Florida Great NW Cluster Targets

Strategic Planning forCluster Development in

Northwest Florida

April 2008

Agenda

!" Background – Why We’re Here

!!"Overview of the Northwest FloridaEconomy

!!!"Analysis of Northwest Florida’s IndustryClusters

!#"Global and National Trends in the TargetClusters

#"Final Cluster Identification

#!"Questions and Answers

#!!"Next Steps: Strategy Design

Meeting Objectives

Florida’s Great Northwest is preparing a long-term roadmap for industry cluster development

Why are we here today?

$ To present our analysis and target industryselection

$ To gather stakeholder feedback and inputs

$ To identify strategic initiatives and actionsfor future development

Overview of the

Northwest Florida

Economy

Overall Economic IssuesEconomicAnalysis

$ Diversified economy, with strengths in a wide rangeindustries

$ Disparity of economic prosperity between north andsouth of I-10

$ Major concerns include:! Consequences of the national economic downturn (housing,

unemployment, etc.)! Possibility of future BRAC rounds and non-BRAC “mission creep”! Limited transportation links to some areas! High operating costs for low-cost, low-margin operations

$ Regional economic goals & aspirations identified:! Change perception of the region (internally and externally)! Create high wage employment opportunities! Avoid the mistake of overdevelopment, shape destiny! Harness regional innovation assets for growth! Protect and enhance the region’s quality of life

Technology & KnowledgeBased Industries

NW FL Industry Profile in 2005EconomicAnalysis

Traditional ManufacturingIndustries

Services Industries

! 26% of total employment (123,195 workers)

! 3.6% growth in employment from 2003-2005

! 22% of total establishments (7,486establishments)

! Average U.S. salary of $53,701


! -4.6% growth in employment from 2003-2005

! 3% of total establishments (967establishments)



! 1% growth in employment from 2003-2005

! 75% of total establishments (25,254establishments)


Economic FoundationsCompetitive

Analysis

% Lack of startup capital

% Low venture capital use

% Weak links with federal seedcapital programs (SBIR, STTR),but being addressed

& Access to small businessloans

Financial

Resources

% Relatively new innovationstructure

% Low levels of overall R&Dspending

% Growth of academic R&Dspending

% Patents obtained

% Low journal publications

& Significant militaryresearch capabilities

& Private research institutes

& University researchfacilities

& High federal R&Dspending

Innovation

Resources

% Insufficient “soft skills” (workethic, basic reading and mathskills)

% Scarcity of highly-skilledworkers

% Low numbers of science andengineering graduates

& Strong labor force growth

& Quality of personnelseparating from military

& Students taking AP exams

Human

Resources

WeaknessesStrengths

Economic FoundationsCompetitive

Analysis

% Inadequate broadbandaccess in non-urban areas

% Limited commercial flights

% Congested roads

% Threat of hurricanes

& Port facilities

& West Bay Sector Plan todevelop advancedinfrastructure

Physical

Infrastructure

% Lengthy permitting processfor new construction orexpansions (not an issue forthose leasing)

& Predictable

& Ease of operations

& Easy business start upprocess

& No state personal incometax

& Business supportinstitutions

Regulatory

Environment

% Eroding cost of livingadvantage

% Need for diverse culturalactivities desired byknowledge workers

& Highly attractive climate

& Natural beauty

& New job growth in cities

& Reasonable cost ofhousing

Quality ofLife

WeaknessesStrengths

Analysis of

Northwest Florida’s

Industry Clusters

Characteristics of Cluster Strategies Rationale

$Built on objective analyses of economicrealities

$Focused on traded (export) sectors –engines of growth

$Are not exclusive – any industry orinvestment is fine

$Target clusters are traded industriesoffering the best prospects for sustainablegrowth

Characteristics of Cluster Strategies Benefits

$Establish commonly-held regional identityand vision for future development

$ Identify initiatives to strengthen economicfoundations and align them with targetindustry needs

$Provide for targeting of scarce promotionresources

Technology & KnowledgeClusters

Existing Sub-Cluster StrengthsSub-Cluster

TrendsThese sub-clusters are already strong in the NW Florida region (highemployment or employment concentration) and have experienced stronggrowth rates in the last few years.

Traditional IndustryClusters

Service IndustryClusters

!Aerospace

!Power Generation &Technology

!Programming, SystemsDesign, & Data Services

!Media & Broadcasting

!Engineering, Testing, &Architecture

!Consulting & Research

!Construction, Industrial,& Other MaterialsManufacturing

!Wood ProductsManufacturing

!Call Centers &Electronic Sales

!Construction Services

!Real Estate & BuildingServices

! Insurance

!General Retail

!Rentals & Leasing

!Ground FreightTransportation

!Accommodations

!Food & Beverage

!Wholesale Trade –Durable Goods

Technology & KnowledgeClusters

Up-And-Coming Sub-ClustersSub-Cluster

Trends

These sub-clusters are currently very small in the NW Florida region, buthave experienced strong growth rates in the last few years.

Traditional IndustryClusters

Service IndustryClusters

!Recycling & WasteRemediation

! Internet Services

!Pharmaceuticals

!Design Services

!TelecommunicationsEquipmentManufacturing

! Industrial Machinery &Product Manufacturing

!Textiles

!Securities

!Rail Transportation

!Logistics &Warehousing

!Ground PassengerTransit

!Wholesale Trade – TradeAgents & Brokers

Definition Of NW FL’s Sub-RegionsSub-Regional

Analysis

Northwest Florida has three distinct sub-regions in termsof cluster and sub-cluster assets and trends.

Central Sub-Region

Western Sub-Region Eastern Sub-Region

Western Sub-Region Cluster Profile

$ Clusters with high employment levels(>20,000 workers):

!Retail Trade

!Tourism

!Life Sciences & Medicine

!Construction & Real Estate

!Education & Government

!Business Services

$ These account for 65% of the sub-region’s total employment

$ Clusters with high employment growth rates (>9%):

! IT Services

!Research & Engineering Services


!Wood & Furniture

$ Clusters with high employmentconcentration ratios (>1.0):

!Aerospace, Defense, & NationalSecurity

!Retail Trade

!Tourism


!Research & Engineering Services

!General Services

Current Cluster Strengths

Emerging / Growth Clusters:

!Transportation & Logistics Services

!Energy & Environment

!Aerospace, Defense, & NationalSecurity

Central Sub-Region Cluster Profile


!Retail Trade




!Tourism




!Automotive & Transportation Equipment Manufacturing


! Industrial & Commercial Equipment Manufacturing

!Financial Services

!Tourism


!Wood & Furniture

!Textiles & Apparel

!Agriculture & Agribusiness


!Retail Trade



Eastern Sub-Region Cluster Profile



!Retail Trade

!Tourism


!Business Services


!General Services



!Materials & Chemicals


!Wholesale Trade


! IT Services

!Energy & Environment


!General Services

!Retail Trade

!Tourism



!Tourism

! Industrial & Commercial EquipmentManufacturing

!Media & Design Services

Industry Cluster Selection CriteriaTarget

Clusters

1.High Growth

2.High Wages

3.Role inRegionalDevelopment

4.RegionalLinkages

Recent (2003-2005) employment growth of at least 2%

Wages greater than $35,000 (10% higher than theregional average of $31,000)

Plays a highly significant development role in at leastone sub-region (size, wages and growth)

Major interrelationships with other potential targetclusters in Northwest Florida.

25 industry clusters were examined according to these criteria. Six industryclusters were selected for further analysis – next slide.

Initial Cluster SelectionTarget

Clusters

Cluster finalists included:!Aerospace and Defense!Building Components and Construction!Financial Services!Health Sciences and Human Performance

Enhancement!Renewable Energy and Environment!Transportation and Logistics

Each cluster finalist was examined further:!A SWOT (strengths, weaknesses, opportunities

and threats) analysis was conducted!Global and national industry trends and forecasts

were assessed

Global and National

Trends in the Target

Clusters

Trends and Opportunities Overview

Why look at global/national industry trendsand opportunities?

$ Target growing sectors and sub-sectors

$ Examine regional strengths and weaknesseswithin national and global context

$ Align regional strategies to reflect both localadvantages and global realities

Trends and OpportunitiesAerospace& Defense

$$468 billion market (2005)

$Annual growth expected in key sub-clusters:!Unmanned systems ~ 15-20% through 2011

!Composite materials ~ 5% through 2015

!Maintenance, repair & overhaul ~4.5% through2017

!Aircraft assembly - light jets, very light jets,and regional jets ~ (probably) double-digitthrough 2015

Trends and OpportunitiesHealth Sciences &

Human Performance

$U.S. and global health care spendingrising, with growth expected for nextdecade

$Sub-cluster trends includes:!Medical devices ~ 9% CAGR from 2001-2006

!Health IT ~ 13% AAGR through 2011 (U.S.only)

!Aging population points to increased marketfor wellness/performance enhancementproducts and technologies

Trends and OpportunitiesRenewable Energy

& Environment

$Global energy consumption to grow57% from 2004-2030

$Renewable energy will grow from $55billion (2006) to $227 billion (2016)

$Key renewables sub-areas:!Biofuels ~ 15% CAGR

!Wind power ~ 13% CAGR

!Solar power ~ 16% CAGR

!Fuel cells/distributed hydrogen ~ 27%

Trends and OpportunitiesTransportation

& Logistics

$$1.6 trillion U.S. market (2006)

$U.S. freight shipments expected torise 70% between 1998 and 2020

$Sample sub-cluster statistics:

!Air cargo ~ 6% AAGR through 2025

!Maritime transport ~ 5% AAGR (in freightvolume carried) during past decade

!Freight trains ~ 33% growth (in freight volumecarried) between 1996- 2006

!Trucks ~ 38% nominal growth (in revenue)between 2000-2006

Trends and OpportunitiesFinancial Services

$Pre-mortgage crisis revenue growth ratesfor financial services segments rangedfrom 2.4% to 6.9% through 2012, e.g.:!Securities brokerage ~ 6.3%

!Investment banking and securities dealing ~ 6.9%

!Insurance ~ 2.4% to 3.3%

$Post-mortgage crisis projections notavailable, but most segments expected todecline substantially in the U.S.

$Expectation is that the industry willexperience instability and consolidation

Trends and OpportunitiesConstruction &

Building Materials

$ Overall, single digit growth expected in the U.S.through 2009, with:!Sharp declines (-8% to -23%) in residential construction

!Moderate to solid growth (7% to 11%) in heavy engineering(infrastructure) and non-residential construction

$ Future prospects are heavily dependent onoverall economy, interest rates, and outcome ofmortgage crisis

$ Sub-cluster trends include:!Market for green building products will expand by 17% through

2011, but will still be a small segment of overall constructionmaterials market

!“Smart” materials (e.g., sensors embedded in bridges to sensefatigue, cracks) may make inroads, especially in infrastructureconstruction

Final Cluster Selection

and Identification of Sub-

cluster Opportunities

Final Cluster SelectionTarget

Clusters

Based on the region’s existing clusters, theSWOT, and global/national trend analysis, fourtarget clusters were chosen:

!Aerospace and Defense!Health Sciences and Human Performance

Enhancement!Renewable Energy and Environment!Transportation and Logistics

Two additional clusters were added because oftheir strategic support to all clusters:

!Information Technology Services!Research and Engineering Services

FGNW can build on Industry trends

Aerospace andDefense

Health & HumanPerformance

RenewableEnergy &Environment

Transportation &Logistics

- Numerous defense institutions and universities withR&D capacity

- Strong UAV, MRO, other sub-cluster credentials

-Institutions with national/international reputations-University expansion in health-related infrastructure-Existing base of medical devices and other firms

-World’s largest plantation-style pine forests-University interest and activities

-Planned rail and road improvements-New international airport-New inter-modal distribution center

Aerospace and Defense ClusterSub-Cluster

Opportunities

Northwest Florida’s A&D Cluster is based on strong assets.Ten sub-sector opportunities have initially been identified.

• Unmanned systems

• Engineering, testing, research and development, and industrialdesign

• Avionics

• Composite materials

• Consulting services

• Air Cargo and distribution

• Maintenance, repair and overhaul

• Air transportation and support activities

• Flight training

• Aircraft assembly (very light, light, and regional jets)

Health Sciences and HumanPerformance Enhancement

Sub-ClusterOpportunities

Examples of Sub-Sector Opportunities

• Medical devices

• Health IT

• Wellness and human performance enhancement

• Clinical testing and research

Northwest Florida Perspective

• Capitalizes on regional assets (e.g., Andrews Institute, IHMC, FSU)

• Focuses on traded industry segment, building on existing “retailhealth care”

• Medical technology industry (medical devices & health IT) driven byaging and global growth in health care systems

• Human performance enhancement – augmentation of human skillsthrough the use of technology, medicine or therapy

Renewable Energy and EnvironmentSub-Cluster

Opportunities

Examples of Sub-Cluster Opportunities

• Renewable energy (biofuels)

• Power generation & technology

• Environmental research & management

• Recycling & waste management

Northwest Florida Perspective

• Small but growing footprint in the region

• Builds on substantial pine forest resources

• Fits well with state & national initiatives & global trends

• Represents an integrated set of value creation activities

Transportation and LogisticsSub-Cluster

Opportunities

Examples of Sub-Cluster Opportunities

• Ground, air & rail freight transportation

• Water transportation

• Logistics & warehousing

• Allied industries (wholesale trade, call centers & electronic sales,trade agents & brokers, etc.)

Northwest Florida Perspectives

• One of the region’s fastest growing clusters

• Builds on region’s geographic and infrastructure assets

• Offers an attractive mix of skill/wage jobs

• Positions all sub-regions as an integrated, international portal

• Supports goal of developing a diversified, sustainable economy

Strategic Support ClustersSub-Cluster

Opportunities

Research & Engineering Services

• Engineering, testing and architecture

• Specialized consulting and research

Information Technology Services

• Programming, systems design & data services

• Software development

• Internet services & telecommunications services

' Two clusters are vital to overall success (enablers)

' They are important in their own right (12,000 employees)

' They represent key assets to each key target clusters

Questions & Answers

Next Steps:

Strategy Design

We Need Your Help and Ideas!StrategyInputs

' Regional stakeholders have intimate knowledge ofeconomic conditions and needs

' Your insights, suggestions and feedback will beinvaluable

' We expect different perspectives and proposedinitiatives from varying industry and sub-regionleaders

' Our goal is to elicit as many good ideas as possible,and then organize them

' We will then assess suggestions from the perspectivesof feasibility, regional support, national experience andbest practices

Structure of DiscussionStrategyInputs

Key Question: What initiatives (public and private) willincrease the region’s competitiveness and growth path inthe target industries?

' Some initiatives will relate to specific industries;others will cut across different industries

' Some initiatives will relate to specific sub-regions;others will affect all sub-regions.

' Most initiatives will be directed at economicfoundations.

If you were “in charge,” what actions or activitieswould you propose to propel Northwest Florida’starget industries?

SRI International

Strategic Planning forCluster Development in

Northwest Florida

April 2008

Florida Great NW Cluster Targets

Business

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