December 26, 2012 Utah Economic Development Clusters Around a Governor’s Vision

Volume 15 | Issue 4

Utah, and its forward thinking governor, wants to make the state a fertile environment where businesses can thrive and increase

The most innovative memory process technology in the world resides in Utah. The former agrarian community of Lehi has become synonymous with innovation and rapid growth. IM Flash, a world leading NAND flash memory producer, contributes mightily to Utah’s information technology and software development industry cluster and significantly adds to the state’s diverse export base. IM Flash worked closely with the state to grow its business in Lehi. The relationship thrives in a business-friendly environment. The collaborative growth exemplifies the “targeted cluster” economic development strategy executed by the Utah Governor’s Office of Economic Development (GOED) an organization advanced by Utah’s 17th and current governor Gary R. Herbert.

Growth is not isolated to Lehi. In fact, Utah is the second-fastest growing US state. Lehi officials and business leaders worked closely with the State of Utah to make the city one of the state’s most attractive business destinations, but Lehi competes with other Utah cities (such as Logan, Ogden, Cedar City, and St. George) that are among the nation’s most highly regarded places for business growth and job creation.

GROWTH IN CLUSTERS
In 2011, Utah experienced growth in each of its six targeted economic clusters (see sidebar). Together these clusters employed more than 172,000 people – 16 percent of Utah’s total employment. Also, one surging cluster – the energy sector – grew to more than 24,000 employees, while software and IT added six percent, employing some four percent of Utah’s total workforce with more than 48,000 jobs.

Meanwhile, Utah’s singular outdoor products and recreation (OPR) industry cluster stands out for several reasons:

• Utah is eight times more concentrated than the overall US concentration, employing 0.5 percent of Utah’s workforce compared to only 0.06 percent for the nation;
• For total OPR jobs, Utah is second only to California; neighboring Colorado isn’t even in the top 15;
• This cluster is a major driver of the twice-yearly Outdoor Retailer show, the Tour of Utah bicycle stage race and some of the world’s most innovative outdoor marketing and manufacturing concepts.

This growth is critical for Utah’s social and economic health; cluster-related jobs pay on average 60 percent more than the state’s average monthly salary.

“Quality jobs elevate an individual’s quality of life,” says Herbert. “When I issued my challenge to the private sector to accelerate the creation of 100,000 jobs in 1,000 days, we knew a great deal of growth would occur in Utah’s most vital, vibrant and promising economic clusters.”

The Governor’s challenge accompanied a regulatory review process that saw the elimination or amendment of 368 outdated regulations. “The review was long overdue and was essential for nurturing a business ecosystem that is appropriately regulated, effectively keeping the government off your back and out of your wallet,” he adds.

Utah’s accelerating workforce pipeline supports the unique labor needs of modern industries, by aligning educational training with the workforce demands of the targeted economic clusters. Governor Herbert’s “66 by 2020” call to action looks to the future to help two-thirds of adult Utahns achieve postsecondary training by 2020.

LIFE SCIENCES CLUSTER: CLARITY ON THE TOP OF A MOUNTAIN
For Kirk Ririe and the executive team of BioFire Diagnostics, Utah’s unique blend of business opportunity and quality of life converges on Mt. Wire, a peak in the Wasatch Mountains just east of the company’s headquarters in the University of Utah’s renowned Research Park.

BioFire’s executive management holds weekly “Moving Meetings” on the mountain, says Mr. Ririe. Talking about complex company issues while climbing Mt. Wire, the team has found they “can find clarity when we are on top of the mountain.”

The meetings have been carried out for a decade, during which BioFire launched its FilmArray, which Ririe calls “a revolutionary infectious disease diagnostic platform [that is] fast, easy to use, and comprehensive, testing for large syndromic panels of viruses, bacteria, and other pathogens.”

Such clarity helped the company launch its product. Now Biofire’s recently announced $50 million investment (as part of expansion) suggests a bright, innovative future. It also means as many as 657 additional jobs over the life of the project in the life sciences cluster that will pay a minimum of 125 percent of Salt Lake County’s average annual wages. The jobs come with the support of a post-performance incentive by GOED that will amount to nearly $25 million, but only after taxes have been paid, representing 25 percent of new state revenues generated by the project.

“Utah has demonstrated its commitment to growing the biomedical sector through a combination of incentives and investments,” says Ririe. He acknowledges that some scientific and management positions were recruited outside, but he says the most important investment in Utah has been in developing the talent pipeline. In addition to training, university innovation is right next door. “[Our] proximity to a major medical research institution is a significant advantage for a molecular diagnostic company.”

Overall, the life science industry employs some 26,000 people and accounts for 2.1 percent of Utah’s workforce. The cluster’s resiliency, however, is demonstrated by its 11 percent growth since 2006, including some 300 new establishments and continual innovation by global leaders such as Fresenius, Merit Medical, Edwards Lifesciences, Haemonetics and Domain Surgical. Growth, in other words, despite recession.

IT AND SOFTWARE: UNPARALLELED SUPPORT
In addition to growth in the life sciences, Utah’s information technology and software development industries have been growing dramatically for nearly three decades. Representing four percent of Utah’s workforce, the IT and software cluster is Utah’s largest, and its growth outpaced the national rate of growth from 2010 to 2011.This cluster’s strength still raises eyebrows. Digital media, for example, is a vibrant force behind the economic vitality.

Earlier this year, GigaOM, a leading provider of online research for global technology innovators, analyzed data from Google Insights for Search to determine regional interest in technology. They found Utah near the top in several areas. The search interest data gathered by GigaOM for their story on US tech hotspots aligns Utah with the nation’s epicenters of technology in Silicon Valley and Boston. In 1985, two of the three largest software companies in the world (Novell and WordPerfect) were based in Utah. They laid a foundation for talent development and opened the state to an influx of venture capital through the next couple of decades. Today, Utah’s “Silicon Slopes” brand is populated by companies such as Adobe, Domo, Electronic Arts, eBay, L3, Qualtrics and Fusion-io.

IM Flash’s $4 billion private sector investment in 2006 represents one of the largest in Utah’s history. The facility quickly catapulted IM Flash into an industry leadership position. In less than five years, IM Flash captured 20 percent of the NAND flash memory market share. IM Flash is about innovation, as well as quantity and quality. Says IM Flash co-chief executive officer Keyvan Esfarjani: “IM Flash was the first to announce 20 nanometer NAND flash products. Each NAND flash product contains thousands of patents.”

Last year, IM Flash announced operation expansion in Utah, with the support of GOED. “This puts us on a path to invest hundreds of millions of dollars in new capital over the long run while increasing our workforce by 13 percent,” adds Esfarjani.

That’s a workforce of highly paid jobs and an increased concentration of Utah’s IT cluster. Esfarjani says that IM Flash currently employs more than 1,600 people locally, but has a support network of nearly 100 companies with 600 employees. IM Flash operates continuously, an increased production capacity that Esfarjani attributes in part to Utah tax incentives.

“Utah offers unparalleled support to the business community,” says Esfarjani. “IM Flash has regular dialogue with its government, education and community leaders.”

Like other executives, Mr. Esfarjani points to Utah’s business-friendly environment and quality of life as primary reasons for choosing Utah for business.

CONCRETE VISION, CONCRETE REALITY
Governor Gary R. Herbert loves Utah. He recently spoke about the privilege of leading a great and generous state: “We have strong families, and traditional values of honesty, integrity and hard work. People in Utah don’t rely on government programs.”

America exemplifies a culture of opportunity, Herbert believes, and within that culture he learned to navigate and excel within the free market as a successful long-time business owner. It all points to the business-friendly environment he champions in office and that creates an atmosphere within which companies can thrive. He also believes in states’ rights and the power of self-determination. That power, he says, will get America back on a track to economic vitality, as it enables the maintenance of a regulatory climate within which the private sector can thrive and create jobs, particularly in the clusters where growth is occurring most rapidly and that have helped keep Utah ahead of the curve despite economic hardships.

Herbert’s vision, that “Utah will lead the nation as the best performing economy and be recognized as a premier global business destination,” is built on the cornerstones of job creation, education, responsible energy development and self-determination. Having garnered more than 68 percent of the vote in Utah’s 2012 gubernatorial election, the governor will have the next four years to focus on further strengthening this foundation.

Herbert has been frequently asked about Utah’s secret for economic success. “It’s no secret,” he avers. “Utah embarked on a path of unprecedented partnerships toward continued economic prosperity, but collaboration has always defined our state. Utah was built on a pioneer heritage of innovation, education and productivity. That heritage continues today and places Utah as a leader in the new economy.”

This heritage now includes an “all of the above” approach to responsible energy development (to keep business costs low), a disciplined legislature and a constitutionally mandated balanced budget that ensures predictability and stability. These elements drive Utah’s cluster acceleration.

Utah recently jumped to the top of the Pollina Corporate Real Estate’s Top 10 Pro-Business for 2012 list – a testament to the pro-business climate and job creation in the private sector. The Pollina Corporate report specifically cites the value of Governor Herbert’s leadership and the state’s close collaboration with the highly regarded Economic Development Corporation of Utah (EDCUtah), the 25-year-old public/private partnership organization that helps attract and grow quality jobs from respected companies. EDCUtah works with the corporate recruitment and incentives team at GOED to accelerate that growth, focusing on Utah’s strongest and most promising industry sectors. “It used to be that companies looking to expand or relocate were surprised to find such incredible economic dynamism propelling Utah’s economy,” says Jeff Edwards, EDCUtah’s president and chief executive officer. “Forward thinking leaders and sound business policy have brought Utah to an apex of economic planning, where strategies of education, business development and infrastructure all converge. Our partnership with GOED has been a factor in creating such success for the private sector.”

LOOKING AT THE FUTURE
Utah’s targeted economic cluster strategy is forward-looking and forward-acting. It integrates industry needs with educational attainment goals. Utah’s fiscal prudence and predictable governance mean revenue surpluses for the state’s “rainy day fund” and businesses that aren’t afraid to grow, hire and work toward common goals.

“Cluster strategy reveals how Utah uses smart business strategies to make smart government strategies,” says Juliette Tennert, Utah’s chief economist. “Taking advantage of the synergies of proximity in our strong sectors makes for effective recruiting. It utilizes established supply lines and establishes a stronger local knowledge base.”

The United States Department of Labor’s Bureau of Labor Statistics reinforces the strategy: Utah’s unemployment rate is dropping and wages and growth in virtually every sector are up. But as the Bureau of Economic Analysis makes more clear, focusing on Utah’s industry strengths has paid dividends for Utah’s economy, as the state’s gross domestic product has surged in recent years – in large part because of contributions from its natural resources, computer and electronic product manufacturing, information technology, manufacture and retail of outdoor products, and financial services.

But Utah continues to innovate on the strength of research excellence and entrepreneurialism. The Utah Science Technology and Research initiative is a major contributor to Utah’s innovation economy, and a successful model that is being copied by neighboring states.

Meanwhile, Governor Herbert recently touted Utah as the best state for unmanned systems innovation. It’s one of several trends that Utah has jumped ahead of, thanks to deep collaboration and integrated planning at all levels of state and local government.

Author Andrew Dash Gillman is a marketing coordinator for the Utah Governor’s Office of Economic Development.

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