Transcript No Slide Title

CONNECT SI
Southern Illinois: Garden of the Gods
Readiness Assessment
Chapter 1: State, National & Global Trends
December 18, 2007; revised Feb 15, 2008
ViTAL Economy Alliance
Frank Knott, Project Lead; Stan Halle, Senior Editor;
Jim Haguewood, Rob Beynon, & Neil Gamroth, Principal Economic Researchers
[email protected]; http://www.vitaleconomy.com
—1—
©2007 ViTAL Economy, Inc.
Table of Contents

EXECUTIVE OVERVIEW: the Big Picture &
Importance of Change in Southern Illinois
1.01 Globalization: The World is
Flat
1.02 eCommerce & Connectivity

READINESS ASSESSMENT (RA)
1.03 KBE and Innovation
1. State, National & Global Trends
1.04 Transformation of U.S.
Economy
2. Indigenous Resources & Industry Asset Mapping
1.05 Livable Communities & Age
of Choice
3. Enabling Environment
1.06 Manpower & Immigration
4. Climate of Innovation, Incubation &
Entrepreneurship
1.07 Aging Population
1.08 Tourism
1.09 Logistics, Transportation &
5. Southern Illinois Competitiveness
Distribution
1.10 Energy
6. Regional Perspectives
1.11 Conclusions
7. Roadmap to Success
APPENDICES
—2—
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
Rural communities typically focus on their local geographic area and have limited insight into
the larger world around them. This chapter provides key trend information and what this means
for Southern Illinois. Each of these trends represents potential opportunities for Connect SI.
Chapter 1:
State, National & Global Trends
1.01 Globalization: The World is Flat …….. 5
1.07 Aging Population …. 74
1.02 eCommerce & Connectivity ………… 16
1.08 Tourism ……………. 87
1.03 KBE and Innovation ………………….. 26
1.09 Logistics, Transportation
1.04 Transformation of U.S. Economy …… 39
& Distribution ..…….. 106
1.10 Energy .……………. 118
1.05 Livable Communities & Age of
Choice …………………………………. 56
1.11 Conclusions ………. 133
1.06 Manpower & Immigration ……………. 67
—3—
©2007 ViTAL Economy, Inc.
Chapter 1: Perspective
Understanding Trends is Critical:
Assumptions are Often Wrong
“American business must embrace globalization as the new reality or
risk losing their place in the economy of the future. There are others
out there willing to do the work if we aren’t.”
-
- “Globalization: The New Reality”
Univ. of Wisconsin Journal Of Management In Engineering / Nov/Dec 2000
“I think there’s a world market
for maybe five computers”
- IBM Chairman, 1943
"The range of what we think and do is limited by what we fail to notice. And
because we fail to notice that we fail to notice, there is little we can do to
change, until we notice how failing to notice shapes our thoughts and
deeds.” - Dr. Ronald Laing, Scottish Psychiatrist & Philosopher
—4—
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
Certain events, new technology and other shifts over the last two decades have fundamentally
changed the rules of competition world-wide. Southern Illinois (SI) is now a virtual neighbor
with every corner of the globe — and, as such, can do business with any and all of them.
Chapter 1:
State, National & Global Trends
1.01 Globalization: The World is Flat
—5—
©2007 ViTAL Economy, Inc.
Globalization: The World is Flat — Overview
1.01 Globalization: The World is Flat

Tom Friedman’s book “The World is Flat” provides many insights
about how dramatically the world has changed over the last two
decades

While any one of the ten (more recently eleven) flatteners could be
viewed as a notable trend, it is the cumulative effect of the whole set that
is truly profound

Taken together, these flatteners have opened up the world to everyone




Barriers to entry have all but disappeared regarding almost any business,
particularly those knowledge-based
Size doesn’t matter as much as what the Region brings to the table
Combining the unique assets of a region, packaging these in a compelling
manner, using connectivity to its fullest — are the key enablers
Moving goods & services has become far easier than moving people — a
Thai farmer can sell mangos to Carbondale, but may find it rather difficult to
visit
Every business in the world is now competing with each other in a closer and more intimate way
—6—
©2007 ViTAL Economy, Inc.
Results of Not Playing on the Global Stage
Reduction of
trade barriers &
increased capital
investment flow
internationally
have fueled this
dramatic growth
Average Annual
Growth Rate %
1.01 Globalization: The World is Flat
6
5
5.62%
4
3
3.14%
2
2.19%
1
1.34%
0
AAGR 1977-2001
Worldwide
USA
State-wide
Southern Illinois
AAGR = Average Annual Growth Rate
SI’s economy has not achieved potential due to not
effectively participating in the Global Economy
Source: “State of Working Illinois”, by Northern Illinois University (Nov 2005); “21st Century Workforce” (May 2004); IMF
—7—
©2007 ViTAL Economy, Inc.
Ten Flatteners: Intro
1.01 Globalization: The World is Flat
1
Global unification under
the auspices of capitalism
10
2
Computing speed,
file sharing, wireless
Amplifying
Technologies
9
Ability to build &
maintain your own
supply chain (Google)
Web-Browsers equals
technology for grandmothers
Fall of the
Berlin Wall
New Age of
Connectivity
3
Workflow
Software
Informing
Ten Flatteners
4
8
OpenSourcing
Insourcing
Third-party
managed logistics
Supply
Chaining
Web-based standards
Self-organizing
collaborative communities
(Apache, Wikipedia)
Outsourcing
Off-Shoring
Horizontal
collaboration
(Wal-Mart)
7
Turbo-charged
by the
dot.com bubble
China joins
WTO
5
6
Source: “The World Is Flat”, by Thomas Friedman
—8—
The following five
slides explain each of
the Ten Flatteners in
more detail
©2007 ViTAL Economy, Inc.
The World is Flat: Ten Flatteners
1.01 Globalization: The World is Flat
1. Berlin Wall Comes Down November 1989
• Millions of highly skilled engineers, scientists and technicians became available to
serve the global market at bargain prices
• Human resource marketplace became global. Firms access best practice skills at
competitive prices anywhere at any time. SI workforce supply chain must
benchmark its performance against global best practice education & training
2. When Netscape Went Public, August 1995 from PC-Based to Internet-Based
Platform
• The Internet became the medium for electronic communication. Anyone could
communicate with anyone else on the planet without regard to boundaries
• Vertical, hierarchical control is gone. Geo-political boundaries became barriers to
progress. The world became flat. Individuals communicating with each other,
regardless of boundaries, create new ideas faster and cheaper. SI success will be
directly related to how effectively it moves away from boundary-based
policies and hierarchical organizational control
Source: “The World Is Flat”, by Thomas Friedman
—9—
©2007 ViTAL Economy, Inc.
The World is Flat: Ten Flatteners
1.01 Globalization: The World is Flat
3. Workflow Software Enables a Global Supply Chain
• Workflow software seamlessly connects applications to applications, so that people
can manipulate all their digitized content using their computers and the Internet —
“People all over the world can now shape, design, create, buy and sell things, track
inventories, prepare tax returns, read X-Rays from half a world away using a
common software platform”*
• SI is competing in a world without boundaries, which uses workflow software
to improve productivity and increase prosperity. SI’s economy will only be
transformed when it encourages investment in workflow software to improve
the efficiency and effectiveness of every citizen, business, NGO and
government entity
4. Open Sourcing-Shareware
• Free tools from software (Linux) to servers (Apache) and encyclopedias
(Wikepedia) enable millions of people and firms to compete with bigger
organizations on a level playing field and get to market faster
• SI firms, governments, NGOs and citizens have the opportunity to leap frog
traditional development timeframes and become global competitors through
the savvy and effective use of Open Sourcing
Source: *“The World Is Flat”, by Thomas Friedman
— 10 —
©2007 ViTAL Economy, Inc.
The World is Flat: Ten Flatteners
1.01 Globalization: The World is Flat
5. Outsourcing, Y2K, Using Telecom to Contract to Another Firm in Another
Country
•
Y2K proved that firms could access well developed intellectual capability in developing
countries 24 hours per day without owning the capacity or reducing quality. Production is no
longer limited by time or geography
•
SI’s mid-U.S. location and its significant educational resources positions SI to be a
potential outsourcing hub for the “Heartland of America” to the world and the world to
the Heartland of America. SI collaborating with next door neighbors’ resources versus
competing with them is a critical step in making Outsourcing an opportunity rather than
a threat
6. Off Shoring — Moving a U.S. Operation to Another Country
•
All prior flatteners prepared global firms to be able to produce the same product or service in
the same way to serve local markets and expand global capacity. Off-Shoring is occurring
from U.S. locations to the world and from global locations to the U.S.
•
Off-Shoring is as much an opportunity as it is a threat to SI. The key is to identify those
indigenous human, natural, geographic location and knowledge resources that enable
SI to offer products and services to the global marketplace at higher value rather than
at commodity prices
Source: “The World Is Flat”, by Thomas Friedman
— 11 —
©2007 ViTAL Economy, Inc.
The World is Flat: Ten Flatteners
1.01 Globalization: The World is Flat
7. Supply Chaining — Connected Throughout the Chain Without Owner Control
• Elements of the supply chain from raw material to customer are connected, resulting
in on-demand production and logistics resulting in increased efficiency and lower
costs (Wal-Mart, CISCO, etc)
• Effective supply chaining requires that SI know what elements already exist in
the region as well as where gaps exist. There is Supply-Chaining opportunities
for SI in every field of economic output (tourism, healthcare, government
services, agriculture, energy, healthcare products and services, etc).
Expanded markets and increased numbers of higher value jobs resulting from
effective supply chaining strategies
8. In-Sourcing — UPS into Your Company
• Logistic companies (UPS, FEDEX) enter into a brand new market of relieving major
product producers of non-core competencies. This results in improved quality and
speed of service to the customer. It enables customers to go global faster using
proven logistics resources
• SI has an opportunity to become a global logistic services hub for logistics
firms because of its geographic location. SI business and government entities
can identify In-Sourcing opportunities for improving customer service, quality
and speed to market
Source: “The World Is Flat”, by Thomas Friedman
— 12 —
©2007 ViTAL Economy, Inc.
The World is Flat: Ten Flatteners
1.01 Globalization: The World is Flat
9. Informing: The Ability to Build and Deploy Your Own Personal Supply
Chain — of Information, Knowledge, and Entertainment (Google,
Yahoo, MSN Web Search)
• Informing is searching for knowledge, allies and collaborators and connecting
them. Small and mid-sized enterprises (SMEs) are able to level the marketplace
by being able to operate and present themselves as an equal to large
multinational corporations
• SI businesses, governments, NGOs and citizens have the opportunity to
create new services and products and reach broader local, regional,
national and global markets through the use of informing technologies and
strategies
10.The Steroids — Digital, Mobile, Personal and Virtual
• Information and communication technology innovations have created the ability to
work from anywhere, anytime improving the speed of transactions whether we are
at work, at home or on the go, whether we are wired or wireless
• SI, through Connect SI, is in the process of developing and implementing a
broadband connectivity strategy that will enable all of SI to take advantage
of these digital, mobile, personal and virtual steroids. Learning and adapting
these technologies will be critical to SI economic transformation
Source: “The World Is Flat”, by Thomas Friedman
— 13 —
©2007 ViTAL Economy, Inc.
Globalization & The World is Flat:Implications
1.01 Globalization: The World is Flat

SI is competing with World-is-Flat-savvy country economic strategies

SI political/jurisdictional boundaries are a competitive disadvantage

Collaboration across SI assets will be required to expand SI economy

Continued internal competition will relegate SI to continued decline

One of the fastest growing sectors: Logistics, Transportation & Distribution



It’s changing so fast, SI better get moving
SI broadband access, penetration and usage need to be at best practice
levels

SI institutions, governments, citizens and businesses must become more
knowledgeable about the value and impact of web based productivity tools to take
advantage of the ten flatteners for accelerated SI economic growth

World is Flat education of SI citizens needs to become a priority strategy

Wired and Wireless connectivity and applications strategy is essential
Global markets are an opportunity for SI growth, not a threat to growth

SI needs to expand the percentage of its economy that is globally driven

A greater focus on value added KBE growth is critical to future success of SI

Public policies focused on industrial attraction must be changed
— 14 —
©2007 ViTAL Economy, Inc.
Globalization & The World is Flat: Opportunities
1.01 Globalization: The World is Flat

The Global Economy is growing at 4x’s the rate of SI — SI can literally double
its economy by tapping into global markets, by fostering new working
relationships with foreign companies that desire entrance to the U.S. market

This means jumping from 1.34% to 3.85% average annual growth rate (AAGR)

SI should use the ten flatteners as an opportunity to leverage its geographic
location and inter-modal transportation and logistics assets to become a
global logistics service center for In-Sourcing and Out-Sourcing

SI should leverage its significant research and development knowledge base
as well as workforce education and training assets to develop a significant
regional collaborative KBE and innovation growth strategy

SI has the opportunity to demonstrate to the rest of Illinois how to use the Ten
Flatteners to develop a collaborative regional approach to economic
development, 24x7 government services and industry cluster strategies that
cross traditional political, industry and jurisdictional boundaries — building
prosperity for all
— 15 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
While the Ten Flatteners have opened up access to global markets for all, broadband
connectivity is the key to getting there — market access has expanded exponentially. To take
full advantage of this growing enabler, SI must learn how to maximize its usage.
Chapter 1:
State, National & Global Trends
1.02 Broadband Connectivity &
eCommerce
— 16 —
©2007 ViTAL Economy, Inc.
Broadband Connectivity & eCommerce: Overview
1.02 Broadband Connectivity & eCommerce

Broadband connectivity is bringing the undeveloped and developing countries
on even par with the industrialized nations — remoteness is now becoming
an asset


Rural broadband parity with global best practice economies is as important as
Rural Free Delivery was in the 19th century, electrification in the 1930’s, the
Interstate in the 1960’s
Key trends to watch:

Global connectivity has now put small & medium sized enterprises (SMEs) on an
equal footing with corporate giants competitively

In 2006, the U.S. fell to 19th globally in household broadband penetration

As of Dec 2005, 87.5% of U.S. at-work connected users had high speed internet
connections

Broadband access is now one of the top ten considerations in deciding business
location

Annual eCommerce growth is six-times faster than the overall U.S. economy

Connectivity & eCommerce have made knowledge & human capital more
important than physical-infrastructure and financial capital
“Broadband has the power to make geographic isolation irrelevant” —
Sources: Varied (see the rest of this Section)
— 17 —
Tom Friedman
©2007 ViTAL Economy, Inc.
ICT Makes a Disproportionate Contribution to
National Productivity Growth
1.02 Broadband Connectivity & eCommerce
Overall
Economic
Growth Rate
%
Contribution
of ICT
ICT
Contribution
to Economic
Growth
United States
4.3%
0.8
19%
Canada
4.75%
0.5
11%
Japan
1.5%
0.5
33%
Germany
2.5%
0.5
20%
France
2.2%
0.3
14%
UK
3.1%
0.6
19%
Australia
4.9%
1.3
27%
Belgium
2.8%
0.5
18%
•1950’s – 2%
Korea
5.0%
1.2
24%
•1990’s – 17%
Country
1995-2000
• ICT = Information,
Communications &
Technology
• Productivity growth is a key
driver of economic growth
• Studies indicate ICT is
responsible for somewhere
in the region of 1/2 to 2/3 of
overall productivity growth
• Evidence is showing that
ICT’s contribution to
economic growth is
continuing to increase
Source: Enabling Canada’s Economic Potential: ICT and National Economic Performance, InterVISTAS, 2005
— 18 —
©2007 ViTAL Economy, Inc.
Growing SI Broadband Penetration is Critical
% Penetration of
Population
1.02 Broadband Connectivity & eCommerce
60.0
50.0
40.0
30.0
20.0
10.0
0.0
24%
12%
S
I
54%
I
C
E
L
A
N
D
U
S
A
2005
Southe rn Illinois
USA-Rural
France
United Kingdom
USA-Average
Japan
Be lgium
Sweden
Canada
Norway
Finland
Switzerland
De nmark
Ne the rlands
Kore a
Technology
Deployed in the U.S.
• DSL 39%
• Cable 54%
• Other 7%
Note:
SI 12% penetration
(Jan ‘06) has already
increased by 1/3 to
16% due to the
collaborative efforts
of Network Providers
COI & Connect SI
Iceland (Be st)
Since 2005, the U.S. has been slipping even further behind in Broadband penetration
Source: Organization for Economic Cooperation and Development (OECD) Broadband Statistics Dec 2005 (Survey of 14 Countries);
Pew Internet and American Life Project — Rural Broadband Internet Use Feb 2006
— 19 —
©2007 ViTAL Economy, Inc.
1.02 Broadband Connectivity & eCommerce

47% of all adults have a broadband
connection at home (2007)

Among individuals who use the
Internet at home, 70% have
broadband and 23% have dialup

55% of Rural Internet users have a
broadband connection at their
home vs. 73% of Urban and
Suburban

Rural broadband adoption at 31%
continues to lag behind Urban 51%
& Suburban 52%

Rural vs. Urban Broadband:
The Divide is Shrinking
SI as of Jan ‘06 —
Only 12% Penetration,
less than 1/2 National
Rural Average!
*SI
55% of Urban and Suburban
workers have hi-speed internet at
their work vs. 38% of Rural workers
Quote from SI Citizen: “Connect SI has achieved more
broadband growth in one year than the previous decade!”
Source: PEW/ Internet, “Home Broadband Adoption” 2007
— 20 —
*SI
SI as of Nov ‘07 —
Up 1/3 to 16%
Penetration
©2007 ViTAL Economy, Inc.
73% of American Adults Now Use the Internet
1.02 Broadband Connectivity & eCommerce
eCommerce Activity
U.S. Adults Who Have Ever
Engaged in Activity (%)
Researched a product or service prior to purchase
78
Obtained travel information
73
Purchased a product
71
Purchased or made a reservation for travel
63
Look for “how-to”, “DIY” or repair information
55
Online banking
43
Obtain financial information (i.e. stock quotes, mortgage
interest rates)
41
Pay bills
38
Rate/ review a product, service or person
32
Use online classified ads or sites
30
Sell something
15
Buy/sell stocks, bonds, mutual funds
13
Source: PEW Internet & American Life Project Home Broadband Adoption March 2006
— 21 —
©2007 ViTAL Economy, Inc.
U.S. Online Retail Sales:
More than Doubled in 3 Years*
1.02 Broadband Connectivity & eCommerce
140
$130.3
120
100
80
$63.9
60
40
20
$12.3
0
99
9
1
00
0
2
01
0
2
02
0
2
03
0
2
04
0
2
05
0
2
06
0
2
U.S. Online Re tail Sales
*Excludes Travel, Prescription, and Auto
*AAGR = Average Annual Growth Rate
Since the 3rd Quarter of 2003 U.S. Economic Growth has Averaged 4.6%
vs. 26.8% AAGR in Online Retail Sales — nearly 6x’s faster!
Source: Jupiter Internet Shopping Model, 2006
— 22 —
©2007 ViTAL Economy, Inc.
eCommerce Enables U.S. SMEs to Go Global
1.02 Broadband Connectivity & eCommerce

Strong U.S. growth in flexible and dynamic SMEs
(small/medium enterprises) — driven by eCommerce




Export Power
with eCommerce
In 2005, SMEs employed 57 million Americans, over half of
U.S. employment
65% of European Gross Domestic Product (GDP) comes from
SMEs, vs. 45% in the U.S..
SMEs dominate development of new eCommerce sites:

Accounted for 90% of new commercial sites in 2007 (vs. 80%
in 2006 and 75% in 2003)

SMEs focus on eCommerce because it provides access to
international markets in a cost-effective manner
Small businesses turn to the Internet because:




Impact – communicates a strong organizational identity
Partnerships – allows companies to partner with distant
companies for product development, marketing, etc.
Export Opportunities – opens up markets at lower cost of
entry
Growth – replaces power in employee count with power of
technology
Source: SMEs rule the world. Peter Cochrane. July 2006
— 23 —
©2007 ViTAL Economy, Inc.
1.02 Broadband Connectivity & eCommerce

Broadband Connectivity & eCommerce:
Implications
Extreme growth in Online Retail Sales has a direct impact on Rural main-street retail as
well as entrepreneurial-generated goods and services


Broadband: key distribution channel for existing digital content & applications, driven by:

Rapid diffusion of read/write storage within consumer access devices (MP3 players, PVRs)

Benefits of interactive online purchasing tools, such as search, find and compare tools

Efficiency gained in bypassing off-line old distribution channels, getting closer to “C” (Ref: P=>C)
Broadband content & applications: packaged or bundled with other services, driven by:


Content & applications production stimulate significant cross-sector linkages, driven by:


Convenience of a single relationship for order entry, billing, & customer service,
Sharing production costs for content across a range of broadband platforms
Broadband will stimulate new content and applications for the consumer and business
markets, driven by:

Latent consumer demand for interactivity greater choices, e.g., anywhere, anytime, anything type access

Advanced user-devices, with technical capabilities approaching that of a PC, and the ability to perform multiple
functions
Broadband & eCommerce enables SI to take advantage of the Ten Flatteners
to transform its economy — not be the victim of these
— 24 —
©2007 ViTAL Economy, Inc.
1.02 Broadband Connectivity & eCommerce
Broadband Connectivity & eCommerce:
Opportunities
Southern Illinois Opportunity Sectors
Tourism
Healthcare
International Incubation
Sector Niche Applications
Development of a SI wide online tourism portal for one stop
reservations and purchases (11 million people within 4-hrs drive)
Utilization of a SI wide healthcare Intranet for EMR, telemedicine, etc.
Online access and interaction with global best practice R&D and
companies desiring to enter U.S. markets
Telecommunications
Creation of virtual organizations linking multiple sites using Intranets
Homeland Security
Remote locations enable better distribution of knowledge assets that
avoid “single-points-of-failure”, reducing 9/11-type impact & risk
Customer Service
Development of virtual call centers for customer support
Product Design
Online global collaborations for product design and maintenance
Education and Training
Remote worker training for the national 10 million worker shortfall
Product Procurement
Creation of virtual buying groups, especially government for large
common orders
Retail Services
Online retail and service franchises for small business; mobile-IT desks
Southern Illinois Points of Light include:
Illinois Virtual High School
Audio-Image Marketing
Shawnee Hills Wine Trail
Illinois Eastern Community College On-line Nursing
— 25 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
While connectivity is a great enabler, it requires knowledge, innovative thinking and
entrepreneurial spirit to take full advantage of this conduit to global markets — growth,
prosperity, & economic advantage (past and future), come from innovation.
Chapter 1:
State, National & Global Trends
1.03 KBE and Innovation
— 26 —
©2007 ViTAL Economy, Inc.
KBE and Innovation: Perspective
1.03 KBE and Innovation
REVENUE GROWTH

Every person, company or
organization has IDEAS,
INVENTIONS, PRODUCTS, &
KNOWLEDGE with potential KBE
market value

A KBE Economy is driven by the
production, distribution and use of
knowledge for growth, wealth
creation, productivity and
employment increases

KBE competition is based in
innovation rather than price as in
classical economies

Countries and regions that show
more evidence of innovation are
richer and grow faster

Companies that show more
evidence of innovation post better
financial performance
TIME
Traditional Economy
Innovation Economy
Source: ViTAL Economy
— 27 —
©2007 ViTAL Economy, Inc.
KBE and Innovation: Overview
1.03 KBE and Innovation


KBE (Knowledge-Based Enterprise) Economies that grow as a result of
innovation are transforming their regulatory and community resources to
support just-in-time partnerships, lifelong learning and 24/7 global access
Trends to watch include:

Small and medium-businesses (SMEs) & innovation have been key to U.S. job
growth in recent decades — many relying on unique knowledge or skills

In the last ten years, 90% of all U.S. job growth has been in KBE firms of
50 employees or less



Innovation is shortening the life-span of new/existing businesses — at ever
increasing speed
KBE work and workers are more mobile and are choosing active lifestyle in Urban
or Rural settings … suburban living is no longer in vogue
ALL Product and services have the potential to exchange ever quicker and
cheaper via the internet around the world


Most SI businesses have not leveraged this opportunity
Many new businesses have yet to be created to accomplish this
In a KBE Economy, the best strategy for profits is
to invest in the connecting power of the internet
Sources: Varied (see the rest of this Section)
— 28 —
©2007 ViTAL Economy, Inc.
Knowledge versus Industrial Enterprise
1.03 KBE and Innovation
Industrial Enterprise
Knowledge-Based Enterprise
Economies of scale
Smaller business units
Standardization of work
Customization of work
Standardization of workforce
Flexible, multi-skilled workforce
Financial capital as scarce resource
Human capital as scarce resource
Corporate HQ as operational controller
Corporate HQ as advisor & core competency guardian
Hierarchical pyramid structure
Flat or networked structure
Employees seen as expense
Employees seen as investment
Internally focused top-down governance
Both internal and external distributed governance
Individualistic functional orientation
Team orientation, emphasis on cross-functional teams
Information based on “need to know”
Open & distributed information system
Vertical decision making
Distributed decision making
Emphasis on stability
Emphasis on change
Emphasis on vertical leadership
Emphasis on empowered self-leadership
Business has shifted from where you compete to how you compete
Source: ViTAL Economy; 1000ventures.com
— 29 —
©2007 ViTAL Economy, Inc.
1.03 KBE and Innovation

Education Level


Percentage of college graduates is
primary indicator of higher per
capita income
Innovation Across Industries
and Sectors

75% of personal income growth
during the 90’s tied to technology
output


Industries oriented to
national/global markets produce
higher value products and pay
more


90% of the new jobs created in the
new economy will be generated by
companies of 50 or less employees
Source: ViTAL Economy
— 30 —
Regions that promote talent across
industries are most likely to
become economic winners
Reduction of Poverty and
Inequality

Entrepreneurial Initiative
Productivity gains do not depend
on what region an industry
competes, but rather how it
competes
Talent Strategy
Export-Oriented Industries



Science and Technology Activity


Must Haves of a KBE Economy
Broad-based well-being of
residents and decreased poverty
are important for sustained
increases in economic growth
©2007 ViTAL Economy, Inc.
Microprenuers are the Stars of KBE Economy
1.03 KBE and Innovation

Micropreneurship is a business trend for individuals that falls between the traditional
entrepreneur and the garage salesman



New business creation is at record high levels:




Over the past two years there have been between 2.3 and 3.5 million new businesses, 0.5
million per year in the 1970s — Source: NFIB
Most will remain small mom-and-pop operations
A small share of start-ups will grow into titans — exceptionally important: 4% of all U.S.
companies, yet create 60% of all new jobs
Technology progress stems from:




With eBay, Amazon, PayPal, low cost manufacturing in Asia, and logistical support from
companies like UPS, an micropreneur can start a business even without a bank loan
These businesses run lean with very little out-of-pocket cost
New radical innovations (50%)
Incremental or sustaining improvements (50%)
95% of radical innovations come from new companies, not big, established firms
R&D spending in largest companies declined from 65% to 43%, while R&D has grown in
smaller companies
Source: National Federation of Independent Business
— 31 —
©2007 ViTAL Economy, Inc.
KBE Economy: Emergence of the Creative Class
1.03 KBE and Innovation


The Creative Class — composed of workers whose job is to create
meaningful new forms

Composed of scientists and engineers, university professors, poets and architects,
to name a few

38.3 million Americans and 30% of the workforce in America identify themselves
with the creative class

Grow more than 10% in the past twenty years

Shaping a new culture for the America of the 21st century
The Creative Class and the Global economy

Will bring any country who has them to great economic power and growth

Driven by the shift towards technology, research and development, and the internet

Creates new ideas, high-tech industry and regional growth

Europe is now almost equal with America's numbers for this class

Regions & cities compete to attract the Creative Class
Jobs follow the Creative Class!
*Source: “Work of Nations” by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004:
Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida
— 32 —
©2007 ViTAL Economy, Inc.
The Creative Class Fuels a KBE Economy
1.03 KBE and Innovation

Business Trends

Business, engineering and design schools are revamping curriculum within traditional
programs to meet companies demand for innovation, globalization, knowledge management
and product design skills as competitive advantage

Companies are addressing customer and organizational demands for consumer power and
online cultures by recruiting professionals who understand and can manage in a world
where global consumers co-create goods and services in peer relationships
Businesses now recognize that a vibrant cultural arts community is critical to the
development of livable communities which encourage creativity and innovation in their
workforce.


Creative Worker Trends

Creative workers play an increasing role in forming new jobs and companies, and helping
mature industries retool

The U.S. non-profit arts and culture community grew by 24% from 2000-2005 generating
$166.2 billion in annual economic activity and supporting 5.7 million full-time jobs

Creative workers thrive in an environment where there is an authentic sense of place, a
recognition of diversity and opportunities for an energetic exchange of ideas

Creative workers are mobile and are attracted to areas where creativity is welcomed
*Source: “Work of Nations” by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004:
Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida
— 33 —
©2007 ViTAL Economy, Inc.
SI’s Opportunity to Attract the Creative Class
1.03 KBE and Innovation

Creative Class populations are converging in areas that provide them
special amenities; the key is offering “the three 'T's”:




Talent — have a highly talented/educated/skilled population
Tolerance — have a diverse community, which has a 'live and let live'
ethos
Technology — have the technological infrastructure necessary to fuel an
entrepreneurial culture
The Creative Class is looking for regions that better accommodate
their cultural, creative, and technological needs


SI can provide these qualities attractive to the Creative Class
SIUC, the Community Colleges and R&D Parks are great attractors and
could be promoted to these creative people
*Source: “Work of Nations” by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004:
Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida
— 34 —
©2007 ViTAL Economy, Inc.
High Performing Rural Communities
1.03 KBE and Innovation

Rural communities that attract Creative Class professions have
strong job growth and tend to generate more patents and adopt
technology faster


Richard Florida Research defines the Creative Class as “jobs that are
generated by KBE workers”
Counties with Creative Class attributes are among the top 25% highest
performing in the U.S.
More than twice as many metro counties (593) have Creative Class
attributes as non-metro counties (205)
 Rural communities with a high percentage of Creative Class jobs had
stronger job growth than Urban regions
Key to growth of rural communities, which support Creative Class
professions, is the strategic role of a locally based research university


U.S.D.A. ranks Jackson and Williamson Counties as non-metro Creative Class counties;
by comparison, IN had none; IL had only two others
*Source: “Work of Nations” by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004:
Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida;
http://www.ers.usda.gov/data/creativeclasscodes/
— 35 —
©2007 ViTAL Economy, Inc.
Role of Universities in a KBE Economy
1.03 KBE and Innovation
FROM:
Teaching to Learning
Service
Research
Ivory Tower
3 Pillars
Teaching
TO:

Classrooms

Classrooms without walls

Teaching inputs

Educational outcomes

One-way content delivery

Two-way exchange

Preparation of next generation

Continuous prep of all generations
Research to Innovation

Idea generation

Idea application

Individual inventions

Collaborative inventions

Single discipline focus

Interdisciplinary focus

University-centered work

Regional collaborations
Service to Shared Leadership
Stewards of Place
3 Pillars

Episodic, short-term involvement

Sustained, long-term involvement

Tactical, individual contributions

Strategic, institutional commitment

Issue/cause focus

Community/region well-being focus

Accountability for services rendered

Shared responsibility for results
Source: Collaborative Economics; 2006; Alliance for Regional Stewardship, AASCU, & NCHEMS
— 36 —
©2007 ViTAL Economy, Inc.
KBE and Innovation: Implications
1.03 KBE and Innovation


No high-growth economy can maintain high wages and living standards, and hold its
own in global markets, by producing standard products using standard methods
We live in an age of increasing pace of change and information innovation — healthy
communities are both knowledge-centric & creative

Communities need to create a climate that encourages the development, incubation
and growth of UNIQUE ideas/opportunities

Universities, colleges and incubators are critical to developing a prosperous KBE
(Knowledge-Based Enterprises) economy




Effective technology transfer is key to ensuring that innovation is commercialized
Productivity and prosperity cannot increase without innovation
“In an age where economies are driven by ideas, universities must do more than creating &
disseminating ideas — it requires a redefinition of the university-model that fosters permanent
engagement as a full partner in the viability & vitality of the region to which each university is
connected, …”*
There are prerequisite elements/qualities to attract & retain KBEs in a rural community
(see Section 1.05 Livable Communities)
* ©2006 Alliance for Regional Stewardship, AASCU, & NCHEMS “Tools & Insights for Universities Called to Regional Stewardship”
— 37 —
©2007 ViTAL Economy, Inc.
KBE and Innovation: Opportunities
1.03 KBE and Innovation

Encourage the development of innovation-fostering incubators, knowledge transfer and
commercialization systems, that lead to more local start-ups


Continually improve your ability to identify and commercialize new products, services and processes
Transform to a KBE Economy — SI has existing assets supporting innovation: SIU
research, Community College’s, Incubators, Research Parks, etc.


The best opportunities will link R&D innovations with entrepreneurs and specialty finance bringing economic
benefit to the region
Over 7,000 new KBE jobs can be created by SI innovators with knowledge that can
address global trends such as:





Green technologies
Homeland security response and services
Mining & safety-related technologies
Bio-sciences, plant and animal
Existing success stories in SI are proof that this can be done:



Dinger Bats — driven by individual passion to produce in SI and compete globally
Dippin’ & Dots — new application for CO2 technology
Precision Mining (see Chapter 4) — innovative application of mine infrastructure

Crownline Boats – innovators in recreational boating
Green Locomotives – National railway

CommunityLink – a service of Craig Williams Creative

— 38 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
The U.S. is experiencing a profound economic transformation driven by
globalization and our transition to an economy based on knowledge. Tried and
true industries of the past are shrinking and whole new ones are emerging.
Chapter 1:
State, National & Global Trends
1.04 Transformation of U.S. Economy
— 39 —
©2007 ViTAL Economy, Inc.
Transformation of U.S. Economy: Introduction
1.04 Transformation of U.S. Economy


America’s Great Lakes region, once the core of the nation’s industrial
production and wealth creation, is struggling to maintain its ground

This 12-state region reaches from Buffalo and Pittsburgh in the east, to
Minneapolis-St. Paul and St. Louis in the west

Some parts of the region, such as Chicago and the Twin Cities, are thriving in the
KBE Economy, while other communities, like Buffalo, Detroit, Cleveland, and
Milwaukee, are losing jobs, talent, and economic vitality
Great Lakes states — lots to offer, yet have suffered more than others:

More than a third of U.S. manufacturing job losses from 2000 to 2005 occurred in
seven Great Lakes states

Yet, colleges and universities in these states annually produce 38% of all U.S.
bachelor degrees, 36% of all science and engineering degrees, and 37% of all
advanced science and engineering degrees

The Great Lakes watershed includes one-fifth of the world’s fresh water and
almost 11,000 miles of coastline
Source: The Vital Center: A Federal-State Compact to Renew the Great Lakes Region: The Brookings Institution, October 2006
— 40 —
©2007 ViTAL Economy, Inc.
Transformation of U.S. Economy: Overview
1.04 Transformation of U.S. Economy

KBE and innovation are fundamental driving forces changing the very basis
of our economy — the rules, structure, systems have all changed


The old way: “For 25 years have only paid for my hands, when you could have
had my brain for nothing” — GE hourly worker to Jack Welch, CEO
Trends to watch for:

Over the last four decades there has been a monumental shift in the structure of
the U.S. Economy — from Manufacturing to Services


1997-2003 Manufacturing employment shrunk as a result of productivity improvements
due to more efficient use of labor, automation and new IT
Service industries created more high-skilled occupations than manufacturing — 30%+ of
the these jobs were in the highest skill category of professional, technical, managerial and
administration, versus only 12% in the manufacturing sector

Traditional commodities and services have also been transforming as new
opportunities for value-added niches have emerged — e.g., in bio-agriculture
creating new pharmaceuticals from tobacco

Agriculture is also declining as a % of the national economy
In ten years only one in seven businesses existing today will still be in business in the USA.
Change is happening quickly, open your eyes or be left behind” - Peter Drucker
Sources: Varied (see the rest of this Section)
— 41 —
©2007 ViTAL Economy, Inc.
U.S. Economy Restructured Since the 1960s
1.04 Transformation of U.S. Economy
Share of U.S. Economy GDP by Economic Sector
30
Biggest % Declines:

Agriculture

Manufacturing
25
20
15
Biggest % Growth:

Services

F.I.R.E.
10
5
O
th
er
.
R.
E
F.
I.
s
vi
ce
M
Se
r
ng
ct
ur
i
ic
an
uf
a
ul
tu
re
e
ho
l
es
al
ai
l
Re
t
W
Ag
r
G
ov
er
nm
en
t
0
1960
2006
*F.I.R.E. = Finance, Insurance & Real Estate
From 1960 to 2006: Manufacturing’s share of GDP fell by more than
50%, while Service’s share almost doubled
Source: Bureau of Economic Analysis
— 42 —
©2007 ViTAL Economy, Inc.
Globalization hits Manufacturing in Illinois
1.04 Transformation of U.S. Economy
Manufacturing Employment as a
% of IL Economy:

30%
Manufacturing sector in Illinois
declined — from 30% of jobs
in 1970 to 12% (2006), due to:

30%

25%
20%
17%
Increased automation
requires less human labor
Difficulty finding skilled young
workers

Manufacturing represents
only 10% of jobs in the
Southern Illinois region now

Net Result: traditional
manufacturing is no longer a
target area for growth and
jobs
15%
12%
10%
5%
0%
1970
1990
Source: sciencejobs.com, Insider Article
2006
— 43 —
©2007 ViTAL Economy, Inc.
Manufacturing Job Loss in IL Was Worse
1.04 Transformation of U.S. Economy
Illinois: Overachiever in Job Loss
Illinois: Underachiever in Job Growth
IL lost 1.86 manufacturing jobs for every job lost by
RMW (Rest of the Mid-West) between 1990-2006
— 44 —
©2007 ViTAL Economy, Inc.
U.S. Holds a Globalization Productivity Advantage
1.04 Transformation of U.S. Economy

The U.S. leads all countries in the
absolute level of labor
productivity, both per hour and
per employee

The increased productivity
performance in the manufacturing
sector causes optimism for the
sectors ability to adjust to rising
levels of competition

KBE innovations create advanced
manufacturing leaders offering
higher wage U.S based jobs
*OECD = Organization of Economic
Co-operation and Development
A 31% productivity advantage of the U.S. economy over OECD*
members accounts for 3/4’s of the per capita income difference
Source: Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers, 2004
— 45 —
©2007 ViTAL Economy, Inc.
Yet Advanced Manufacturing Remains a U.S. Cornerstone
1.04 Transformation of U.S. Economy
Manufacturing Industry Facts



The manufacturing sector continues
to account for 14% of the U.S. GDP
and 11% of the total U.S.
employment.
BEA analysis: “Every $1 of final
demand spent for a manufactured
good generates $0.55 of GDP in the
manufacturing sector and $0.45 of
GDP in the non-manufacturing
sector”
From 1977 to 2002 productivity in
the overall economy increased 53%;
while manufacturing sector
productivity rose by 109%
How does the U.S. compete?

Rising productivity is the key to
maintaining U.S. competitiveness in
manufacturing

Innovation holds the key to
productivity
“A nation’s standard of living in the
long term depends on its ability to
attain a high and rising level of
productivity in the industries in
which its firms compete.”**
**Source: Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers, 2004
— 46 —
©2007 ViTAL Economy, Inc.
Declining Impact of Agriculture Jobs
1.04 Transformation of U.S. Economy



Productivity led to resource and
agricultural job losses throughout
the 1900s
U.S. Resource Jobs Declined Steadily
as % of all jobs
5.0%
4.0%
Farm jobs were reduced to less
than 1% of all U.S. jobs in the
1980s
3.0%
Reasons include:
0.0%


2.0%
1.0%
1948
Productivity gains (doing more with
fewer workers)
1977
1997
U.S. Farm Jobs Declined to less than
1% of all jobs in the 1980s
Consolidation of farms
1.6%


Net result: traditional, commoditybased agriculture will not lead job
growth or recovery
The future lies in value-added
agriculture
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
Source: BEA
Note: Resource Jobs includes farming, forestry, hunting and fishing
— 47 —
1977
1987
1997
©2007 ViTAL Economy, Inc.
New Forms of Ag = Value-Added Opportunities
1.04 Transformation of U.S. Economy


Biotech-science refers to lab-based techniques developing biological
research, that will supply goods and services for use by humans, such as:

Recombinant DNA

Tissue cultures-based processes
Biotech combines disciplines like genetics, molecular biology, biochemistry,
embryology, cell biology, & seed hybridization

Linked to practical disciplines like chemical engineering, information
technology, nano bio-technology and robotics

The U.S. biotechnology industry includes approximately 1,000 companies
with combined annual revenue close to $50 billion

Typical bio-agriculture companies are small, averaging 30 employees

Bio-agriculture attracts venture-capital funding

SIU is a leader in these sciences and is actively transferring this research to
new business start ups
Source: ViTAL Economy
— 48 —
©2007 ViTAL Economy, Inc.
U.S. Economy Growing in Value-Added Services
1.04 Transformation of U.S. Economy
1800
1900
90% of the workforce was
in Agriculture
2000
82% of the workforce was
in Services
37% the workforce was
in Agriculture
26% of the workforce was
in Services
4% of the workforce was
in Services
1.5% of the workforce was
in Agriculture
“Our per capita wealth has grown as we've moved up the value-added ladder. Most high paying jobs are
in services — engineers, scientists, computer systems analysts, stockbrokers, professors, doctors,
lawyers, dentists, CPAs, entertainers and other service providers, to say nothing of the megacompensation paid to hedge fund managers and financial engineers.…”
Source: Richard W. Fisher, President,
Federal Reserve Bank of Dallas, May, 2007
— 49 —
©2007 ViTAL Economy, Inc.
Service Exports: a Continuing Success Story
1.04 Transformation of U.S. Economy


While the U.S. runs a tradedeficit on Goods, Services
continue to be an export
success story
U.S. service exports are growing
rapidly. Between 2005 and 2006,
U.S. service exports increased
12%
Service exports include:





Travel
Transportation (cargo)
Royalties and fees
Consulting
Service Exports 2006
U.S. Has Strong Service Surplus
$U.S. Billions

500
450
400
350
300
250
200
150
100
50
0
The majority of service exports are
to Europe (40%), Asia-Pacific
(27%), Latin America (17%), and
Canada (10%)
Source: BEA
Exports
— 50 —
Imports
©2007 ViTAL Economy, Inc.
Shift from Industrial to Service Economies
1.04 Transformation of U.S. Economy
Illinois GDP by Industry
Gross Domestic
Product (GDP)
1970 ($ Billions
current dollars)
2006 ($ Billions
current dollars)
$62,931
$589,598
Representation of Total
GDP (%) 1970 – 2006
Natural Resources
$1,818
$3,761
2.9% - 0.6%
Construction
$3,111
$28,041
4.9% - 4.8%
$18,176
$77,641
28.9% - 13.2%
Wholesale Trade
$4,992
$42,284
7.9% - 7.2%
Retail trade
$6,148
$33,874
9.8% - 5.7%
F.I.R.E.**
$9,247
$132,963
14.7% - 22.6%
$13,210
$214,214
21.0% - 36.3%
$6,230
$56,823
9.9% - 9.6%
Manufacturing
Services**
Government
Source: Bureau of Economic Analysis
Trend
**F.I.R.E. and Services represent the
sectors for high wage KBE jobs
Notes: Services sector includes health and education
F.I.R.E. = Finance, Insurance, and Real Estate
— 51 —
©2007 ViTAL Economy, Inc.
Breaking News Headlines
1.04 Transformation of U.S. Economy
21st Century Economies Create Jobs Differently
Job growth in an economy is directly related to the percentage of your
economy that’s globally based
Economic Growth Is Global
4.8% - 2008 growth forecast for the Global economy
1.9% - 2008 growth forecast for the U.S. economy
-Business Week October 29th, 2007
U.S. Mega Companies Are Leading Globalization
Mega-U.S. companies are chasing global opportunities because the most growth is there
 U.S. is leading globalization, not following it
 Off-shoring has been driven by U.S. companies not by foreign competitors
 100% of Budweiser's profit gains in the third quarter came from sales in other countries

-International Monetary Fund, World Economic Outlook, Oct. 2007
Connectivity enables companies of any size to access these growth markets
— 52 —
©2007 ViTAL Economy, Inc.
1.04 Transformation of U.S. Economy
Fortune 500: Chasing Growing
Global Markets
“This will be the 20th consecutive quarter in which foreign
earnings of U.S. groups have grown at a double-digit clip;
in fact, among the S&P 500, overseas profits are
growing twice the rate of domestic operations profits”
- Bank of America
1999-2002 U.S. Company Profits
$149B in 18 countries; up 68% in 3 years
Successful SME’s are doing the same thing
•
Small business** exporters
account for nearly 30% of total
U.S. exports, which will
approach $1 trillion in 2007
•
From 2000 to 2006, the number
of small businesses doing
exports jumped by 228%
Source: National Federation of Independent Business,
Sept ‘07 Article; and Small Business Administration
Note: SBA defines Small Business as
companies with up to 50 employees
— 53 —
©2007 ViTAL Economy, Inc.
Transformation of U.S. Economy: Implications
1.04 Transformation of U.S. Economy


SI manufacturing employment has declined for 20+ years.
Agriculture employment is also decreasing due to:







Increasing average farm size
Productivity gains
Loss of Agricultural land
High rail rates for agricultural goods has reduced competitiveness
Regional and state policies as well as ED strategies need to more
realistically reflect the growth of KBE firms and creative class
employment in the economic growth sectors of F.I.R.E. and Services
Manufacturing and agriculture strategies need to be focused on
value-added rather than commodity-based
SI has substantial and unrealized opportunity in the global economy
The Transformation of U.S. Economy continues — Southern Illinois as a whole has, in
effect, been impacted by, but has not actively participated in these profound shifts!
— 54 —
©2007 ViTAL Economy, Inc.
Transformation of U.S. Economy: Opportunities
1.04 Transformation of U.S. Economy



Leverage the significant workforce development resources of SI to develop the Region
into a global KBE workforce hub from the Heartland of America to the World
Leverage SI’s long growing season into value-added agriculture, bio-ag, etc. — applying
Dixon Springs and SIU’s research & technology and its plant stress zone reputation
Develop KBE opportunities in existing SI industries — mining, bio-agriculture, waste
water management, safety, advanced manufacturing, energy, etc.

Connect the healthcare sector into a comprehensive regional economic development
strategy to achieve significant KBE job growth

Harvest & leverage asset mapping info to create sustainable new SI growth sectors

Examples of successes in Southern Illinois:



Crownline Boats, Inc. — 150 dealers in US, Canada, Europe, South America, Russia and
Australia
DBT America in Carrier Mills — Major Manufacturer and Re-builder of Mining Equipment
Dippin’ Dots — Asia, Middle, East, Europe, Latin America, South America, Oceania
"There is no magic formula to get the Illinois economy moving again. The key lies in thousands of
decisions made by individual firms and workers that can make the state more competitive.” *
"In the modern, highly competitive world economy, few advantages last forever. The only way to
succeed in the modern economy is to constantly change to respond to competitive forces.” *
*Source: The Illinois Report, 2007
— 55 —
©2007 ViTAL Economy, Inc.
As our economy continues to transform and businesses shift toward capitalizing
on their knowledge-components, workers are also changing their loyalties and
the basis for their lifestyle decisions. These are folks who practice:
“live where you want, work where you live”
Chapter 1:
State, National & Global Trends
1.05 Livable Communities &
Age of Choice
— 56 —
©2007 ViTAL Economy, Inc.
1.05 Livable Communities & Age of Choice
Livable Communities & The Age of Choice:
Overview

High skilled workers are choosing active Urban or recreational Rural lifestyle
— fleeing the blighted suburbs and cities in search of cleaner, greener,
smaller, safer and more neighborly communities

Trends to watch include:

High skilled workers are choosing active Urban or recreational Rural lifestyle. Over
the last 10 years many rural counties have reversed decades of population decline

More and more companies are embracing virtual teams collaborating across the
globe — fostered by connectivity and other supporting technologies —Employees
are telling employers where they will live and work in the age of choice

Emerging KBE firms are prioritizing location decisions based on quality of life
characteristics that are attractive and welcoming of the creative class workforce

As the baby boom generation begins to retire (2007-2025), a significant influx of
urban retirees moving to rural communities is expected
“I have seen the critical role that the arts play in stimulating creativity and
developing vital livable communities” — Paul G. Allen, Co-founder of Microsoft
Sources: Varied (see the rest of this Section)
— 57 —
©2007 ViTAL Economy, Inc.
Rural America is Coming Back
1.05 Livable Communities & Age of Choice


From 1990 to 2000, the population of non-metro counties in the U.S.
increased by 10% — why?

The lower cost of living, the proximity to natural resources such as lakes
and mountains and a less stressful quality of life

A significant attraction to many Americans and recent immigrants

While some of these recent arrivals to rural America are retired, most of
them are still of working age — many bring wealth and a desire to remain
intellectually engaged
Increased geographic flexibility for many workers, largely as a result of
improved technology, has also allowed many people to move or build
second homes in rural areas that are close to desirable recreation areas
Source USDA Briefing Room Report, Economic Research Service
— 58 —
©2007 ViTAL Economy, Inc.
1.05 Livable Communities & Age of Choice

Livable Communities offer an attractive package that makes them a communityof-choice:





Livable Communities:
Portals to Most Cherished Places
Pristine environment, community appearance & proximity to natural beauty &
cultural amenities
High quality, relevant education and high quality healthcare
Safe & uncongested streets, building code & zoning that enhance property
value
Networks of like-minded thinkers which support a climate of innovation
Rural counties that had high levels of natural amenities – a mild climate, varied
topography or access to surface water – averaged a 120% increase in
population from 1970 to 1996

Whereas rural areas that offered few natural amenities averaged only a 1% increase
in population during the same period

Rural regions that lost population in the 1990s were mostly regions dependent on
agriculture or mining (and have not leveraged their natural assets)
“States with strong environmental policies have enjoyed more
economic growth than those with weak ones” — Bank of America study
“States that do the most to protect their natural resources also wind up with the
strongest economies and the best jobs” — Institute for Southern Studies Report
— 59 —
©2007 ViTAL Economy, Inc.
Curb Appeal is Critical
1.05 Livable Communities & Age of Choice

Choosing a community is like buying a house; if you don’t
like what you see from your car, you won’t get out

Curb appeal refers to the desirability of a community and a
region when seen from the curb, from the outside

You cannot get the spouses of desired KBE workers to move to
communities that do not have curb appeal

Just think about what it feels like when you drive into towns
leading the way, including — Elizabethtown, Steeleville,
Albion, Vienna, Metropolis, Red Bud, Fairfield — they act as
gateways to SI’s Garden of The Gods

20% or less of SI counties, municipalities and townships
have any form of planning, zoning or building codes or
permits. Some national firms are now telling their employees
not to buy homes in these communities to avoid resale
problems
— 60 —
What do visitors see when
they visit Southern Illinois?
©2007 ViTAL Economy, Inc.
1.05 Livable Communities & Age of Choice
Arts & Culture:
Strong Attraction Potential for KBE Workers
Key Elements of Success
Case Study
Rock Island, Ill. pop. 38,714


Began with a small startup grant to construct 4x8
displays for juried Phantom Art Gallery in the
windows of empty storefronts in downtown

The Phantom Art Gallery increased traffic in the
downtown area, valuation of the downtown and
utilized the arts as a tool for revitalization

The first festival produced by The District was
“Ya Maka My Weekend”, held in the summer of 1992
with only six weeks of planning

Vacant store fronts have been filled, long dormant
upper floors have been transformed into loft
apartments, and more than 60 new businesses have
opened





The District has propelled Downtown Rock Island
from worst to first. In 1990, Rock Island was
perceived as having the worst downtown in the Quad
Cities and in 2000, 2002, and 2005 it was perceived
as having the most active

Design – Identify what makes the community unique
and appealing both to its residents and potential visitors
Adaptation rather than Replication – Success does
not come from a cookie cutter approach, but rather
identifying uniqueness, assessing existing programs
and looking to the communities strengths and
weaknesses
Involve Artists and Other Professionals – most
successful revitalization programs are were developed
by artists, art entrepreneurs, business owners and
creative professionals
Establish Partnerships – the arts have the ability to
create unique and new partnerships in the community
with greater impact
Use Available Resources – under utilized or
abandoned buildings, factories and historic structures
become creatively woven into a revitalized area
Community Involvement – revitalization projects with
the greatest chance for success are ones that target the
local community and tourists
This example is a “proof of concept” to the VE principles underlying Connect SI
— 61 —
©2007 ViTAL Economy, Inc.
Leveraging Arts & Culture in Livable Communities
1.05 Livable Communities & Age of Choice
$3.90
Arts and Culture Audience Spending
Local
Non-Local
61%
39%
$19.53
$40.19
$5.01
Avg:
$27.79 per
person, per
event
$13.00
$0.34
$2.72
$2.82
Meals/Refreshments
Other
Transportation
Child Care
Lodging
Gifts/Souvenirs
U.S. Non-Profit Arts and Culture Industry
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
Audie nces
$103.1
Organizations
$80.8
$53.2
$63.1
2000
2005
Source: Arts and Economic Prosperity III, 2005
— 62 —
©2007 ViTAL Economy, Inc.
Rural Counties Are Arts Magnets
1.05 Livable Communities & Age of Choice
•
Rural communities
as arts magnets
demonstrates their
ability to attract and
retain creative
talent — related to
the initiatives
promoting rural
cultural tourism
•
A primary
component to
creating rural arts
magnets is the
region’s ability to
retain college
educated workers
Most counties have less than 1% of their employment tied to the arts
Source: Amber Waves, 2007
— 63 —
©2007 ViTAL Economy, Inc.
1.05 Livable Communities & Age of Choice
Livable Communities Practice
Green Economics

Purchase products that have been produced using recycled materials

Apply sustainable building designs to help reduce the consumption of nonrenewable resources, minimizing waste and creating healthy environments

Utilize environmentally friendly service contractors for activities such as
hazardous material handling and waste management

Development and implementation of cost effective waste prevention and
recycling programs including waste collection, reuse strategies and disposal
of excess and depreciated inventories

Promote markets for locally grown food…will be $7 billion market by 2011

Develop innovation strategies that grow new green KBE businesses

Buy and lease environmentally friendly vehicles that use renewable fuel
sources and have a lower overall consumption
Business Week 2007: “Green equals Profits; Green equals Economic Growth”
Source: William H. Frey analysis of 2000 U.S. Census
— 64 —
©2007 ViTAL Economy, Inc.
Livable Communities & Age of Choice: Implications
1.05 Livable Communities & Age of Choice

KBE and other high wage earners have a CHOICE were to: #1-live and #2work


Standards and improvements to one community or neighborhood is not
enough to be considered a Livable Community


Joining forces across a region is essential to muster the necessary resources &
critical mass needed to become a true Livable Community
SI has thus far missed the ‘rural revival’


Communities that proactively seek to become prime locations for these folks will
benefit the most
Rural areas with natural amenities, recreational opportunities and/or quality of life
advantages are seeing significant population growth (2000 Census Analysis)
An active arts and culture character is a primary part of a Livable Community
with benefits including the attraction of visitors and new investment

Community events and festivals highlighting unique local artisans and culture are
‘hot’ and relatively a simple way to differentiate a community
Unless Southern Illinois has ‘CURB APPEAL’ it will decay as the U.S. transient
population looks for a better life for both work and active retirement
— 65 —
©2007 ViTAL Economy, Inc.
Livable Communities & Age of Choice: Opportunities
1.05 Livable Communities & Age of Choice

Southern Illinois has all of the attributes & assets to become a premier Livable
Community — to do so, it will require:






A Livable Community strategy is paramount to retaining the 19-40 age group
In the interim, SI must capitalize on existing indigenous resources to become a major
tourist and retirement destination:






Creating the linkage between quality of life and economic growth by adopting strategies that
build upon its natural and cultural resources
Relying increasingly upon the attractiveness of your natural setting rather than only on
extraction of raw materials for commodity markets
Adopting polices and initiatives that preserve the scenic, ecological and historical assets of a
region
Pursuing an economic development strategy that is broader than the traditional tourism base to
include high skilled – KBE workers
Shawnee National Forest, many parks, lakes, rivers, wine-trails, bike-trails, golf-trails,
historic/cultural assets, arts centers & museums, artifacts, civil war history
Outdoor — hunting, boating, fishing, birding, biking, state & local fairs/festivals, wine & golf trails
University & Community Colleges, speakers forum, significant performing arts resources
Major college sports, minor league baseball
Attractive climate
Successful towns that are already applying Livable principles on a local scale include,
but are not limited to: Elizabethtown, Steeleville, Vienna, Fairfield, Albion, Red Bud, ….
— 66 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
As the global, national and local economies shift, there is a significant and rapidly growing
gap between workforce supply & demand — skill sets as well as sheer number. This is both
an enormous challenge and an opportunity for Southern Illinois!
Chapter 1:
State, National & Global Trends
1.06 Manpower & Immigration
— 67 —
©2007 ViTAL Economy, Inc.
Manpower & Immigration Overview
1.06 Manpower & Immigration

Growth of regional economies will be more negatively impacted by long-term
manpower and immigration trends than the Ten Flatteners — regional economy
strategies must deal with these trends or economic growth will slow further

Workforce Trends to watch:




By 2010 there will be 150 million (M) jobs in the U.S. with only 140M people to fill
them — hence the 10M worker shortage
U.S. workforce grew at rate of 30% in 1970’s, at 12% in 1990’s, now slowing to 3%
and leveling off by 2010
Ever increasing need for skilled workers — U.S. businesses are requiring higher
levels of education, but workforce is projected to have declining skills
34% of adult workers in U.S. now have a bachelor’s degree or better, up from 29%
ten years ago — however, percentage of 25-29 year olds with a bachelors degree
or better has actually fallen in the last ten years

Since 1970, 90% of the growth in the U.S. workforce has been filled by non-U.S.born workers

Human Capital is replacing Physical and Financial Capital as the most important
“capital resource”
Sources: Varied (see the rest of this Section)
— 68 —
©2007 ViTAL Economy, Inc.
Talent Supply/Demand Disconnect
1.06 Manpower & Immigration
$/hour & skills
Developed Economies Labor Market
Lack of resources
creates tension on the
high-skills market
Over-supply of low-skills
resources creates
unemployment
Pronounced oversupply of low-skilled
labor
Supply of workers
Men
Women
Number of people of
available/required by skill level
Demand for workers
There is an oversupply of low-skill workers and shortage of higher skilled workers
Source: Global Manpower Report, 2005
— 69 —
©2007 ViTAL Economy, Inc.
Aging Workforce Effect on U.S.
1.06 Manpower & Immigration

Since June of 2006 an average of 15,600 workers retire everyday








Versus 300 per day in 1972
Number has grown 6-fold since 1991 (2,600/day)
Aging Baby Boomers — 77 million workers due to retire by 2010
Boomers make up about 33% of U.S. workforce today
Through 2021 there will be no increase in native-born workers in the
prime age category of 25-54 year olds — any growth in the labor force
will come from older workers and immigrants
By 2010, 35-44 age cohort in workforce declines by 19%…those
typically moving into upper management
50% of the federal civilian workforce is eligible to retire by 2011
As the U.S. workforce grows older and ultimately retires, the loss of
institutional knowledge will be immeasurable
Source: Conference Board and Forbes, Aspen Institute, National Governor’s Association, BLS; AFT
— 70 —
©2007 ViTAL Economy, Inc.
U.S. Losing Competition for Skilled Immigrants
1.06 Manpower & Immigration
The new international labor market:
OECD countries compete for the
world’s most skilled immigrants, people
with a university degree or more
education or training


In 2000, the U.S. had 12.5 million
immigrants with a high school education
or higher, the highest total in the OECD
But measured by net “brain gain, ”
skilled immigrants versus skilled
expatriates compared to working age
population, Australia and Canada out
compete the U.S.


Net Brain Gain, 2000
U.S. = Half of Australia and Canada
14
12
Percentage

10
8
6
4
2
For example, a high proportion of
Australian doctors are now foreign born
0
And the U.S. is increasingly restricting
young graduate student entries
Australia
Source: Docquier & Marfouk from David Bartlett, “U.S.
Immigration Policy in Global Perspective”
— 71 —
Canada
U.S.
Note: Net Brain Gain is foreign skilled
workers minus skilled expatriates as a
% of working age population
©2007 ViTAL Economy, Inc.
Manpower & Immigration: Implications
1.06 Manpower & Immigration

U.S. not producing or retaining workforce necessary for growth





Any region that can successfully produce a globally competitive workforce, will secure
the ultimate competitive advantage for the next three decades



Regional economies who welcome non-U.S.-born workers will be better positioned to benefit
from these trends
U.S. not effectively leveraging its strong workforce development assets to positively respond to
trends
Educational attainment not keeping pace with job trend requirements
U.S. supplying workers with qualifications that address declining demand for low skill jobs
rather than serving the expanding demand for higher skill workers
Training and education are a key workforce priority
Skills gap range from basic (literacy, numeracy) to complex (computer sciences & application
knowledge)
The U.S. economy will require an influx of immigrants to meet industry demands or the
economy will atrophy as a consequence



Many of these workforce immigrants will require training due to lower levels of education and
skills
This will require a multi-cultural understanding and management skills
Regional economies who welcome non-U.S.-born workers will be better positioned to benefit
from these trends
— 72 —
©2007 ViTAL Economy, Inc.
Manpower & Immigration: Opportunities
1.06 Manpower & Immigration

Position SI as a national workforce development center for addressing the ten million
skilled worker shortfall by 2010

Leverage 60+ years of experience at SIU with over 100 cultures to create an attractive
environment for retaining and growing immigrant workforce

Improve workforce development value chain alignment and strategies (K-12, Higher
Education, Workforce Development Centers, and industry etc.)

Establish measurable strategic goals for raising educational attainment levels of SI and
SWI within next 10 years and link this with economic development initiatives to gain
traction & funding

Embrace workers in their 50’s and 60’s now through creative approaches that move
them from a mindset of wanting “freedom from work” to a desire for the “freedom to
work”

Promote inclusiveness by tapping into underemployed and unemployed non-traditional
labor sources

Reverse the brain drain of 20-29 year olds in SI and tap into the thousands of SIU
International students who would like to stay in SI, but see no opportunity

Emphasize KBE skill focus of current and future workforce
In the next two years CHINA will graduate more MBAs than the U.S.
currently has enrolled students in all our colleges today - USA Today
— 73 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
There is a coming tidal wave of retirees as Baby Boomers turn 65. Those
communities that position themselves as an attractive retirement setting with all the
commensurate amenities will capture a big share of this future reality.
Chapter 1:
State, National & Global Trends
1.07 Aging Population
— 74 —
©2007 ViTAL Economy, Inc.
Aging Population: Overview
1.07 Aging Population

In addition to the significant impact that aging has on the U.S. workforce shown in the
previous Sub-Chapter 1.06, these same shifts will create enormous challenges as well
as opportunities for communities across the country

Trends to watch include:

As noted in Section 1.06:


Since June of 2006 an average of 15,600 workers retire everyday

Versus 300 per day in 1972

Number has grown 6-fold since 1991 (2,600/day)
Aging Baby Boomers — 77 million workers due to retire between 2010 and 2030

Retirees are attracted to warmer climates with active-lifestyle amenities and lower cost-of-living

Retirees are also more attracted to graduated-care facilities, ranging from independent- to
assisted-living with a variety of supportive healthcare and other services all under one roof

An increasing number of retirement-age folks are electing to stay employed (full-time or parttime), in part to continue receiving healthcare benefits and supplemental income

Over the next ten years, for the first time in U.S. history, population growth will be driven not by
increase in birth rate, but by a decrease in mortality rate

Baby Boomers spend more than any other age group on travel, recreation and personal care
products
Sources: Varied (see the rest of this Section)
— 75 —
©2007 ViTAL Economy, Inc.
From Birth to Retirement
1.07 Aging Population
— 76 —
©2007 ViTAL Economy, Inc.
Some Midwest Counties are Retirement Destinations
1.07 Aging Population
Rural Counties are Losing or Gaining 65+ population
Counties with over 18% 65+ years old population, 2000

Retiree-age
newcomers to
non-metro areas
trend to be
better educated,
wealthier, and
more likely to be
married

They tend to
relocate in nonmetro areas
adjacent to large
cities with
services
Some Midwest counties
are retirement destinations
— 77 —
©2007 ViTAL Economy, Inc.
Other States Vying for Seniors
1.07 Aging Population





Nevada's elderly population grew by more than 70% during the 1990s
Senior growth in Alaska, Arizona, New Mexico, Hawaii, Utah and
Colorado all exceeded 25%
Florida, South Carolina, Texas, North Carolina and Georgia all
experienced senior growth rates during the ‘90s of 19% or greater
These states are attractive to people of retirement age because of
their wide array of amenities, such as warmer climates and lower
living costs
Many states in the South have made concerted efforts to lure seniors
who, at least in their immediate post-retirement years, tend to
contribute much more to the local economies and tax bases than they
cost

Many well-off ‘yuppie elderly’ 65-74 years old have considerable
disposable income, good health and remain in married-couple
households
Source: William H. Frey analysis of 2000 U.S. Census
— 78 —
©2007 ViTAL Economy, Inc.
2007: Baby Boomers Turning 65 in IL & SI
1.07 Aging Population

2010 is the year Baby Boomers
start turning 65 — representing the
end of the Great Depression

The population 65+ has declined
since 1990, but will now begin to
quickly increase
Proportion of Population
Represented by 65+ Age Segment
20%
18%
16%
14%
12%
10%

8%
SI’s 65+ population is about 6%
higher than IL as a whole
6%
4%

2%
0%
1990
2000
2006
SI
2010
2020
IL
SI may see an out-migration of the
65+ population due to a lack of
services available that this
segment demands
Source: U.S. Census Bureau
— 79 —
©2007 ViTAL Economy, Inc.
How Retirees Impact the Economy (1 of 2)
1.07 Aging Population
77 million Americans were 50 or older (28% of the U.S. population) — June 2006
Seniors represent a disproportionately
high % of purchases:
Taking advantage of this economic windfall requires a region
to craft specific senior-living economic strategies
Source: mynextphase.com: Retirement Facts & Trends”
— 80 —
©2007 ViTAL Economy, Inc.
How Retirees Impact the Economy (1 of 2)
1.07 Aging Population


Starting in 2010:

Boomers have 70% of the nation's net-worth and control 50% of all household
discretionary spending

They will spend $2 trillion annually on consumer goods and services

Adults ages 45+ will out spend younger adults by $1 trillion annually
Boomers have much more education than prior generations equals much
higher earning power


Will have a continued attachment to the workforce during their retirement years
Boomers have been more mobile all of their life, 60+ population migration
may increase from 4.5% to 20%

Boomers have a strong preference for small rural communities offering
intergenerational social and recreational activities

Rural areas with retirement communities grew 16% in 1980's versus 4% for all
other rural areas

Rural retirement destinations versus all rural areas between 1980-1990 increased
median household income 4.2% vs 0.6%
Source: "How the Retirement of the Baby Boomers Will Affect You, Part II, BBRED Georgia Southern University
— 81 —
©2007 ViTAL Economy, Inc.
Senior Trends
1.07 Aging Population

Growing trend of seniors moving to retirement communities affiliated
with colleges

For many people, living on or near a campus is better than a condo on
the fifth green

Senior housing communities of the future will have majority of residents
with higher education degrees
They will seek communities with college or universities offering life-long
learning programs


Affluent seniors, the Baby Boomer Generation, will soon inherit the
largest transfer of Generational Wealth


The Silent Generation, aged 74-84, will soon pass on their wealth (est.
$71 trillion) to the Boomers
Visionary communities are already crafting senior living strategies to
attract affluent seniors
Source: Threshold Development, Retirement Living Information Center and The Great American Wealth Transfer...Fact or Fiction?
The Sharpe Group 2007
— 82 —
©2007 ViTAL Economy, Inc.
Future Housing for Retirees
1.07 Aging Population

Results from the 2004 Del Webb Baby Boomer Survey: “Fast Facts
About Housing”

36% will move or plan to move when they become empty nesters; onethird of whom will move more than 3 hrs away

When they retire, 55% say they will move; 51% of whom more than 3 hrs
away

26% will consider purchasing a home in an age-qualified Active Adult
Community (versus 51% unsure and 24% who said no)

Of those purchasing a home, 30% prefer an Urban location, 29% want a
community that maximizes local natural benefits; 22% like an active adult
community located within a multi-generational development

Boomers are more than twice as likely as those aged 59-70 to prefer an Active
Adult Community that is part of a multi-generational neighborhood
Source: mynextphase.com: Retirement Facts & Trends”
— 83 —
©2007 ViTAL Economy, Inc.
Big Shifts in Senior Living Preferences
1.07 Aging Population


Mar-Aug ‘07 Survey sponsored by ERA Research; conducted by Opinion
Research

75% of 50+ men & women: want to be near family when considering their next move

20% are thinking about moving in next 5 years; 65% prefer a single family home

70% of those considering an active adult lifestyle community: being near friends &
family was a priority

6% (versus 2% last year) would consider moving to an active adult community
National Investment Center for Seniors Housing & Care Industry “2007 Edition
of the National Housing Survey of Adults Age 55+”

12% (versus 7% in 1998) indicated they lived in housing** planned for 55+ age group

19% of 75+ years of age households lived in age qualified communities in 2007

37% of 60+households (versus 18% in 1998) were willing to consider age qualified
housing

9% of 60+ households (versus 4% in 1998) had decided to move to an age qualified
property in the future
**Age-qualified housing refers to active adult communities, independent living, assisted living,
continuing care retirement communities (CCRCs), 55+ apartments and rent-subsidized housing
— 84 —
©2007 ViTAL Economy, Inc.
Aging Population: Implications
1.07 Aging Population


The aging population will create new needs and pressures for nutrition,
healthcare, and housing on a vast scale

Communities must prepare for the onslaught

Those communities that proactively position themselves and offer a combined
package of life-style, reasonable cost-of-living, attractive facilities and other
amenities will benefit from an influx of wealth and community revitalization
Communities with growing % of elderly population need to have a proactive
strategy with this population to provide these services & related infrastructure:

Arts & Culture

Wealth management services

Retail services

Recreation — amenities for active seniors

Tourism

Independent living through graduated care

Lifelong education

Catering to families with children & grandchildren (visiting & living)
— 85 —
©2007 ViTAL Economy, Inc.
Aging Population: Opportunities
1.07 Aging Population




SI amenity & location assets are of keen interest to 30% of 77 million Baby Boomers

SI land costs and underdeveloped land areas offer opportunities for senior living communities

Emerging opportunities for high-end RV developments and active mature tourists

Active lifestyle amenities of golf, fishing, hiking, birding across SI will receive more support
The purchasing power of future seniors is an opportunity for many SI business sectors

Wealth management services and real estate development will expand

Lifelong learning, performing and creative arts sectors will be in demand

Boutique shopping villages and unique restaurant venues will be desired
Aging, financially-independent retirees will have major implications for healthcare

Large increase in demand for specialty medical services for aging populations

Opportunities to incubate and test new services, medicines and devices for aging population

Expanded and changed critical skills requirements for professionals and para-professionals
Communities with pro-active senior living strategies benefit financially

Communities that end up reacting to senior living trends suffer financially

Now is the time for SI to get in front of and benefit from this on coming economic
tsunami
Every day, for the next 12 years: 18,000 USA workers will retire - U.S. News & World Report
— 86 —
©2007 ViTAL Economy, Inc.
Southern Illinois — “Garden of the Gods”
The southern 16 counties are only getting 1.5% of Illinois tourism revenue, yet have 2.9% of the
population (SI has 3.3%) and most of the Tourism assets! With over 11 million people within a 4hour drive of SI, there is a huge opportunity to capture 2-to-3 times more tourism dollars.
Chapter 1:
State, National & Global Trends
1.08 Tourism
— 87 —
©2007 ViTAL Economy, Inc.
Tourism — Overview
1.08 Tourism

An aging & more mobile population travels more for experience-based
pleasure

Trends to watch for include:

Adventure: Half of U.S. adults have taken an adventure tourism trip in the last five years —
31 million adults engaged in hard adventure activities: whitewater rafting & mountain biking

Educational Travel: The learning aspect of travel is important to U.S. travelers, with 20%
(30.2 million adults) having taken an educational trip to learn or improve a skill, sport or hobby
in the past three years

The Internet & online services are very popular with travelers, who tend to be quite computer
savvy — 65% of the 98.3 million travelers used the Internet to make travel plans in 2004


National/State Park Travel: American travelers love the great outdoors — 40 % of U.S. adults
in 2003 have visited a national park at least once while on a trip of 50 miles or more away from
home in the past five years
Historical Places/Museums are popular attractions for travelers within the U.S.



58% of U.S. adult travelers included an historic activity or event on a trip during the past year:
84.7 million U.S. adults
Their households generated 143.5 million person-trips including a visit to historical places or museums in
2002
41% of past-year travelers say they visited a designated historic site, such as a building, landmark,
home, or monument during their trip; 28% visited a designated historic community or town
Sources: Varied (see the rest of this Section)
— 88 —
©2007 ViTAL Economy, Inc.
Tourism Trends & Impact
1.08 Tourism
Trends:
• More local car trips two-days from home
• 58% of adult travelers trips will include historical and educational site visit
• 65% will book trips on line
• 23% of Boomers seek adventure trips
• 55% of group travelers are going to family reunions or functions
• Tourism spending will increase 15% from 2006 to 2010 to $821 billion
• 89% of travelers will be under 55 years old
Impact:
• 7.5 million Jobs in travel industry in the U.S.
• $700B will be spent in 2008
• Great Lakes region overnight stays to increase 3.5 to 4.3% annually
• Non profit Arts and cultural activities generate $166.2 billion/year in revenue
• Arts employs 5.7 million in full-time jobs
• Arts events often return 299-387% on investment costs to local cities
Source: Tourism Industry Association; Arts & Prosperity II
— 89 —
©2007 ViTAL Economy, Inc.
New Kinds of Group Travel
1.08 Tourism

Median spending for group gatherings is $1,800 (not including
corporate meetings)

On average, 19 individuals attend a gathering and that event typically
lasts 3.5 days

55% of group travelers are traveling for a family reunion or function

Younger respondents (21-34) are more likely to plan friend reunions,
school group/class reunions, bachelor/bachelorette parties, and
concerts or other entertainment/spectator sport events

Travelers making up the groups and meetings segment include family
reunions, sports outings (ski, golf, tennis, etc.), friends' reunions
(mancations, girlfriend getaways, fraternity/sorority, etc.), weddings,
association/community groups, religious events and corporate
meetings
Source: PhoCusWright, Inc. Dec. 2006
— 90 —
©2007 ViTAL Economy, Inc.
World Tourism to Double by 2020:
Annual international tourism arrivals (000’s)
1,800
1,600
1,400
Spending (billions of $s)
The Tourism Market is Global
1.08 Tourism
U.S. #1 Destination for Spending, 2006
(by Country of Origin)
100
80
60
40
20
0
U.S.
Spain
France
Italy
China
1,200
Leisure and Business Travel Increasing;
VFR Declining in Share
1,000
800
600
Other 6%
400
Business
200
0
1995
16%
2010
2020
6.5% AAGR
Visiting
Family and
Relatives
(VFR)
Average Annual Growth Rate
Source: World Tourism Organization
— 91 —
Leisure,
Recreation
& Holidays
51%
27%
©2007 ViTAL Economy, Inc.
1.08 Tourism
International Visitors = High Spend Rates:
Tourism Revenue Opportunity
Average Japanese visitor
spends $2,900/ trip
Total visits = 3.9 million
Average Canadian visitor spends $695 / trip
Total visits to U.S. = 15 million
Average U.K. visitor
spends $2,500/ trip
Total visits = 4.3 million
Average German visitor
spends $2,200/ trip
Total visits = 1.4 million
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
European Visitors:
• 45% visit historical sites
• 27% visit small towns
• 27% see art galleries &
museums
• 24% tour countryside
The U.S. receives almost 50 million international tourist visits per year: projected to
increase 20% in five years
— 92 —
©2007 ViTAL Economy, Inc.
All Tourism Spending in U.S.
to Increase 51% Over 10 Years
1.08 Tourism
Billions
$900
$821.0
$791.2
$800
$762.9
$733.9
$699.9
$700
$653.8
$606.9
$585.8
$600
$555.7 $544.9 $560.1
$546.7
$500
$400
$300
1999
2000
2001
2002
2003
2004
2005
2006
2007f
2008f
2009f
2010f
f = forecast
Source: Travel Industry Association; U.S. Department of Commerce, Office of Travel & Tourism Industries; Global Insight
©2007 ViTAL Economy, Inc.
The Tourism Customer
1.08 Tourism
Demographic Profile of Adults Who
Book Travel on the Internet
(24.7 million U.S. Adults)
GENDER
Male
60%
Female
40%
The demographics of adults
booking online show high
disposable income and an
active age range
HOUSEHOLD INCOME
Under $50,000
32%
$50,000 - $74,999
27%
$75,000 - $99,999
17%
$100,000+
24%
Average Income
$89,100
U.S. median household income
was $46,326 in 2005
AGE
18-34
41%
35-54
48%
55+
11%
89% of the travelers are under
55 years old
Source: Travelers’ Use of the Internet, 2000 Edition
Travel Industry Association of America
— 94 —
©2007 ViTAL Economy, Inc.
Tourism Impacts: SI Growth Potential
1.08 Tourism

Tourism is big business in the U.S.





The SI tourism industry has far less
impact than its U.S. and IL impacts
Annual spending per employee




7.5M jobs are generated by travel
Travelers spend $700B annually
Travel generated a $7.2B trade
surplus in 2006
U.S.: $93,000
IL: $87,000
SI: $73,000
U.S. Economic Impact, 2006
Expenditures
$70B
Employment
7.5 Million jobs
Payroll
$17B
Trade Surplus
$7.B
Annual Spending by Tourists
Per Tourism Job, 2006
— SI behind U.S. and IL —
The U.S. to SI spending gap is
$20,000, or 27%
$100,000
Increased Spending per employee
significant tourism growth opportunity
$90,000
US
$80,000
IL
$70,000
SI
$60,000
$50,000
Source: TIA
— 95 —
©2007 ViTAL Economy, Inc.
1.08 Tourism
Location, Location, Location….
Grey Area Shows 4-hour driving
time from Harrisburg
Population within 4-hour drive:
11,303,789
What does it mean?

Most vacations are now
short— proximity and
ease of access is key

Nearby centers include:

Indianapolis, IN

St. Louis, MO

Memphis, TN

Louisville, KY

Nashville, TN
Potential Gateway
To region
Source: Map Point and Federal Aviation Administration
— 96 —
©2007 ViTAL Economy, Inc.
Online Bookings Surpasses Off-Line Bookings in 2007
1.08 Tourism

54% of all U.S booking will be done on the Internet in 2007

U.S represented 33% of total online and offline bookings (North
America, Western Europe, Asia Pacific), but 60% of all online bookings

Hotels are the fasting growing online segment, surpassing airline,
which had been the fastest prior to 2006

Be aware of Travel 2.0 — the industry’s use of Web 2.0 practices will
empower the online consumer; tools will include:

Tagging

Social content

Social networking

Blogging

Virtual communities people point to as examples of Web 2.0
Source: PhoCusWright, Inc. Dec. 2006
— 97 —
©2007 ViTAL Economy, Inc.
Arts & Culture Economic Impact
1.08 Tourism
$166.2 billion in total economic activity
has a significant national impact
Full-Time Equivalent Jobs
Household Income
5.7 million
$104.2 billion
Local Government Tax Revenues
$7.9 billion
State Government Tax Revenues
$9.1 billion
Federal Income Tax Revenues
$12.6 billion
Focusing on Arts & Culture gives SI a double win — tourism revenues and
helping build a more attractive Climate of Innovation
Source: Arts & Economic Prosperity III: The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences
— 98 —
©2007 ViTAL Economy, Inc.
Arts & Culture Economic Impact
1.08 Tourism
Recent results of San Jose CA festivals in 2006
— 99 —
©2007 ViTAL Economy, Inc.
Trails = Recreational Tourism
1.08 Tourism
Heritage Rail Trail County Park
• 21 miles in length running from the Mason Dixon Line to the York, Pennsylvania Historic District
• 64% of the users were from York County, with a third of the users travel more that 20mi to use the
trail
• Biking is the predominate form of recreation on the trail, 80%
• 72% stated that “hard goods”, mostly biking related, were purchased in the area in the past year
($367 average spending)
Nature trails and
biking paths can
be major
attractions to
areas resulting
in economic
benefits
• 2/3 state that they purchased “soft goods” during each use ($8.33)
• 2001 annual usage 247,000 with a population of York County, 381,000
• Expenditures related to trail activities = $90 million
Virginia Creeper Trail
• 34-mile trail near Damascus, Virginia. Damascus is know as “Trail Town, USA” with the
convergence of five major trails touching the Jefferson National Forest and Mount Rogers
National Recreation Area
• Winter visitation projections = 24,000 and Summer visitations projections = 106,500
• 112,400 person trips per year
• 85% of all visits are by day users, 45% of the users are non-local
• The average distance traveled to utilize the trail was 154mi.
• Non-local day users expenditures per trip = $103
• Non-local overnight users expenditures = $120
Source: National
Trails Partnership
• Total economic impact: Day users = $23,600/per 1000 trips. Overnight users $114,400/per 1000
trips
— 100 —
©2007 ViTAL Economy, Inc.
SI Tourism Growth Sectors: Assessment
1.08 Tourism
Growth Sectors
Rating
Assessment Rationale
Heritage Tourism
SI is a historic region but lacks a name (e.g.
Gettysburg) which attracts national attention
Festival Tourism
The State Fair and festivals in the region are
developed but are individual community focused
Hard Outdoor Adventure
Attractive to Generation-Xers; mountain biking the
only hard adventure opportunity.
Soft Outdoor Adventure
SI offers a wide range of soft outdoor adventures
now – hiking, camping, birding
Wine & Culinary
SI has a growing wine and culinary sector, but
lacks national recognition
Hunting and Fishing
Region offers a wide variety of hunting and fishing
experiences, including Sparta Shooting Complex
and Rend Lake
= Weak to None
Source: InterVISTAS
= Improving
= Average
— 101 —
= Good
= Strong
©2007 ViTAL Economy, Inc.
SI Tourism Infrastructure: Assessment
1.08 Tourism
Infrastructure
Rating
Assessment Rationale
Regional Internet Portal
No easily discovered, one-stop portal for regional
tourism information and bookings exists
Accommodations
Limited number of rooms, beds and campsites
with infrastructure in SI, predominant in NorthSouth
Attractions
Few attractions with recognition outside the region
Transportation
Lack of scheduled air travel into region inhibits
national/international tourism potential
Workforce
Small tourism workforce with relatively low pay.
Relatively little 4-season business
Food Services
Local wineries, a few award winning BBQ &
specialty restaurants offer culinary destinations
Source: InterVISTAS
— 102 —
©2007 ViTAL Economy, Inc.
SI Tourism Opportunity
1.08 Tourism
SI Tourism Expenditures
7.6%
6.4%
24.0%
23.1%
Projections:
1.
Overall SI tourism industry increases by $300$400M/year
2.
SI tourism employment reaches Illinois state
levels of 4.4% of total employment = 9,121
employment with an increase of over 3,500
3.
SI tourism expenditures per job reach Illinois
state levels of $87,000 per job
21.6%
17.3%
Public Transportation
Auto Transportation
Lodging
Foodservice
Entertainment
General Retail
Specific SI Tourism Opportunities
Expenditure Categories
Transportation
Lodging
New Facilities and Business Opportunities
50+ transportation companies, major increase in air-traffic, 100’s of charters
Estimate thirteen 80-room hotels
Food Service
25+ restaurants and specialty food service outlets
Entertainment
35+ venues
General Retail
25+ retail outlets, especially specialty goods
Other Business
100’s of businesses will experience growth and expansion opportunities
— 103 —
©2007 ViTAL Economy, Inc.
Tourism: Implications
1.08 Tourism

Visitors are seeking new and adventurous/educational experiences
largely within the U.S.; foreign travel to the U.S. is also growing

Niche markets like birding, culinary travelers, mountain bikers, and
other “theme-based” packages are high growth markets

Communities/regions with user-friendly and integrated online
presence have a competitive advantage over those that do not

Numerous tourism regions are branding themselves in a unique
fashion — only the ones that deliver authentic experiences that lives
up to the brand, will achieve long-term benefits

Major investment needed in tourism infrastructure and customer
service resources, such as regional airports, new hotels, restaurants,
etc., to support increased overnight-tourists
Rural economies successful at growing their tourism business move
to a “four-season” industry with packages lifestyle offerings

— 104 —
©2007 ViTAL Economy, Inc.
Tourism: Opportunities
1.08 Tourism


Catering to international visitors
— seeking quality experiences,
accommodations and meals

Integrated “theme packages”
across the 20 counties that
leverages the history, culture,
mild-climate, and natural beauty

Access greater overnight stays

Southern Illinois already has
several notable successes:
TIA projected new tourism
business areas

Generation-Xers & Millennials

Travelers with disabilities

Girlfriend getaways

Mancations

Destination weddings

Procreation vacations

Babymoons

Medical/life-enhancement travel

Wine Trail

Voluntourism

B&B Association in Southeast

Pet travel

Encampment at Ft. Massac

Space tourism

Bocce ball in Herrin

Culinary travel

World Shooting Complex

Higher-education travel

Gold Trails
— 105 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
As more and more global opportunities open up, logistics, transportation and
distribution increase in importance — Southern Illinois is truly at the
crossroads of virtually all modalities.
Chapter 1:
State, National & Global Trends
1.09 Logistics, Transportation & Distribution
— 106 —
©2007 ViTAL Economy, Inc.
Logistics, Transportation & Distribution: Overview
1.09 Logistics, Transportation & Distribution


Globalization and the Ten Flatteners open substantial doorways
Trends to watch for include:




Logistics and transportation is an exploding global market opportunity due
to shifts in supply-chain management
Work has begun on doubling the capacity of the Panama Canal — this
$5.5B project will provide access to wider ships to the East Coast and
Texas/Louisiana harbors to feed the Trans-Mexican-Canadian
superhighway with Chinese goods
Due to capacity constraints, security risks and weather vulnerability at
North American coastal ports, trans-loading/intermodal facilities enable
the effective use of smaller ships via inland waterways
The NAFTA Super-highway is a venture unlike any previous highway
construction project — it is actually a daisy chain of dozens of corridors
and coordinated projects that are expected to stretch out for several
decades, cost $100’s billions and end up radically reconfiguring not only
the physical landscape of these U.S., but our political and economic
landscapes as well — Kelly Taylor, 8/06 “New American”
Sources: Varied (see the rest of this Section); US Department of Commerce, Menlo Worldwide, Plunkett Research, Ltd.
— 107 —
©2007 ViTAL Economy, Inc.
Key Transportation Trends
1.09 Logistics, Transportation & Distribution


Transportation is one of the world's largest industries — sectors
range from taxis to trucks to airplanes, trains, ships, barges, pipelines,
warehouses and logistics services
In 2006, the U.S. Transportation Industry was about $1.6 trillion




Includes for-hire and not for-hire sectors, support & repair
Transportation directly employs about 4.5 million Americans — >10% of
U.S. economy
In the U.S. alone, total freight shipment volumes are expected to
increase by 70% between 1998 and 2020
Texas A&M University, analyzed traffic patterns and delays in 85 U.S.
major metropolitan areas


Total annual cost of traffic congestion in these cities was $63 billion
3.7 billion hours of traffic delay and 2.3 billion gallons of fuel consumed by
delays
Well-positioned rural regions have a strategic advantage
in becoming a “traffic-free” hub
Source: U.S. Department of Transportation
— 108 —
©2007 ViTAL Economy, Inc.
The World and Southern Illinois: Rail
1.09 Logistics, Transportation & Distribution
From a regional network
…
… to a North American one
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
•
•
When originally built in 1850’s, it’s
goal was to connect Chicago with
the Mississippi
Modern rail is truly transcontinental, triangulating major
seaports
SI is now the center of a rail network stretching to the Pacific, Atlantic and Gulf of Mexico
— 109 —
©2007 ViTAL Economy, Inc.
U.S. Sea Container Traffic:Base of Globalization
1.09 Logistics, Transportation & Distribution




Six-fold increase in U.S. container traffic since 1980
By 2010, containerization will be 50% greater than 2005 rates and by 2020, they will
more than double
This indicates strong growth in international trade
Container traffic already exceeds port and rail carrier capacity
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
Over 10 million TEUs (20 foot-equivalent-units), are annually shipped back
to Asia empty — a significant opportunity for SI to fill
Source: Cambridge Systematics
— 110 —
©2007 ViTAL Economy, Inc.
Container-On-Barge via Inland Waterways
1.09 Logistics, Transportation & Distribution

Increasing sea container numbers, lack
of U.S. truckers, cost of fuel among the
factors driving containers to barges

This creates SI Mississippi and Ohio
River terminal opportunities

Container on barge is developing on
the Mississippi (Houston-Memphis) and
will expand

SI centrally located on
the Mississippi & Ohio
River Systems

Barges are less expensive because a
barge can move 45 full-sized sea
containers
These rivers have been key
transportation systems for over 300
years
A ton of cargo can be moved 514 miles by barge on a gallon of fuel as compared to
moving that same ton only 60 miles by truck or 202 miles by train
Source: Transportation for Illinois Coalition Press Release, Investment needed in Upper Mississippi-Illinois waterway for economic
growth and jobs. September 15, 2006
— 111 —
©2007 ViTAL Economy, Inc.
The Rhine as a Comparison
1.09 Logistics, Transportation & Distribution
Like the Mississippi, the Rhine
stretches from ocean ports to the
Continent’s interior

Rhine River container traffic
increased from 10,000 units in
1975 to 2.3 million units in 2003

Container barges travel as far
as Switzerland

Cost-of-labor favors barge over
truck; albeit somewhat slower
The Swiss Rhine Container Terminal
— 112 —
©2007 ViTAL Economy, Inc.
SI Has Significant Aviation Infrastructure
1.09 Logistics, Transportation & Distribution

Southern Illinois aviation infrastructure includes:

Three airports with instrument landing systems and runways over 6,000 ft

Nationally acknowledged SIU School of Transportation

Including Aviation Management and Technology

Planned new Transportation Education Centre (TEC) at Southern Illinois Airport

U.S. Transportation Command logistics specialist pool at Scott Air Force Base, an
SI neighbor — major “information exhaust” opportunity
SI Airports have capacity to accept large, jet aircraft & air-taxi service
Airport
Largest
Runway
ILS
(Instrument
Landing System)
Airframe/
Power Plant
Services
Scheduled
Passenger
Services
Mt. Vernon
6500 x 150 ft
YES
YES
Not now
Southern Illinois
6500 x 100 ft
YES
YES
Not now
Williamson County
8000 x 150 ft
YES
YES
YES
Two major SI airports located near interstate highway and rail
junctions, create the possibility of intermodal freight
Source: airnav.com
— 113 —
©2007 ViTAL Economy, Inc.
Warehousing & Distribution: Trade Growth Area
1.09 Logistics, Transportation & Distribution

Transportation and warehousing
continues to grow, supporting
international trade

Distribution Centre services include:




Between 2004 and 2014, the U.S.
economy will add half a million
transportation jobs





The number of distribution centers
is increasing




A typical center has over
200,000 square feet, part of an
international chain, focused on
key market sectors, and offers
value-added services






Pick & pack
Consolidation
Customer system order processing
Returns processing
Quality inspection
Assembly
Damaged returns management
Exporting packing & order processing
Bar code processing
Labeling
EDI services
Kit assembly
Sub-assembly
Build to order
Facility management
Transportation management
SI is situated in the population centre of the U.S., near where FedEx and UPS both
decided to establish their national hubs — Distribution is an investment opportunity
Source: U.S. Department of Transportation
— 114 —
©2007 ViTAL Economy, Inc.
Logistics: Unmet Opportunity
1.09 Logistics, Transportation & Distribution
Illinois in Relationship to Nearby 50 Fastest Growing U.S. Cities

Growth of U.S.
population for 2006
= 0.9%

California, Texas,
Florida contained
most of the fastest
growing centers in
the U.S.

Several centers
within a day’s drive
of SI included in 50
fastest-growing
centers for 20002006 at growth rates
of 12% to 98% (e.g.,
Red Stars)
Source: U.S. Census Bureau and Map Point
Note: Map shows calculated 8 hour driving time from SI
— 115 —
©2007 ViTAL Economy, Inc.
Logistics, Transportation & Distribution: Implications
1.09 Logistics, Transportation & Distribution


Dramatic reductions in shipping costs via containerization has
enabled globalization of manufacturing
Distribution is conducted close to end markets — Southern Illinois
is near the population center of the U.S.


Distribution requires good rail and truck connections



124 milion people reachable within 12-hour drive
Trade and distribution is projected to grow rapidly
Will grow rapidly in the Midwest because of its central location
Southern Illinois sits on the ultimate U.S. logistics sweet-spot, the
intersection of major North-South and East-West trade routes:

Will these bypass SI or will the Region be a substantial player?
Through CN (was Canadian Northern RR), SI can potentially
interact with three U.S. and two Canadian coasts
SI aviation assets have the potential of serving as a niche market
player within a mid-America Intermodal Logistics strategy


— 116 —
©2007 ViTAL Economy, Inc.
Logistics, Transportation & Distribution: Opportunities
1.09 Logistics, Transportation & Distribution

Globalization has increased importance of transportation and logistics

SI is currently below national and state averages

CN has transformed the Illinois Central from a North-South operation to a strong
East-West orientation serving three North American coasts via one railroad


SI has strategic geographic location especially to Eastern and Central U.S.



Distribution centers favor center-of-population location
Multimodal transport: Interstate/Rail/Barge
Opportunities:





SI global reach potential has significantly increased
For multimodal/transload facilities — address 10 million TEU/year East-West deficit
To attract distribution centers
Range in complexity from simple distribution, to assembly and customization
Explore niche-market opportunities for aviation assets
With the dramatic increase in the cost of fuel:



Waterborne traffic becoming increasingly more attractive
Key to keeping Illinois grains competitive in the world market
Inland waterways re-opening as a major logics solution for East-West port congestion

SI infrastructure contains HUB facilities for ALL forms of transportation and distribution
— 117 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
With global demand for energy ever on the rise, and renewable/alternative
energy sources playing an increasing but still minor role, U.S. coal —
especially clean-coal — becomes increasingly important.
Chapter 1:
State, National & Global Trends
1.10 Energy
— 118 —
©2007 ViTAL Economy, Inc.
Energy — Overview
1.10 Energy


The World’s and U.S. appetites for energy continues to grow in all
forms, and without a major technological breakthrough, carbon based
sources will continue to supply the vast majority of raw material
Trends to watch include:

70% of world energy demand is specifically tied to economic growth in
developing countries

If the price of crude oil stabilizes at $75 or greater, new technologies and
alternative sources of energy will emerge and impact markets

U.S pubic policy decisions have the ability to influence markets quickly
and direct R&D investments

Regions that can balance their consumption of resources with economic
growth will have a competitive advantage in the 21st century economy

U.S. coal demand production grew only 5.4% between 2000 & 2005;
while prices went up 32.5%
Source: EIA (Energy Information Administration)
— 119 —
©2007 ViTAL Economy, Inc.
Global Energy Demand Ever Increasing
1.10 Energy
Projected World Energy Consumption in
Quadrillion BTUs
800
700
600
500
400
300
200
100
0
2004

Global energy demand is projected
to increase over 50% by 2030, an
average annual growth rate of 1.6%
70% of the increase coming from
developing countries with China alone
accounting for 30%


2010
Developed
2020
2030
Developing
Coal will see the largest increase in
demand primarily for electricity
production — China and India will
account for 80% of the demand
Source: World Energy Outlook 2006
One quadrillion BTUs is equivalent to two million barrels oil per day
— 120 —

Fossil fuels will remain the
dominate fuel source by 2030, 83%
of the increase by 2030
The world’s growing hunger for
energy will require massive capital
investment; $20 trillion by 2030
(2005 dollars)
Power sector will require 56% of the
capital investment cost
 Over one half of the energy
investment will be in developing
countries

©2007 ViTAL Economy, Inc.
How Global Energy Demand is Being Met
1.10 Energy
Although use of alternative energy sources are growing dramatically,
coal and other fossil fuels continue to dominate
Source: Global Energy Network Institute & Exxon/Mobil
— 121 —
©2007 ViTAL Economy, Inc.
Liquid Energy Fuels Growth: 950% in 30 years
Unconventional liquid fuels will help compensate
for an expected shortfall in ordinary oil
12
2000-2030 Growth
Coal-toLiquid
+138%
8
BioFuels
+66%
6
Heavy Crude
+65%
4
Canadian Oil
Sands
+260%
Projected
History
10
2
20
30
20
25
20
20
20
15
20
10
20
04
20
00
19
90
0
19
80
Millions of Barrels Oil Equivalent/Day
1.10 Energy
Canadian Oil Sands
Ultra-Heavy Crudes
Biofuels
Coal-to-Liquids
Gas-to-Liquids
Other
 SI has the
opportunity to
play a key role in
coal-to-liquid and
biofuels
Source: Business Week, October 29, 2007; Energy Information Administration
— 122 —
©2007 ViTAL Economy, Inc.
Projected Coal Consumption: Next 25 Years
1.10 Energy
Quadrillion Btu
250.0
200.0
China
150.0
United States
India
100.0
Rest of World
Total
50.0
0.0
2004
2010
2015
2020
2025
2030
Year

China = 131% increase in consumption = 47% of world total

India = 88% increase in consumption = 8% of world total

Rest of the World = 38% increase in consumption = 37% of world total
U.S. = 51% increase in consumption = 17% of world total
Source: National Mining Association
— 123 —
©2007 ViTAL Economy, Inc.
U.S. Demand for Electricity Keeps Growing
1.10 Energy
2005 - 2030 Sector Demand Growth
63% increase in the Commercial Sector
39% increase in the Residential Sector
17% increase in the Industrial Sector
Source: Energy Information Administration, Annual Energy Outlook 2007
— 124 —
©2007 ViTAL Economy, Inc.
Coal’s Role in Electricity Generation Increasing
1.10 Energy
Coal-fired power plants
(including utilities,
independent power
producers, and end-use
combined heat & power)
continue to supply most
U.S. electricity through
2030
Coal
Nuclear
Natural Gas
Renewables
Petroleum
2005
50%
19%
19%
9%
3%
2030
57%
15%
16%
9%
3%
Source: Energy Information Administration, Annual Energy Outlook 2007
— 125 —
©2007 ViTAL Economy, Inc.
Alternative Energy is Creating Ag Opportunities
1.10 Energy

Product /
Ingredient
U.S. Plants
Owned
By Farmers
Projected
New Jobs
by 2015
Projected
GDP Increase
Ethanol/Corn
40%
203,879
$46 billion
Bio-diesel/
Soybean
35%
39,100
$24 billion
Wind
70%
In rural areas
12,500
n/a
Even though renewable energy will be playing a relatively minor role
over the next several decades, the opportunity for SI is still significant
— agriculture, fuel production, distribution
Source: Business Week, Renewable Fuels Assoc., LECG, American Wind Energy Assn
— 126 —
©2007 ViTAL Economy, Inc.
1.10 Energy
Corn: Expanding as a Consumer Products Staple
& Transportation Fuel
Corn Production to Meet New
Demands
• June 1, 2007 the U.S. ethanol
industry had 120 active plants
The Real Price of Corn
• Capacity of 6mm gallons/year
• 6.4mm gallons of capacity
under construction
• 2009 prediction – 1.3% of U.S.
corn crop will be used for ethanol
Impressive Ethanol
Production
• Current price of U.S. corn is not
even close in real dollars to the
price in the 1970’s
• Corn has become a staple in a
variety of products:
• Soda sweetener
• Recent price increase is still not
close to the returns needed to
provide farmers with an adequate
income without government
subsidies
• Additive in animal feed
• Dextrose in jams & jellies
• High fructose corn syrup
• New technology has raised
yield to meet rising demands
— 127 —
©2007 ViTAL Economy, Inc.
CleanTech is Attracting
Venture Capital (VC) Investment
1.10 Energy
United Nations Environment Program Headline:
Investors Flock to Renewable Energy and Efficiency Technologies; Transactions Leap to
Record $100 Billion in 2006 with $71 Billion into companies and new sector opportunities
Global Investment in
Renewable Energy 2004-2006
Global Investment in
Renewable Energy
by Technology, 2006
80
4.0% 6.0%
26.0%
$ Billions
70
70.9
60
50
49.6
40
38.0%
30
20
10.0%
27.5
10
16.0%
0
2004
2005
+80%
2006
Biofuels
Biomass & Waste
Solar
Wind
Other Renewables
Other Low Carbon
+43%
Source: SEFI, New Energy Finance
— 128 —
©2007 ViTAL Economy, Inc.
Energy: Implications (1 of 2)
1.10 Energy

Demand for sustainable and non sustainable energy is
increasing in the U.S.

For strategic reasons, the U.S. would prefer to source
more energy within the U.S.

Coal represents continued economic opportunity

New coal opportunities are related to new technology
and knowledge based enterprises (KBEs)

The new industry is knowledge intensive and require
workers with knowledge skills

Alternative Energy offers Agriculture opportunity and jobs

New technology in bio-fuels could increase yield per bushel
— 129 —
©2007 ViTAL Economy, Inc.
Energy: Implications (2 of 2)
1.10 Energy


Breaking News: Clean-Coal has a long way to go to overcome it’s past ‘dirty
image’

Maine still battling acid-rain

Number of states have continued to reject coal-energy generation projects

Potentially offsetting the above:

Clean-Coal technology is receiving major investment

Bolstered by continued high cost per barrel for oil

Breakthroughs could open the doors wide for existing Southern Illinois coal extraction,
transportation & labor
Breaking News: Ethanol in Illinois not keeping up with demand:

Ethanol plant construction has stalled in Illinois; 38 permits issued since 2006 with
only five plants under construction

Primary challenge facing new ethanol plants is the increasing cost of construction,
raising concerns about investor return on investment
“SI’s energy strategy should include processing of the raw material in the region, not competing
in the commodity markets specifically in the area of transportation fuels” - RA interview
— 130 —
©2007 ViTAL Economy, Inc.
Energy: Opportunities
1.10 Energy

Given the demand and cost of energy, opportunities exist for oil, methane, coal,
ethanol, as well as coal gasification & CO2 sequestering

SI has the potential to develop coal, oil & gas, and agriculture product related energy

Opportunities relate to mining, agriculture and manufacturing


Coal opportunities are related to new technology and knowledge based enterprises (KBEs) —
e.g., export coal processing & safety “knowledge” to China & India

Even coal demand is projected to grow

At SIU, the region has educational resources which specialize in alternative energy
development

Rail and marine access can support large energy developments
SI has had a long history of contribution & knowledge-base from the Electric Coops

Collaborating with other extractors & generators will help implement a Regional Energy
Strategy
“SI has coal reserves totaling an estimated 181 billion short tons — enough to
electrify the eastern half of U.S. for 80 years” - U.S. Dept of Interior
— 131 —
©2007 ViTAL Economy, Inc.
Energy: Opportunities
1.10 Energy


The future will not focus on traditional energy, but rather alternatives uses and sources
SI has a variety of assets that support a diversified energy strategy, opportunities exist for
oil, methane, coal, ethanol, as well as coal gasification & CO2 sequestering


SI has the potential to link its energy assets with its transportation and logistics assets to
develop transportation fuels and technologies




Coal opportunities related to new technology and knowledge based enterprises (KBEs) — e.g.,
export coal processing & safety “knowledge” to China & India
At SIU, the region has educational resources which specialize in alternative energy
development; Clean Coal Research Center, National Ethanol Research Center
Create a Southern Illinois University Energy Technology Center of Excellence
SI has had a long history of contribution & knowledge-base from the Electric Coops


Processing proximity to raw materials such as coal and corn or cellulosic materials supports
feasibility
Leverage the energy knowledge infrastructure and asset base


A diversified energy strategy will allow SI to have greater control over their future to better
temper energy cost cycles
Collaborating with other extractors & generators will help implement a Regional Energy Strategy
Major energy projects such as FutureGen and Prairie State will have significant economic
impact and will expand the regions energy knowledge base
— 132 —
©2007 ViTAL Economy, Inc.
Southern Illinois — "Garden of the Gods"
Chapter 1:
State, National & Global Trends
1.11 Conclusions
— 133 —
©2007 ViTAL Economy, Inc.
Chapter 1: Conclusions
1.11 Conclusions

SI has assets to connect with economic trends
and their related implications and opportunities


Include the region’s natural setting and recreational
opportunities, existing universities and colleges, and
geographic location
Challenges for the region: lack of clear




Pan-regional leadership
Skilled human resources
Financing
Internet infrastructure (improving)
— 134 —
©2007 ViTAL Economy, Inc.
Trends, Implications & Opportunities (1 of 4)
1.11 Conclusions
Trends
Globalization: The World
is Flat
Broadband Connectivity
& eCommerce
Implications
•
SI is competing with savvy country
economic strategies

The world economic growth rate is
4 times the rate of SI – “go get it”
•
Business competition is much more
intimate

•
Increase flow of business capital to
international growing markets
SI can leverage its central location and
inter-model transportation assets to
become a logistics service center



KBE: Innovation and
Knowledge Drive Jobs
and Wealth Creation
Opportunities
Broadband capacity and connectivity is a
“must have” infrastructure to compete

Utilize the “ten flatteners” to create a
collaborative regional economic
development strategy

Internet sales and distribution

On-line retail sales have a direct impact
on rural Main Street America
A region wide broadband infrastructure
strategy

Broadband allows SI to take advantage of
the “ten flatteners”
Apply best practice connectivity
applications to improve efficiencies

Global R&D collaborations

90% of all new jobs will be created by
companies of 50 employees or less

Link SIU research to business incubator,
expertise and capital

Innovation and commercialization of
knowledge is key

Green technologies

Homeland security response and
services

Mining & safety-related technologies

Life sciences, plant and animal

KBEs: “work where they live rather than
living where they work”
— 135 —
©2007 ViTAL Economy, Inc.
Trends, Implications & Opportunities (2 of 4)
1.11 Conclusions
Trends
Transformation of the U.S.
Economy
Livable Communities
Global Workforce Shortage
and Immigration
Implications

SI manufacturing job base has declined for
20+years

Commodity production will be replaced with
knowledge based enterprises

Opportunities

KBE potential in mining technologies,
bio-agriculture, waste water
management, safety, advanced
manufacturing, energy, etc.
U.S. companies will need to be nimble and
adjust to the global economy and pursue
growing markets

Leverage the workforce development
resources to create a world class KBE
workforce

Jobs migrating to attractive smaller
communities

Recreational services and products,
tourism, attractive communities

Boomers retiring moving to rural small
communities,

Senior living strategies

KBE creation and attraction

Visual and creative arts

Recreation and natural environment is a
priority

2010 there will be a 10 million worker
shortage in the U.S.




Need for “smarter” workers

Since 1970, 90% of the growth in the U.S.
workforce has been filled by immigrant
workers

Transform SI into the “corporate
casting agent for the 21st century
Leverage over 60 years of SIU with
students from over 100 cultures
Embrace workers in their 50’s and 60’s
create a climate of “freedom to work.
Regions competitiveness will be at risk due
to lack of workforce
— 136 —
©2007 ViTAL Economy, Inc.
Trends, Implications & Opportunities (3 of 4)
1.11 Conclusions
Trends
Aging Population
Active Tourism
Growing Logistics and
Transportation
Implications

15,600 workers retire everyday, 77
million workers due to retire by 2010
Opportunities

Healthcare Products and Services

Senior Living

Nutraceuticals

Increased demands for nutrition,
healthcare and housing requirements

Consumer markets will follow the baby
boomers generation

Visitors to the U.S. seek unique, historic,
cultural visits

Niche markets: Eco, culture and
adventure tourism

Resources needed to support language,
customs and dietary requirements of
international travelers

SIU international student population
linked with tourism

Recreational tourism focusing on SI
unique qualities

SI is in a prime geographic location to
seize the logistics and distribution
markets

With in ever increasing cost of fuel
waterborne transportation is attractive;
marine transportation services

Shorter trips within 4 hours of home
•
Movement of goods and services is far
easier than moving people

Logistics and distribution will continue to
grow with imports from China and India

Mfg jobs will continue to shrink

Distribution is close to end markets
— 137 —

¾’s of the countries wealth is residing
with active adults desiring many of the
attributes of SI
©2007 ViTAL Economy, Inc.
Trends, Implications & Opportunities (4 of 4)
1.11 Conclusions
Trends
Energy Demand
Sustainable Communities
Implications

Energy costs will rise with increased demand
especially in the U.S.

Alternative energy will receive policy support
and increasingly in demand

Coal as a fuel source and clean coal
technologies will have strong demand
Opportunities

Coal mining

Clean coal technologies

Regional energy strategies

Alternative energy innovations

Transportation fuels sources

Coal will have to fight the a “dirty image”

Attention on global warning and pollution,


Concern about healthy foods and the growth
of locally produced products
Carbon offsetting (growing trees) in
rural regions,

Locally grown organic foods
Access to water is a strategic advantage

Nutraceuticals,

Alternative green energy

Regional recycling businesses

— 138 —
©2007 ViTAL Economy, Inc.
Potential SI Jobs by Sector (1 of 2)
1.11 Conclusions
• Global growth opens up opportunities to expand SI
economy beyond its traditional growth rate
• 10 million U.S. worker shortage is an opportunity for SI
workforce development resources
• Growth in services exports enable SI to move away from
uncompetitive legacy economic activities

Global
Workforce
Opportunities
18,750
New Jobs
ICT* investments contribute 33% to U.S. productivity
growth…this validates importance of NP-COI

SI’s 64% increase in broadband access can better
leverage six-fold increase in e-commerce activity



KBE
4 of 5** factors in rural KBE growth are SI strengths
8,023
— need to be leveraged for SI economic growth
Livable community assets present in SI are an
attraction asset for KBE, Senior Living and Tourism
Alternative energy, global warming and “greening”
of society is creating innovation opportunities
New Jobs
See: RA Chapter 1
ICT = Information & Communication Technology
— 139 —
**Five Factors are:
• High Quality Workforce
• College or Universities
• Local Amenities
• Transportation Infrastructure
• Size
©2007 ViTAL Economy, Inc.
Potential SI Jobs by Sector (2 of 2)
1.11 Conclusions
• 77 million retiring baby boomers present an affluent
senior living growth opportunity for SI
3,676
New Jobs
SI energy assets and knowledge are in the
sweet spot of energy priorities for growth
Energy & Mining
• Preferred tourism growth sectors indicate SI is
positioned for accelerated tourism growth
Tourism


Senior Living
Significant transportation labor shortages are moving
transportation and distribution centers from the coast
to the center of North America. SI location and
logistics assets position it for growth
5,680
New Jobs
4,450
New Jobs
Log/Trans//Dist
1,675
New Jobs
Climate of Economic Opportunity = an additional 10,210 new jobs
NEW GRAND TOTAL = 50,789 Jobs (vs. 27,298 Jobs Feb ‘07)
See: RA Chapter 1
— 140 —
©2007 ViTAL Economy, Inc.
The Reason for Action
1.11 Conclusions
A changing economy impacts the way we live, work, learn,
govern and connect
We can’t run a 21st century business, community or
government on 20th Century rules
Opportunity is just opportunity, unless
you cease it, then it becomes reward
Carpe Diem — Seize the Day!
— 141 —
©2007 ViTAL Economy, Inc.