The U.S. Chamber of Commerce Foundation, the Chamber’s FreeEnterprise.com and 1776, a public benefit corporation that funds high-growth startups, today released findings from their latest Innovation That Matters 2016 report, a study that outlines which American cities are the strongest drivers of the digital economy and how they got there.
The report ranks 25 U.S. cities according to their readiness to become digital economy hubs. It aims to help local startup community leaders benchmark their progress and identify strengths and weaknesses within their respective communities.
“There is a wide array of technologies making their way into the market,” said Donna Harris, co-founder of 1776 and contributor to the report, in a press briefing announcing the study. “Everyday, we see things like smart objects, drones, artificial intelligence, robotics, virtual reality and more reported in the media, yet we have barely begun to scratch the surface on how this technology will impact us.”
Here’s Harris and other leaders with more on the study and what it means:
According to Harris, this digital era represents the biggest technology transition the world has ever seen and, quite possibly, the greatest economic shift it has ever experienced.
“The wake this transition will leave behind has the potential to either be disastrous or game-changing for every city in the county,” Harris said. “What we wanted to know is how ready U.S. cities are to capitalize on this inevitable transition and what community leaders can do to ensure their cities will not only survive, but thrive.”
Cities Included in the Report
The cities included in the report are:
Of the 25 cities examined, five rose to the top:
- San Francisco Bay Area
- San Diego
One of the most surprising finds was that the Bay area of San Francisco did not rank in first place. Rather, that honor went to Boston.
“While San Francisco is the clear leader in total startup activity, its lack of a cohesive community and declining quality of life for residents helped move Boston to the top spot,” Harris said. “Entrepreneurs in Boston reported having a much better connection to the community overall and to the key things that Boston offers, such as top-notch universities and institutions.”
Denver and Raleigh-Durham, N.C., also proved surprising. Even though they have fewer startups than larger cities such as New York and Los Angeles, the ties between the startups and institutions in the community are much stronger.
In preparation for writing the report, two researchers, Michael Hendrix and Patrick McAnaney, traveled to eight of the cities on the list — Atlanta, Denver, Kansas City, Los Angeles, Philadelphia, Raleigh-Durham, Salt Lake City and Seattle — meeting with leaders in the public and private sectors.
“We picked eight cities we thought of as interesting hubs to study, and met with local startup community leaders and entrepreneurs to discuss their biggest challenges and greatest opportunities,” McAnaney said during the press briefing.
“We also surveyed 300 entrepreneurs in 25 cities, looking at traditional measures of startup activity, such as access to capital, as well as things like culture, how the quality of life in the various cities helped or hurt these entrepreneurs and how open their communities were to accepting the changes the digital era would bring.”
Four Recommendations Help City Leaders Transition to Digital Hubs
Based on their findings, Hendrix and McAnaney, together with Harris and other contributors, developed four specific recommendations that provide a framework for how city leaders can evolve their startup communities into digital hubs.
The four recommendations are:
1. Understand the Inevitable Trajectory of the Digital Economy
It is critically important that city leaders understand the inevitable trajectory of the digital economy.
“Before cities can embrace the possibilities of technology, they must first understand what those technologies bring to bear,” Harris said. “Too few city leaders grasp the magnitude of what these technologies bring and even fewer demonstrate a willingness to proactively question long-held norms in ways that cities can lead, operate and engage in the digital era.”
2. Imagine a New Future that Includes History — Where Technological Possibility Intersects with Legacy Assets and Unique Strengths
Cities need to lean on existing strengths while imagining a new future. Every city has assets to leverage, such as healthcare, education or livability. They need to identify those assets and be purposeful in unlocking them for the digital future.
3. Focus Beyond Startups to Include Corporations, Universities, Nonprofits and Local Government.
“We wrongly define startup ecosystems as something separate from the rest of the city’s economic infrastructure,” Harris said. “In reality, startups are feeders to become leading corporations for the future. Cities must integrate startup activities into the rest of the ecosystem, and large enterprise and government must be at the table. Collaboration is the key to future success.”
4. Work Proactively Toward a New Governing Framework that Marries Technological Possibility and Regulation.
Government at all levels must work toward a proactive governing framework. Impediments in the regulation process must be addressed, to accommodate the new digital era, and cities must not be left to rely on a patchwork of archaic rules and regulations.
Connectedness Central Theme of the Report
From Harris’s comments and the report’s findings, it is apparent that how well-connected entrepreneurs relate to their communities — particularly to local government and area corporations — plays a vital role in the success of a city becoming a digital hub.
“We confirmed that the ‘secret sauce’ of [digital] ecosystem development lies in the creation of effective networks that bring together broad arrays of stakeholders within an industry, facilitate the open exchange of ideas and bridge cultural gaps between different groups to promote effective collaboration,” the report said.
Entrepreneurs Feel Disconnect Exists
However, the report also reveals that, nationwide, just 32 percent of entrepreneurs feel connected to local corporations, and only 33 percent felt connected to local government.
It also indicates that, in many cities, a disconnect exists between their past and future regarding domination of certain industry sectors, such as healthcare or education. Not all cities are taking advantage of the assets they have and transitioning them to the digital era.
The report issues this caution: Just because a city has dominated in a certain industry in the past doesn’t mean it will in the future.
“Yesterday’s expertise will not guarantee tomorrow’s economic wins,” says the report. “Without leaders who understand this and act to help their communities transition, cities will fall behind.”
Click here to download a full copy of the report.