at the beginning of its potential, is delighting customers with the wind at its back and isn’t falling prey to proxies. A Day 1 city, much like a startup, doesn’t have to know all the answers in order to be successful. Sometimes it just has to decide and commit.
