Digitize or Die: Reinventing Big Cities and Small Towns

Digitize or Die: Reinventing Big Cities and Small Towns

Metropolises and small towns are taking a page from Silicon Valley to survive.

Businesses want what you want: technology to improve the way they do things. And that doesn’t mean just faster Internet speeds. In this economy, cities need to offer a strong tech foundation to coordinate safety, education and recreation. And for New York, Boston and Chicago, the stakes are very high. Because in this game, it isn’t just about bragging rights — it’s about economic revitalization.

Far from the sunny beaches of California, tech is spreading east to the subways and alleys of America’s oldest metropolises. It’s giving these traditional economies a digital overhaul. But they’re not abandoning stalwart industries like airports, universities and institutions — no, they’re building on them. Mayors are taking a page from Silicon Valley, the pioneer that reinvented itself decades ago and now boasts more than 52,000 IT jobs — or about four percent of the residents.

Now, it’s New York City’s turn. Moving beyond the suits and ties of Wall Street, its start-up scene is thriving. In just five years, entrepreneurs have launched about 1,000 startups in the region known as “Silicon Alley,” according to nonprofit Center for an Urban Future, or CUF. But unlike Silicon Valley, New York didn’t have a clean slate to plan a tech sector. Instead, it plays to its own strengths — digitizing existing industries in fashion, media and finance for the years ahead.

“More and more, companies today are applying technology to traditional industries that New York is dominant in,” Jonathan Bowles, executive director of the CUF, told Crain’s New York Business. “Companies are forming left and right to create content, to sell things, and to provide services online or on mobile platform.”

New York City has a designated chief digital officer, Rachel Sterne Haot, who plans and carries out its “digital roadmap.” The goal is to realize the Big Apple’s full potential as a hotbed of innovation and experimentation. By investing in strong digital infrastructure — like a $10 million commitment to build out public Wi-Fi or expanding broadband to 80,000 low-income families — it’s laying the foundation for a digital revolution. City Hall is also developing talent, throwing $2 billion into training for science, technology, engineering and mathematics, dubbed “STEM,” including two applied science campuses.

The strategy, spearheaded by mayor Michael Bloomberg, is working. According to Crain’s New York Business, New York is the only region to see an increase in venture capital deals between 2007 and 2011 — up one-third compared to a 10 percent decline in Silicon Valley. In addition, the number of IT-related jobs spiked to 52,900, a significant jump, but a far cry from the 325,000 jobs in finance. Still, New York City, it seems, is making inroads in tech, and it’s ready to rumble.

But beyond education and infrastructure, Silicon Alley is joining the big data movement by passing open data legislation. By 2018, all 80 city agencies will release their databases to the public, which New York City Council member Gale Brewer expects to jumpstart businesses and projects dealing with drug treatment programs, affordable housing, homelessness and even traffic crashes. That means better jobs and better living conditions — it’s a win-win.

Big Boston Goes for Big Data

Boston is taking a similar approach and opening up data on inspections and foreclosure, as well as codes and regulations. To manage these initiatives and form partnerships, it created the Office of New Urban Mechanics. In addition to planning the digital revitalization, it’s also working with businesses to develop apps and services to, for example, detect potholes, sending information back to the city to quickly improve infrastructure.

“We take some of those ideas and we pilot them, we create products, we create services,” Bill Oates, Boston’s Chief Information Officer, told Open Forum. “We find new ways to approach old problems — the solutions that work, we will find a way to scale.”

Bostonians have the highest tweets per city, due in large part to the number of universities, like MIT and Harvard, nearby. In fact, it ranks higher than New York City in computer science masters programs, showing it, too, can capitalize on its existing resources.

Boston is no stranger to digital revitalization. The city has undertaken the transformation for over a decade at the Fort Point Channel neighborhood. According to Wired, the “Cyber District” movement began to attract companies in 1997, with the goal of keeping and incentivizing businesses to consider Boston for their tech jobs. The difference today? Boston’s early success, coupled with strong educational roots and more open approach to big data, is giving the city a second wind.

Chicago Gets Smart

Chicago’s CIO Brett Goldstein believes big data is the secret to his city, too. He’s leading the development a “dashboard” project, called the SmartChicago Analytics Platform, that can detect real-time patterns in city data. In a flood relief scenario, for example, officials can use the dashboard to pull up all related resources: water department orders from past emergencies, historical weather data and specific neighborhood responses. But instead of merely showing data, the dashboard will actually decide to best way to allocate resources. More importantly, though, in calmer times, it can be used in tactical and strategic planning.

In the past, Chicago, along with most cities, relied on say, a water chief’s memory of a similar event, but today it’s using hard data to solve problems in faster and more efficient ways.

Chicago is also using technology to figure out where to improve infrastructure in areas that, well, don’t always work. By using software to analyze historic city data, officials can look for patterns of inefficiency that’ll not just improve the lives of residents, but also reassure businesses it can accommodate their warehouse, trade shows and corporate headquarters.

The city is building infrastructure to keep up with the influx of tech jobs. According to Huffington Post, Groupon co-founder Brad Keywell said, “The pace of startups being founded in Chicago is moving faster than ever, with 195 companies started in 2012 — about double what it was two years ago.”

Startup incubators such as 1871, The Coop and TechNexus flock to the River North neighborhood, in part for the thriving tech culture, Midwestern friendliness and often, cheaper rent. But Keywell, also a managing partner at startups investment firm Lightbank, said there were nearly four times as many departures during that time, so it’s a race to keep momentum moving forward.

“We’re in the game and building our own unique global tech hub,” he said, according to Huffington Post.

Welcome to Silicon Prairie

Cities are digitizing to create industries for the next generation — they’re investing in the future, and fighting for talent and business as well. But they aren’t alone. Far from the urban lights and steel skyscrapers, small towns between the Silicon Valley and Silicon Alley are also struggling to digitize or die.

Small towns don’t have the resources to lay the foundation for a tech sector. And they can’t raise taxes, either — businesses and residents will just move to cheaper neighborhoods. To make matters worse, their stalwart industries, like auto-manufacturing and agriculture, are moving overseas where labor is cheaper.

So what’s a town to do?

The sad truth is, most are dying, but a few creative ones are looking to tech for a second chance. Big cities can afford to spend millions, but small towns need to take a different approach — they need to collaborate with tech titans to build out a network and then lure entrepreneurs with low-cost incentives to build a thriving tech community.

Google Fiberhoods

When you think about startups, the Midwest doesn’t comes to mind — but the region, in fact, is attracting startups and investment money alike. Kansas City, Kan. is becoming the next high-tech hub, according to Inc. Magazine, thanks to its partnership with Google. Last fall, the Internet search company started installing a high-speed network, dubbed “Google Fiber,” to give businesses and residents speeds of up to 1-gigabyte per second. These “fiberhoods,” as they’re called, are the first steps to developing a tech community. The investment is a blessing for city officials and regional entrepreneurs, allowing them to build businesses in areas previously dominated by manufacturing.

“The hope is that these startups will move their operations,” Ben Barreth, a local Web developer, told the Associated Press. “This will really bring in jobs and taxes and Kansas City will build a really cool tech scene.”

Locals are already feeling the effects. In the already-connected Hanover Heights, the community is buzzing with the job opportunities from the influx of tech startups, resulting in an upswing in real estate prices.

But what’s in it for Google? By controlling the service, Google can use location to better target advertising. Say you live in Russell, Kansas, for example. Right now, you may see ads for Verizon, but if you’re connected to a fiberhood, Google can show you an ad for a Verizon store across the street. By showing more specific ads, Google can charge higher rates, and that helps pay for the cost of building it out, as well as helps cement its lead in the online advertising industry.

By offering a faster network, rival Internet providers must speed up their service to match. And that benefits Google, too. Faster networks means a better Internet experience for all, and that means you’ll stay online longer, browse more pages and view more advertising — from Google, of course. According to Google chairman Eric Schmidt, Kansas City is just the first stop. The project isn’t just an experiment, but a business venture, which gives other communities hope they, too, can jump onboard tech wave. Schmidt didn’t say which cities are next, but tech hubs are following in its wake.

Cisco Connects Lake Nona

Lake Nona is a 7,000-acre, 25,000-person planned community in Orlando, Fla. — far from the bright lights of New York City or the hum of Silicon Valley. But Cisco is working with city officials to connect healthcare, real estate, retail, education and community services, which cuts expensive bureaucracy costs and improves communication and care between hospitals, doctors and clinics. The aim is to make Lake Nona into the first “smart-connected city.”

Lake Nona will also have “smart work centers,” where employees can meet and share not just high-tech services like wireless access, but also catering, reception and daycare. And that infrastructure is encouraging businesses to offer more flexible options, while luring new companies to the region. It’s also creating employment opportunities, improving commute times and reducing greenhouse gas emissions and traffic congestion.

And for play, Cisco and Lake Nona plan to wire malls, shops and retail stores to help reduce their operating costs and boost revenues. For residents, digital sports and entertainment options will connect fans with their favorite teams.

Silicon Prairie’s Advantage to Silicon Valley

Nebraska, Iowa, Missouri and Kansas are hosting events to help local entrepreneurs connect with regional investors. The “Big Omaha” conference, for example, doubled in attendance to around 1,000 companies last year.

But why would you launch a startup in a so-called “flyover” state? Silicon Valley is rich with talent and deep-pocketed investors, but it has higher costs, too. According to CNBC, employment costs in Omaha are about 20 to 30 percent cheaper compared to San Francisco. In real estate alone, those businesses pay $7 to $10 per square foot, compared to $25 to $40. For a startup with limited funding, those savings can buy extra time that may mean the difference between success and failure.

With fewer tech rivals to compete for funding and attention, smaller ideas have a bigger chance to stand out. Take Dwolla, an online payment system, for example. The service lets you transfer money from one bank account to another, free in many cases, and for a small fee in larger amounts. It’s not revolutionary, and in Silicon Valley, it wouldn’t turn heads. But in the Midwest, Marc Ecko, founder of youth-focused lifestyle company Ecko Unlimited, noticed the Iowa-based service, where startups are less common.

Omaha-based Dundee Capital told Silicon Prairie News it prefers to invest in smaller firms a start, and once they have a proven model, they can tap into larger investors, often from Silicon Valley, for the seed money needed to grow. The reality is, most tech firms, when they start, don’t need much money or talent — aside from the founders. The stereotype of a resourceful dropout, bootstrapping in his garage, is not without some truth. And building a startup in the low-cost Midwest buys time for future success.

The Internet makes the world smaller, and the advantages of San Jose, instead of Omaha, are becoming less prominent. According to CNBC, SeedTable, a website that tracks tech companies, reports Omaha hosts 47 startups, Kansas City has 26 and Des Moines supports 13 — and those numbers are growing. Of course, they trail far behind the 1,800 in San Francisco alone, but it’s a healthy start.

“There’s a unique sense of pride and ownership to what we’re doing,” Jeff Slobotski, co-founder of Silicon Prairie events, told CNBC. “You can make a mark and make a change, on a bigger scale.”

By partnering with Google and Cisco, small towns laying the civil infrastructure to attract businesses and create a tech industry. Most regions would welcome a partner to spark a tech scene, but it’s not that simple. High-speed access is one part, low-cost tax breaks are another — and pooling resources to offer businesses services gives a tech community reason to grow.

Every region wants to create its own Silicon Valley, but there are real challenges. Few regions are as well-established, financially solid, or full of success stories as northern California. But the hope is that Silicon Prairie can set things ablaze.


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