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Contents

Executive Summary ....................................................................................................................................... 2

Background and Approach ............................................................................................................................ 6

Savannah’s Economy: Key Industry Trends, 2005-14 ................................................................................... 7

Bottom Line from Industry Analysis ............................................................................................................ 18

Strengths, Weaknesses, Opportunities & Threats Analysis ........................................................................ 20

Asset Inventory & Assessment .................................................................................................................... 22

Opportunity Identification .......................................................................................................................... 34

Overarching Initiatives ................................................................................................................................ 46

Benchmark Indicators ................................................................................................................................. 48

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EXECUTIVE SUMMARY

The Savannah region is poised to become one of a new breed of innovative Southern cities,

supported by its strategic location and intermodal transportation assets, high quality of life and

emerging creative class, and existing industrial base. However, the regions’ stakeholders need

agreement on a long-term vision (spanning 10 to 20 years) for what Savannah can and should

be. That vision will enable the region to align its efforts and investments supporting target

industries and related economic opportunities that will drive future regional growth and job

creation.

On behalf of the Savannah Economic Development Authority (SEDA), SRI conducted a data-

driven analysis with input from a range of stakeholders representing established companies,

local technology startups, financial institutions, the port, nonprofit organizations, the public

school system, the technical college, and other institutions of higher education. The SRI study

sought to answer important questions about the current structure of the region’s economy and

recent performance of key industries, as well as analyzing the implications of national and global

industry trends for the region’s future growth and diversification. We also examined how well

the Savannah region is positioned to take advantage of economic opportunities, focusing on

regional competitive strengths and weaknesses. Finally, SRI recommended target industries and

high-potential economic opportunities related to these industries that stakeholders can act on

in the near term.

SRI recommends that SEDA and regional stakeholders proactively target four industry sectors for

growth and development: (1) Advanced Manufacturing, (2) Professional, Technical and

Specialized Business services, (3) Film/TV/Digital Media, and (4) Transportation and Logistics.

These sectors encompass the following:

Advanced Manufacturing builds on the region’s existing manufacturing base and focuses on

aviation and aerospace, materials and chemicals, machinery, and processed food. Advanced

Manufacturing differs from traditional manufacturing in its greater integration of

information technology, automation, robotics, and new materials in the manufacturing

process. Although Savannah has a relatively narrow manufacturing base, the heavyweight

companies in the region are globally competitive and export-oriented.

Professional, Technical and Specialized Business Services is a “bellweather” for the ability of

a region to support a range of high-tech and high-wage industries, since companies in this

sector provide the design, consulting, legal advice, R&D, computer programming, and other

critical services. The size of many of the industry segments that comprise the Professional,

Technical and Specialized Business Services sector lags the national average employment

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concentration, implying that Savannah companies are going outside the region to find these

services. However, nearly all of these industry segments are projected to add employment

through 2014, and many of the companies in this sector are local startups.

Film/TV/Digital Media builds on several existing state and regional assets. The economic

impact associated with film and TV stems from the employment of local crew and technical

talent, but also the variety of small local businesses—hotels, restaurants, dry cleaners,

caterers, electricians, taxi drivers—that benefit from the large daily expenditures of major

feature films.

Finally, Transportation and Logistics builds on the region’s location and intermodal

transportation connectivity, which provides access to 80 percent of the U.S. consumer

market within two days of transit. The Port of Savannah is ranked as the fourth largest port

in the country in terms of container shipments and is projected to grow by 10 percent per

annum over the next 10 years. Transportation and Warehousing represents a mid-level

industry in terms of employment, similar in size to the Manufacturing sector (approaching

15,000 employees).

Building on these target industries, SRI identified the five related economic opportunities for

near-term actions. There is a clear opportunity in Advanced Manufacturing to actively recruit

manufacturers and related service facilities (e.g., maintenance and repair facilities for other

aviation companies expanding in the U.S., such as Embraer). In this sector, overcoming

workforce bottlenecks with an emphasis on technical training and communication of

manufacturing career pathways to K-12 students and their parents is paramount. In the short

term, collective action is needed to recruit skilled workers from the military and outside of the

region.

A second economic opportunity is the development of the Savannah region as a center for

materials research and development, integrated with the use of materials in product design.

SCAD has a world-class industrial design program with many industry partners, and the Herty

Advanced Materials Development Center has unparalleled capabilities in prototyping the

production of new materials for Fortune 500 chemicals and materials companies like DuPont.

Georgia Southern University is also strengthening its materials program with new faculty hires

focused on research to serve industrial needs. SRI recommends developing a business plan for a

collaborative research and design center which includes identifying potential partners for

research and marketing. SEDA can also work with national design associations to bring

executives and thought leaders to Savannah introducing them to the region’s unique capabilities

and also raising the profile of the region nationally.

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As mentioned, the Savannah region has a clear asset in the Port of Savannah and an intermodal

transportation infrastructure, which is a big draw to manufacturers with global supply chains

and global customers. Significant investments have occurred in warehousing and distribution

facilities. However, there is a clear opportunity for the region to pivot into higher value logistics

and support services leveraging the Port and local companies as a “test bed” for logistics R&D

activities which could attract software logistics companies to the region.

Directly related to the need to diversify into higher value, knowledge-based Professional,

Technical and Specialized Business Services industries, SRI recommends a strategy to both

support regional startup activity and to recruit small and medium-sized tech companies from

overseas that are looking to enter the U.S. market. SRI’s study provides data that shows that the

Savannah region is likely unable to support the formation of companies based on proprietary

technologies that require additional investment and development to reach the market place,

although the region boasts many startup companies that are self-financed. The former type of

company is important, since they may be more scalable with higher employment and growth

potential compared to existing technology and creative companies in the region. Specifically, SRI

recommends the establishment of a virtual incubator or entrepreneurial “boot camp”

associated with a professionally managed VC fund to provide screening of business ideas and

capital to investable deals.

In addition, SRI’s interviews with regional stakeholders point to the interest of non-U.S. small-

and medium-sized technology companies that are looking to establish a U.S. base in Savannah.

Increasingly, countries like Singapore and Israel are creating “soft landing” programs that aim to

make it as easy as possible for international technology companies to incorporate, from

obtaining a business license to finding office space and hiring. Savannah stakeholders should

further develop and strengthen their networks and “no wrong door” structure to make the

Savannah region a soft landing for international tech companies.

Finally, Georgia’s Entertainment Production Tax Credit has helped make Georgia a Top 3

location nationally for film production. In Savannah, the City of Savannah’s effective film

commission; Meddin Studios, a startup digital production services company with small sound

stages; the Savannah College of Art & Design’s (SCAD) capabilities in production and sound

design; and interest by a Los Angeles-based studio infrastructure group with connections to

major motion picture producers are a collective impetus to capitalize on this opportunity. The

key impediment to film industry development in the region is the absence of large sound stages,

as one would find in Atlanta and other competitor regions.

Similarly, in the digital media space, SCAD computer animation, special effects, and related

digital media talent and their recruitment by major companies in Hollywood, Silicon Valley and

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New York are a major asset. SRI sees an opportunity in approaching SCAD alumni who are now

mid-career professionals and attracting them back to the Savannah region to start their own

companies leveraging their networks and connections.

The Savannah region is at an important crossroads in its economic development. Alignment and

action by SEDA and regional stakeholders around a strategic vision of the future can help to

transform the Savannah region into a prosperous, innovative Southern city focused on global

opportunities. SRI’s study is intended to support the implementation of this vision through the

recommendation of target industry sectors and near-term economic opportunities that will help

SEDA and regional stakeholders generate better jobs and attract more investment to the

Savannah region.

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BACKGROUND AND APPROACH

The Savannah Economic Development Authority (SEDA) is undertaking a strategic planning

process to identify four to six economic opportunities that can drive long-term growth and

diversification of Savannah’s economy. This strategic planning, or “visioning,” process is

comprised of three main components: (1) a competitive positioning analysis, (2) an innovation

component (i.e., due diligence on early-stage VC fund), and (3) a marketing strategy for business

attraction and retention. SEDA contracted SRI International to bring an informed, third-party

perspective to bear on the competitive positioning component. Our analysis serves as a data-

driven basis for building consensus among stakeholders regarding the set of target industries

and opportunities that can drive long-term growth in the Savannah region.

SRI’s technical approach for this assignment sought to answer the following questions:

1. What is the overall structure of Savannah’s economy today, and what is the trajectory of

its key industries?

2. What are the region’s competitive strengths, weaknesses, opportunities and threats?

3. What are Savannah’s unique assets for attracting, retaining and growing new

companies?

4. In which economic opportunities should SEDA focus its time and resources?

5. Are there cross-cutting initiatives in which SEDA and other stakeholders should

collaborate?

6. What indicators should SEDA use to measure its own performance?

In answering these questions, SRI conducted the tasks depicted in the table below.

Key Questions Posed by SEDA Analytical Tasks Conducted by SRI What is the structure of Savannah’s economy and the trajectory of key industries?

Targeted industry analysis over the 2005-2014 time period.

What are the region’s main strengths, weaknesses, opportunities and threats?

SWOT analysis based on stakeholder interviews and data analysis.

What are Savannah’s unique assets for attracting, retaining and growing new companies?

Asset inventory analysis based on stakeholder interviews and data analysis.

In which economic opportunities should SEDA focus its time and resources?

Building on previous analyses, identification of 5-6 key economic opportunities for the Savannah region.

On which cross-cutting initiatives should SEDA and other stakeholders collaborate?

Recommendation of key cross-cutting initiatives

What indicators should SEDA use to measure its own performance?

Identification of high-level benchmarks

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SAVANNAH’S ECONOMY: KEY INDUSTRY TRENDS, 2005-14

The Savannah metropolitan statistical area (MSA)—which includes Chatham, Bryan and

Effingham counties—is a $13 billion economy with a civilian labor force of approximately

175,000 people.1 Looking at the size of Savannah’s industries ranked by employment, the five

largest industry sectors are: Government, Wholesale & Retail Trade, Tourism & Recreation,

Health Care, and Manufacturing. We examined employment trends in significant industries in

Savannah over the period from 2005 to 2014, which captures trends leading up to the Great

Recession of 2007-09, the effects of the recession on the region, and its projected recovery.

Figure 1 Total Employment by Industry in the Savannah MSA, 2005-14

Source: 1 EMSI (2011).

Several interesting observations can be made regarding the data presented in Figure 1:

The average wage in the Savannah MSA in 2011 is $44,510. Of the five largest industries by

employment, Government ($68,078), Health Care ($51,548), Manufacturing ($85,731) and

1 According to the U.S. Bureau of Economic Analysis, the Savannah MSA’s GDP was $12.921 billion in 2009. Labor

force data comes from the U.S. Bureau of Labor Statistics.

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the wholesale component ($63,861) of Wholesale & Retail Trade have average wages which

exceed the regional average.

The average wage levels for Retail and Tourism sector jobs are far lower than the regional

average wage: $28,297 for the retail component of Wholesale & Retail Trade; and $19,112

in the Accommodation & Food Services component and $17,630 in the Arts, Entertainment

& Recreation component, which together comprise Tourism.

Manufacturing employment in Savannah over the 2005-14 time period stayed relatively flat

which is an achievement compared to the steep declines in manufacturing employment at

the state and national level (over 15% declines). Although employment declined in several

of Savannah’s manufacturing industry segments (such as paper and chemicals), it created a

nearly equal number of new manufacturing jobs, driven primarily by strong growth in the

aviation and aerospace sector over the 2005-14 time period.

Compared to the national average, several knowledge-intensive industries represent an

unusually low share of total employment in the Savannah MSA: Professional & Technical

Services, Finance & Related Services, and Post-Secondary Education. These are also

industries where prevailing wages are well above the average level.

To promote long-term economic growth with increasing per capita incomes, the Savannah

region needs diversify its portfolio of industries, with stronger emphasis on the more highly-

skilled service sector industries.

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Figure 2 Gross Change in Employment in the Savannah MSA, 2005-14

Source: 2 EMSI (2011).

To highlight recent industrial drivers of employment, Figure 2 above shows the absolute change

in the total number of jobs by industry sector over the 10-year period from 2005 to 2014.

Growth in Health Care and Tourism & Recreation from 2005-14 is driven largely by the aging

population and the resulting growing demand for and consumption of health care services

and recreational travel among baby boomers.

The Government sector expanded significantly from 2005-08, with the number of

Government jobs peaking in 2008. There was then a contraction in the Government sector

from 2008-11 due to fiscal tightening, with some new jobs anticipated as the economy

recovers in 2012-14. The next few years are likely to see more modest growth in these jobs

because of state and national fiscal austerity measures and a large number of government

employee retirements.

Transportation & Warehousing has generated large employment growth driven by

investments in distribution and warehousing facilities and, of course, very strong growth in

containers moving through the Port of Savannah.

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Employment in the Construction sector has suffered a steep decline since its peak in 2006.

Through 2014, this sector is expected to continue to lose jobs shedding nearly 5,500 jobs

from the level in early 2008.Employment in Wholesale & Retail Trade has also contracted as

a result of economic conditions.

Figure 3 Percent Change in Employment in the Savannah MSA, 2005-14

Source: 3 EMSI (2011).

Looking at the relative change in employment presents a slightly different perspective, as

illustrated in Figure 3 above. Some of the industry sectors (such as, Tourism and

Government) with large gross changes in employment from 2005-14 have lower rates of

growth, since they are starting from a large base. Post-Secondary Education moves to the

top followed by Health Care, Transportation & Warehousing, and Professional, Technical &

Specialized Business Services.

The most dynamic sectors are ones that tend to have a higher component of education,

skills, and value-added compared to the large employment sectors. For example, the growth

rate for employment in Professional, Technical & Specialized Business Services from 2005-14

moves it from 6th to 4th in the industry rankings. Therefore, we explore these more

specialized sectors in more detail below.

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Figure 4 Employment Growth in Professional, Technical & Specialized Business Services, 2005-14: Savannah MSA, State of Georgia, and U.S.

Source: 4 EMSI (2011).

The Professional, Technical and Specialized Services industry is a bellwether for the ability of a

region to support a range of high-tech and high-wage industries, since this sector provides

critical services to those industries (such as design, consulting, legal advice, R&D and IT services).

Since 2007, the growth of employment in the Professional, Technical & Specialized Services

industry in the Savannah MSA has lagged average employment growth in the same industry

nationally and in Georgia overall.

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Figure 5 Change in Concentration of Employment in Savannah MSA vis-à-vis the U.S. in Professional, Technical & Specialized Business Services, 2005-10

Source: 5 EMSI (2011).

Significantly, the concentration of employment in this sector regionally is much lower than the

national average. The figure above plots the industry segments comprising the Professional,

Technical & Specialized Business Services sector. The size of the bubble represents employment

in that industry segment in 2005, and the horizontal axis of 1.0 (the location quotient, or LQ)

represents the point where the share of Savannah’s total employment contributed by an

industry is equal to the share of U.S. national employment attributed to that same industry. An

industry’s position relative to the vertical axis of 0% indicates the degree to which Savannah’s

employment concentration in that industry grew or shrank from 2005-10 compared to the

national average. In other words, industries to the left of the vertical axis are ones whose share

of Savannah’s total jobs is not keeping up with the national trend for that industry.

From this figure, one can see that the share of regional employment in this industry sector trails

the national average for nearly all of the Professional, Technical & Specialized Business Services

segments, except Architectural, Engineering & Related Services. The rest are all below the

horizontal axis of 1.0. This is a critical industrial indicator, since typically regions with location

quotients less than 1.0 are importing these services from outside the region. For example,

Computer Systems Design and Scientific R&D Services have extremely low LQs, so it is likely that

Savannah area companies are contracting outside the region for these services. Still, it is also

notable that the Scientific R&D Services industry has seen a rapid increase in its relative

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employment concentration in Savannah, despite the fact that it is still far below the national

average. This would indicate that there is a rapid increase in local demand for such services.

Stakeholder interviews suggest that the growth of companies and employment in the

Professional, Technical & Specialized Business Services sector would contribute to Savannah’s

overall business environment. Many of the companies in this sector provide needed support to a

variety of companies in other sectors from manufacturing to health care.

From 2005-10, the concentration of employment in Accounting, Tax Preparation & Bookkeeping,

Specialized Design Services, and Advertising, Public Relations & Related Services increased.

However, the concentration of employment in a number of other sectors declined relative to

the national average.

The table below shows actual and estimated employment in the Professional, Technical &

Specialized Business Services sector by industry segment, as well as the average wage in 2011.

One can see that based on current industry trends and state and national projections, all of the

industry segments are anticipated to generate net employment gains from 2010-14.

Table 1 Breakdown of Savannah's Professional, Technical & Specialized Business Services Sector by Industry Segment: Change in Employment and Average Wage

Source: 6 EMSI (2011).

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An interesting contrast to Savannah’s Professional, Technical & Specialized Business Services

sector—whose performance has trailed state and national growth—is Savannah’s

Manufacturing sector. The figure below shows that employment growth in Savannah’s

Manufacturing sector has been much stronger than the national and state average—both of

which experienced employment declines of more than 15% from 2005-11.

Figure 6 Employment Growth in Manufacturing, 2005-14: Savannah MSA, State of Georgia, and U.S.

Source: 7 EMSI (2011).

Looking at the share of regional employment in the Manufacturing sector compared to the

national average, one sees that all segments of Savannah’s Manufacturing industry are above a

ratio of 1.0. This is significant since a LQ greater than 1.25 typically means that a region is

employing more people and producing more goods and services than can be consumed by the

local economy. In other words, either the region’s firms in that industry are highly inefficient

(not usually the case with capital-intensive U.S. manufacturing), or they are exporting their

outputs to other regions. This is definitely the case with Savannah’s aerospace and aviation

industry and paper industry, which are both major employers and large exporters to both

domestic and foreign markets.

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Figure 7 Change in Concentration of Employment in Savannah MSA vis-à-vis the U.S. in Manufacturing, 2005-10

Source: 8 EMSI (2011).

The figure above plots the industry segments comprising Savannah’s Manufacturing sector.

Again, the size of the bubble represents total employment in that industry in 2005, while its

vertical position indicates the share of jobs relative to the national average for that industry, and

the horizontal position indicates whether that industry is growing or declining in significance to

the local economy.

From 2005-10, the concentration of employment in Pulp, Paper & Paperboard Mills, Aerospace

Products and Parts, and Sugar & Confectionary Products increased. The concentration of

employment in a number of other smaller manufacturing industry segment declined relative to

the national average. These include segments such as Motor Vehicles and Trailers, Basic

Chemicals, Industrial Machinery (hit hard by the recession and construction downturn), and

industries based on natural resources.

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Table 2 Breakdown of Savannah's Manufacturing Sector by Industry Segment: Change in Employment and Average Wage

Source: 9 EMSI (2011).

Table 2 above shows the actual and projected employment in the Manufacturing sector by

industry segment, as well as the average wage in 2011. One can see that based on current

industry trends and state and national projections, employment in nearly every industry

segment, except Aviation and Aerospace, is projected to decline from 2010-14. This is not

surprising when one looks at historical manufacturing employment trends for the U.S., Georgia,

or even Savannah. However, it is a reminder that manufacturing is a highly competitive, global

industry sector. Note that the employment projections are based on models using historical

data, and do not include actual expected changes, such as the announced expansion of

Gulfstream’s facilities.

The Aviation and Aerospace industry segment has and is expected to continue to drive

Manufacturing sector employment gains in the region, adding nearly 3,000 new jobs from 2005-

14 and representing over half of Manufacturing sector employment in 2014—up from one-third

of Manufacturing sector employment in 2005. Machine Shops are anticipated to grow from

2010-14, albeit from a relatively modest base. Food Manufacturing is expected to maintain

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employment, with Sugar & Confectionary employment growing modestly and continuing to

represent half of Food Manufacturing employment.

Looking at other major Manufacturing segments, Savannah’s Pulp, Paper & Paperboard industry

shed jobs from 2005-10 and this decline is predicted to intensify from 2010-14 with another 800

jobs lost. Chemicals industry employment is also anticipated to decline from 2010-14 pulled

down by continuing contractions in the Basic Chemical segment. Basic Chemicals accounted for

two-thirds of Chemicals industry employment in 2005 and is likely to account for less than half

of Chemicals industry employment in 2014. Modest employment growth is anticipated in the

Paint, Coatings & Adhesives; Resins, Synthetic Rubber & Artificial Fibers; and Other Chemical

Product & Preparation Manufacturing segments from 2010-14.

Machinery segment employment has also been on the decline in spite of large recent

investments by JCB and Mitsubishi Power Systems. This is largely the result of the recession of

2007-09 which severely impacted new construction and infrastructure investments and,

therefore, demand for industrial machinery. However, the relatively low employment growth

that is projected for the machinery segment from 2010-14 likely does not take into account

Mitsubishi’s near-term expansion plans, since the projections are based on national and state

industry trends.

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BOTTOM LINE FROM INDUSTRY ANALYSIS

It is clear from the analysis of Savannah’s industrial performance that the Savannah region

needs to diversify its portfolio of industries, with stronger emphasis on the more highly-skilled

service sector industries. The largest sectors in terms of employment currently—Government

and Wholesale & Retail Trade—are not likely to expand significantly over the next 10 years, and

they do not represent engines of growth for the region in terms of spillover economic benefits.

Rather, the most dynamic sectors are ones with a much higher component of education, skills

and value-added than the largest employment sectors: Post-Secondary Education, Professional,

Technical & Specialized Business Services, Advanced Manufacturing, and Financial Services.

In particular, the growth of Professional, Technical & Specialized Business Services industry is a

bellweather for the ability of a region to support a range of other high-tech and high-wage

industries, since this sector provides critical services to these industries (such as design,

consulting, legal advice, R&D and IT services). Since 2007, the growth of employment in this

industry in the Savannah MSA has lagged average employment growth in the same industry

nationally and in Georgia overall.

Often companies operating in the Professional, Technical & Specialized Business Services

industry grow up locally. There are an increasing number of design, accounting, IT services and

other specialized services companies that represent Savannah’s Creative Coast, and the growth

of these companies are reflected in the 2005-14 industry employment data. There are also a

number of small and medium-sized technology companies from overseas that are showing

interest in Savannah as a potential U.S. headquarters. Supporting the growth of local

entrepreneurial companies and attracting innovative companies from outside the region

presents a clear opportunity for the Savannah region to bolster the Professional, Technical &

Specialized Business Services sector and fabric of the regional economy.

Manufacturing is another industry sector in which the Savannah MSA has a clear competitive

advantage represented by the sector’s high concentration of employment relative to the

national average. Employment gains and/or retentions are projected for the following

manufacturing segment from 2010-14: Aviation and Aerospace, Machine Shops, Food

Manufacturing, higher value-added Chemicals, and Industrial Machinery. In addition, recent

startup of operations at the new Boeing plant in Charleston and interest by aviation companies,

like Brazil’s Embraer, in identifying new locations for maintenance, repair and overhaul (MRO)

facilities present opportunities for Savannah to expand its role in the aviation industry supply

chain.

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Driven by recent and future expectations of strong port growth, Transportation & Logistics is

another dynamic industry in the region. Of course, continued investments in infrastructure will

be required and a shift to more highly value-added services, like supply chain management,

logistics, and export/import support services in the region would benefit the regional economy,

as well as the sector overall. The following sections of the report explore some of these key

assets and challenges.

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STRENGTHS, WEAKNESSES, OPPORTUNITIES & THREATS ANALYSIS

A strengths, weaknesses, opportunities and threats (SWOT) analysis determines the degree of

“fit” between an organization and its external environment. Originally, SWOT was developed as

a tool for evaluating corporate strategy. For the Savannah region, a SWOT analysis provides a

quick summary of competitive advantages and disadvantages for attracting, retaining and

expanding business activity in a region. The SRI team conducted over 25 interviews with

Savannah stakeholders representing companies, local entrepreneurs, financial institutions,

education and workforce institutions, research institutions, and related organizations. The figure

below organizes our key findings from these interviews using a SWOT framework:

Figure 8 SWOT Analysis of Savannah Region, 2011

Source: 10 SRI International (2011).

On the positive side, the Savannah region has many strengths, and significant opportunities

enabled by those strengths. Clearly, the city’s location on the coast, with the country’s fourth

largest port and easy rail and highway access, has played a role in the region’s historic

advantages in manufacturing and transportation and logistics. Similarly, the city’s unique

historical and architectural environment and scenery have underpinned the thriving tourism

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industry. Like many Southern cities with a newly awakening creative class, the city’s charm, high

quality of life and closeness of the emerging entrepreneurial and tech community are major

draws for other tech-based startups.

Several stakeholders mentioned the growth of the Savannah College of Art & Design (SCAD) as

contributing to the city’s architectural vibrancy and brand. Similarly, Savannah Tech, Armstrong

Atlantic, Savannah State, and Georgia Southern are contributing to the growth and capabilities

of the local workforce.

On the negative side, most people cited a number of constraints on economic growth that will

need to be addressed. Some of these require long-term investments, such as improving road

capacity, expanding facilities at the community college, improving research aligned to industry

need, and upgrading the skill level of the workforce (including support for the public K-12

education system). Progress in these areas will be hampered by the poor macroeconomic

environment. With cutbacks at the state and federal levels, Savannah’s economic stakeholders

need to realize that any investments in improving the region in the short term will need to be

funded locally.

With regard to Savannah’s entrepreneurial environment, key constraints cited include the

absence of professionally managed venture capital funds and the limited availability of

experienced managerial, financial, and IT talent in the region. The Savannah region is also

hampered by the absence of a Tier 1 research university, and many stakeholders expressed

disappointment at the decision to phase out the undergraduate and graduate engineering

programs at the Georgia Tech-Savannah campus. If Savannah wants to move into a position

where it is generating new technological innovations, rather than only consuming them, then it

will need to make substantial long-term investments in its scientific research capacity and

infrastructure.

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ASSET INVENTORY & ASSESSMENT

SRI’s methodology is based on the “Asset Mapping” framework developed by the Council on

Competitiveness, a Washington, DC, think tank founded in the 1980s by former HP CEO John

Young. The objective of asset mapping is to assemble in one place a data-driven picture of the

region’s key sources of competitive advantage (or disadvantage). For each category of asset, we

present some sample quantitative data along with our qualitative analysis.

Table 3 Asset Inventory Overview

Source: 11 Council on Competitiveness

The table above presents the primary categories of economic assets used in the framework.

Keep in mind that the inventory and analysis are targeted at economic assets—those that

provide the foundation for growing and maintaining industrial production and employment.

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Table 4 Savannah Region Physical Asset Assessment, 2011

Savannah has several physical advantages led by the strength of its intermodal transportation

options and location. Companies based in the Savannah region can reach 44% of the U.S. market

via Savannah’s intermodal network which includes the Port of Savannah (the country’s fourth

largest container port), rail access (Savannah Port Terminal Railroad, CSX, Norfolk Southern),

and highway access (I-95 and I-16). The region’s air connectivity is a disadvantage cited by

business people, because Savannah/Hilton Head Airport is not a major hub. One must typically

go through Atlanta, Charlotte, or another major city for connecting flights to Savannah.

Although these assets have supported Savannah’s prosperity in the past, they may not do so in

the future without significant additional investment. For example, $100 million of Federal

funding is being pursued to deepen the Port of Savannah. The harbor must be deepened to take

advantage of the expanded Panama Canal and the supersized cargo ships that will sail from the

Canal and possibly offload at the Port of Savannah.2 Some business stakeholders noted that as

the Port of Savannah continues to expand, investment in roads will be required to handle the

additional traffic as well, or else the region risks creating gridlock that limits the movement of

both workers and cargo.

Finally, the Savannah region boasts some key industrial sites with additional capacity for

development, including the Mega Site development and Crossroads Industrial sites, the

2 See “USA: Port of Savannah Needs USD 600 Million Deepening, Says Official,”

http://www.dredgingtoday.com/2011/08/23/usa-port-of-savannah-needs-usd-600-million-deepening-says-official/

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Tradepoort East and West locations, and the Interstate Centre. The region and state also have

natural resource advantages including 24 million acres of forest. While the forest has

historically supported the pulp and paper industry, it can also be utilized for exploring new

market opportunities, such as wood pellet biofuels for European energy utilities.

Table 5 Savannah Region Human Resources Asset Assessment, 2011

People power companies. Whether it’s the attraction of new companies, the expansion of

existing companies, or the creation of local startups, the quality of the local workforce drives the

growth potential for a region. In this regard, the Savannah region faces two key human

resources challenges: a public K-12 system with historically low high school graduate rates and

the absence of a Tier 1 research university.

Several manufacturers and the Port of Savannah cited workforce as a critical issue to their

future growth and expansion. The Savannah-Chatham County Public School System graduated

only 62% of students in 2006-07.3 This has a huge workforce impact, since without a high school

diploma or equivalent a student cannot even enter a certification or Associate’s degree

3 Savannah-Chatham County Public School System, “Strategic Goal 1d – Graduation Rate,”

http://internet.savannah.chatham.k12.ga.us/district/Superintendent/das/Pages/STRATEGICGOAL1D.aspx

25

program at a community college. Often employers are looking for technical and line level

workers with skill sets that can be acquired through intensive certification or Associate’s degree

programs.

High school graduation rates have risen steadily over the past few years under the current

superintendent to 77.5% in 2009-10.4 This is a positive sign, and the business and community

stakeholders will want to ensure that with the rising graduation rates exiting students have

achieved the necessary reading, math and science skills that are required by employers and

conveyed by their holding a high school degree.

On the other end of the spectrum, the Savannah region lacks a major research university like

Georgia Tech, University of North Carolina at Chapel Hill, or University of Florida at Gainesville.

Such universities have strong graduate programs, and it is often graduate students who are able

to fill the high-skill positions available at companies and who invent the technologies that

become the basis for new firms and industries.

While nearly all Savannah companies interviewed said they recruit nationally for key positions,

some executives commented that Savannah is an initially hard sell to married people with

spouses who may also be looking for a job. Several executives mentioned a challenge in finding

workers regionally with mid-level or senior-level experience in management, finance, data-

driven marketing, and programming. Most of the promising candidates for such positions are

more readily attracted to Atlanta or other large metro areas, due to the perception that such

cities offer more plentiful opportunities for career advancement and more resources and

attractions for families.

4 Ibid.

26

Figure 9 Percentage of Population Aged 25+ by Highest Degree, 2009: Savannah MSA and U.S.

Source: 12 U.S. Census Bureau (2010), 2009 American Community Survey.

Looking at the educational attainment of the 25 years and older population in Savannah, over

two-thirds (66.9%) of the population had achieved at most only a high school degree as their

highest degree held in 2009. This is only slightly higher than the national average—64.5% of the

25 years old and older population had no high school degree or only a high school degree.5

Among residents with post-secondary degrees, Savannah is most significantly behind the

national trend in residents who finished an associates’ degree, followed by those with graduate

degrees, and finally those whose highest degree is a baccalaureate.

However, the national unemployment rate and earnings profile of people with this low level of

educational attainment is striking. In the Bureau of Labor Statistics graphic below, we can see

that the average unemployment rate for people with no high school degree was 14.9% in 2010.

The unemployment rate for people with only a high school diploma was 10.3%.6 By comparison,

the national unemployment rate for people with a PhD or professional degrees was only 1.9%

and 2.4% respectively in 2010; for those with a Master’s degree 4.0%; and for those with a

5 U.S. Census Bureau (2010). 2009 American Community Survey, http://www.census.gov/acs/www/

6 Bureau of Labor Statistics, Current Population Survey, http://www.bls.gov/cps/.

27

Bachelor’s degree 5.4%.7 Individuals who are able to complete an Associate degree gain an

above-average opportunity to find employment in the current economy.

In July 2011, the unemployment rate in the Savannah MSA was 9.4% compared to the national

unemployment rate of 9.1%. The unemployment rate is clearly a function of both the rate of

reduced economic growth and the inadequate educational attainment and skill set of workers,

since many job openings are going unfilled today in Savannah and across the country.

7 Ibid.

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Table 6 Savannah Region Technical Asset Assessment, 2011

The technical asset base indicates the readiness of the Savannah region to support the growth

of high-technology, research-intensive businesses. In this area, the Savannah region has a

significant number of very strong assets, but also a number of potentially critical deficiencies.

Clearly, Savannah has a number of technology-intensive manufacturers, although many of these

are standalone heavy-weights as opposed to a cluster of companies in one manufacturing

industry sector. The only exception is chemicals, which builds on Savannah’s historic

competence in process manufacturing for paper and other wood products. In addition to

companies, Savannah is also home to some notable research institutions. Herty Advanced

Materials performs contract research for a variety of multinational companies, including

DuPont. Skidaway Institute of Oceanography performs federally funded marine and

environmental sciences research. The Savannah College of Art & Design’s industrial design

program conducts projects for companies including Coca-Cola, Hachette Filipacchi Media U.S.,

JCB Inc., Dell, Freescale, Philips, PlayPower, Newell Rubbermaid, Kiz Toys, Fossil, Motorola,

Johnson Controls, VTech and Kids II. Memorial University Medical Center (Anderson Cancer

Institute) conducts cancer research and clinical trials, primarily through its partnership with

Mercer University’s College of Medicine.

29

Looking at the technologies developed within the region, our analysis of 2008-10 patenting

activity shows that Savannah’s patenting activity (0.23 patents per 1,000 people) is about a third

of Georgia’s (0.71 patents per 1,000 people) on a per capita basis and about a quarter of the

national average (0.87 patents per 1,000 people) on a per capita basis. Savannah has a different

set of technical focus areas than the state overall. While computers and communications

technologies accounted for 42 percent of Georgia patents in the last three years, those

technologies composed only 10 percent of Savannah patents. Instead, Savannah has a relatively

larger share of patents in the chemical field (44%), and a large share in “other” technologies

(particularly furniture and building materials). The majority of patents went to well-established

companies, as opposed to startups.

Figure 10 Patent Classification of Patents Awarded 2008-10: Georgia and Savannah

Source: 13 SRI Analysis of U.S. Patent & Trademark Office data

With regard to Savannah’s entrepreneurial environment, some key elements are missing. One is

the absence of professionally managed risk capital funds which will be discussed in the Financial

Asset Assessment which follows. Angel capital is very limited, and there are no venture capital

funds in the region. In addition, federal money for Small Business Innovation Research (SBIR) is

not being tapped successfully by Savannah companies. However, the SBIR program is relatively

less significant for IT-based startups, which seems to be the predominant technology focus of

startup firms in Savannah.

A second constraint is the absence of a Tier 1 research university, which would provide the

capital-intensive infrastructure required to conduct R&D. In other regions, the large land-grant

30

universities excel at partnering with small, medium, and large companies who sponsor

collaborative R&D projects. This is a win-win for both parties, and one of the biggest benefits to

companies is access to students with applied research experience relevant to the company.

Many stakeholders expressed dismay at the decision to phase out the undergraduate and

graduate engineering programs at the Georgia Tech-Savannah campus.8 Faculty and students

had partnered with local companies on research projects, and graduates had been hired by local

companies. While it is good news that Georgia Southern will begin to offer undergraduate Civil,

Electrical and Mechanical Engineering degrees, it will take time to make these programs world

class.

Finally, Savannah lacks many of the specialized firms that support emerging technology

companies in other metro areas, e.g., intellectual property (IP) law, accounting firms specializing

in startups, market research firms, etc. This is a chicken-and-egg type of problem similar to the

risk capital problem: these specialized service providers will emerge as the number of

companies demanding these services grow, but the provision of these services support the

growth of startup and existing technology companies. For now, most startups are forced to go

outside of Savannah, to Atlanta or even farther, for such expertise.

The Advanced Technology Development Center (ATDC), housed at the Georgia Tech-Savannah

campus, is part of the Enterprise Innovation Institute (EI2) at Georgia Tech, which helps Georgia

enterprises improve their competitiveness through the application of science, technology and

innovation. ATDC provides a variety of entrepreneurial support services to startup companies in

collaboration with The Creative Coast and other partners. The Creative Coast is a non-profit

organization that supports Savannah’s creative and innovative companies through its

networking and advocacy. The organization has been instrumental in attracting small

technology companies to the region as well. These two organizations are important nodes on

which to continue to build Savannah’s entrepreneurial fabric.

8 See Georgia Institute of Technology, Office of the Provost and Executive Vice President for Academic Affairs

(2011). GTS Task Force Report: Defining a Path Forward for Georgia Tech-Savannah, http://savannah.gatech.edu/task-force-update/task-force-report-recommendations

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Table 7 Savannah Region Financial Capital Asset Assessment, 2011

Financial asset assessments are difficult to conduct, as much of the data on the industry is

proprietary and not easily accessible. However, comments by stakeholders and small technology

companies indicate that there is a distinct lack of “risk capital” for individuals who want to start

or expand their businesses. The absence of professionally managed risk capital is a constraint on

regional entrepreneurial activity. There is only one “angel” fund, Ariel Savannah Angel Partners

(ASAP), and there are no venture capital funds in the region. From 2008-10, Georgia companies

(mainly Atlanta area companies) attracted $1.028 billion of venture capital financing.9 None of

this venture capital went to Savannah companies.

Savannah companies could access public funds, such as the federal SBIR program, but

apparently they are not doing so. From 2008-10, none of the $80 million in SBIR awards to

Georgia companies went to small companies located in Savannah. The overwhelming majority of

SBIR funds went to Atlanta. SBIR awards are an increasingly common form of “seed” capital for

small technology companies, especially those who cannot access the venture capital flowing

into the software and biotechnology industries (which accounted for 37% of all VC dollars

invested in Q2 of 2011). Venture capital funds look more favorably upon investing in companies

which have already succeeded in winning SBIR Phase 1 or 2 funding for commercialization

activities, depending on the industry sector in which the company is operating.

On the more traditional lending side, Savannah’s community banks are still struggling from the

housing market collapse, and lending decision by larger banks are made outside the region in

financial capitals, like Charlotte, NC. This makes it more difficult for local area companies to

make their case to financial decision makers.

9 PricewaterhouseCoopers/National Venture Capital Association (2011). MoneyTree Report.

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Table 8 Savannah Region Business Environment Assessment, 2011

Objective, quantitative information on the overall business environment in the Savannah region

is difficult to obtain, but comments from interviewees reflect a relatively high level of

satisfaction with the ease of doing business in the region. According to Moody’s Economy.com

North American Business Cost Review, 2010 Edition, Georgia ranked in the top half of the

country (30th highest costs) in terms of the overall cost of doing business measured by unit labor

cost, energy index, and state and local taxation. The cost of doing business in the Savannah

region is significantly lower than the Atlanta metro area.

The City of Savannah is committed to being a business-friendly partner, and has implemented a

new system for monitoring and evaluating permitting processing time, which is one example of

responding to local business concerns. City leadership and pragmatic, effective administration at

the city level are key components of a good business environment. The continued collaborative

working relationship between the City, SEDA and other business stakeholders will enable other

business issues to be tackled as they arise. One interviewee, an owner of a small technology

company, raised the issue of one of the zoning ordinances being outdated that permits or

denies the use of a building by a company for a particular business purpose. For some IT-based

companies that may originate in a home, the zoning issue can be problematic since it is tied to

the receipt of a business tax certificate.

With regard to taxes, the Tax Foundation’s 2009 State Business Tax Climate Index ranks Georgia

as the 27th most favorable overall business tax climate and the 8th most favorable in terms of

corporate income tax structure. In addition, the city and state are able to put together good

incentive packages from Georgia Quick Start workforce programs to tax exemptions and credits.

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Table 9 Savannah Region Quality of Life Asset Assessment, 2011

Quality of life is a significant advantage of the Savannah region. The region compares very

favorably to other locations in terms of the city’s unique historical and architectural attributes,

restaurants and nightlife, recreational opportunities, natural environment, and other resources

that are attractive to employees and employers. The most significant issues raised in this area

were around public K-12 education, affordable housing, public transit for low-income workers,

crime, high unemployment, and the limited economic opportunities for minorities.

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OPPORTUNITY IDENTIFICATION

Building on SEDA’s previous work and SRI’s industrial analysis and asset inventory assessment,

we recommend the following target industries and segments for the Savannah region:

Advanced Manufacturing

o Aviation and aerospace

o Materials and chemicals (resins/plastics, woods products, ceramics, etc.)

o Industrial machinery

o Food

Professional, Technical & Specialized Business Services

o Industrial, graphic, web design

o Architectural, engineering services

o Computer systems/IT

Film/TV/Digital Media

o Film and TV production

o Animation and special effects

o Game design and development

Transportation & Logistics

o Marine transportation

o Logistics and warehousing

o Export/import and other transportation support services

Following from these target industries, a number of economic opportunities emerge with

specific courses of actions that stakeholders can take to bolster these sectors of the regional

economy. We present each of these identified opportunities and initiatives to support them

below.

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Table 10 Advanced Manufacturing Opportunity

According to a 2011 report by the consulting firm Booz & Company10, based on interviews with

over 200 manufacturing executives, four factors which will influence site location decisions for

factories in the future are:

1. The skill level and quality of factory employees, especially for high-tech facilities;

2. The presence of high-impact clusters, in which many companies can learn from one

another and innovate more readily;

3. Access to nearby countries with emerging consumer markets and lower-cost labor; and

4. A reasonably competitive regulatory and tax environment.

The U.S. has been losing manufacturing capacity and employment steadily since the 1960s. One

major factor in that shift was the attractive labor rates found in other countries. Labor cost is

only one input into manufacturing success, however. Today, manufacturers find that their

10

Arvind Kaushal, Thomas Mayer, and Patricia Riedl, “Manufacturing’s Wake-Up Call.” Strategy+Business, Issue 64, Autumn 2011.

36

success depends more heavily on their continuing ability to increase productivity and generate

new innovations in products and processes. A key factor in ensuring such success is the

transition from traditional manufacturing to advanced manufacturing.

A recent report from the President’s Council of Advisers on Science & Technology11, a standing

advisory group at the White House, defines advanced manufacturing as “a family of activities

that (1) depend on the use and coordination of information, automation, computation,

software, sensing, and networking, and/or (2) make use of cutting-edge materials and emerging

capabilities enabled by the physical and biological sciences, for example nanotechnology,

chemistry, and biology.” While Savannah-area factories will continue to generate revenues

from the fundamentals in manufacturing—welding and bending metal, assembly of parts and

components, etc.—their competitive edge will be based on newer technologies and techniques,

such as computer-numerically controlled machine tools, and replacing traditional materials

light-weight, high-strength composites and ceramics.

In terms of traditional manufacturing, the Savannah region has several key assets that provide a

locational advantage in attracting manufacturers:

The region is the home of manufacturing facilities for market leaders, including Gulfstream,

Mitsubishi Heavy Industries, and JCB.

Market access is facilitated by proximity to overseas markets (via the Port of Savannah) and

the U.S. market (via rail and the I-95 corridor).

The State of Georgia and the region’s municipalities have maintained a favorable regulatory

environment (in terms of state labor law and state and local tax rates). Gulfstream in

particular noted that retaining its tax status enabled the recent expansion of its facilities.

These are necessary, but not sufficient, conditions for building a critical mass of manufacturers

for a full-fledged “cluster” in manufacturing. In particular, for the region to attract higher-value

employers in advanced manufacturing, there needs to be evidence of the region’s leadership in

its workforce skills and technology adoption.

Several manufacturers in the area emphasized that recruiting and retaining qualified workers is

their top priority and their greatest challenge. Some noted that they had difficulty in finding

entry-level employees with even basic workplace competencies, particularly in work ethic and in

quality of workmanship. These firms cannot afford to invest singlehandedly in providing

11

Report to the President on Ensuring American Leadership in Advanced Manufacturing, President’s Council of Advisers on Science & Technology, Executive Office of the President, Washington, DC, June 2011. Available at http://www.whitehouse.gov/sites/default/files/microsites/ostp/pcast-advanced-manufacturing-june2011.pdf

37

remedial training to their new hires. Therefore, the region needs to build capacity in its

workforce development system to give its workers both basic manufacturing skills and in

preparation for learning to work in an advanced manufacturing environment.

A critical weakness of the region is the relative shortage of programs offering such training.

Savannah Technical College has the most prominent role in this domain, but the institution

suffers from space constraints, although the opening of the new Advanced Manufacturing

Program in 2013 should improve this situation. Also, training in manufacturing requires

significant upfront and continuing investments, as students need access to examples of the

latest tools and machinery that they will encounter on the factory floor. Even more significant,

there appears to be a lack of interest among high school students and recent graduates in

careers in manufacturing. Even if the region were to build sufficient training capacity, there is

no guarantee that it would be able to fill those seats with motivated learners.

To address these key shortcomings, the Savannah region needs a multi-pronged approach:

To deal with the immediate shortage of qualified workers, the region needs to seek out less

traditional sources of potential labor. Recruiting military personnel who are leaving service at

nearby Fort Stewart could be one such recruiting pool. The region should also assist local

manufacturing employers in looking outside the region for potential new hires to ameliorate

short-term labor shortage conditions.

Increasing the capacity of public training programs must also be a top priority. The costs of this

effort can be mitigated partially by contributions from local employers. Also, there is likely to be

some funding available from federal agencies, depending on whether the White House can

implement some of the provisions of its Strategy for American Innovation and the recent

reauthorization of the America COMPETES Act. Given sufficient funding, there are many helpful

models and resources available for designing such training programs, such as the Advanced

Manufacturing Competency Model developed by the National Coalition for Advanced

Manufacturing, and sample curricula for advanced manufacturing available through the

Employment and Training Administration at the Department of Labor.

To ensure a longer-term supply of motivated and qualified workers, the region needs to gain the

attention of students earlier in the pipeline, in middle school and high school—and even

elementary school. First, students and their parents need to be aware of the potential for career

advancement and future standard of living in manufacturing. The National Association of State

Directors of Career Technical Education offers literature and resources to help educate students

about the career pathways in manufacturing. Second, students need exposure to some of the

fundamental competences required for advanced manufacturing, such as using statistics for

38

quality assurance and process control. Finally, the region needs to continue marketing

manufacturing training opportunities and job potential to middle school, high school and post-

secondary students.

Table 11 Materials & Design Opportunity

Design is one of the most important components of innovation in today’s economy. Apple owes

its position as the nation’s most valuable company (in terms of market capital) not to its use of

technology, but its ability to design a more compelling user experience. Industrial design in

particular helps to transform low-margin commodity goods into more desirable, high-value

items. More of the nation’s top engineering schools, such as Stanford and MIT, recognize this

trend and have integrated design courses into their curricula.

Cutting-edge product design is enabled by the availability of new materials that meet both

functional product requirements and the creative vision of the designer. With advances in

materials science and engineering, designers are now able to create innovative products that

combine attributes such as low weight, high flexibility, and aesthetic quality. Much of the “look

39

and feel” of modern goods, from cars to vacuum cleaners to kitchen appliances, are possible

only due to new composite materials constructed from fibers, plastics, and hybrid materials.

The Savannah region is home to two potentially-complementary sets of capabilities that can

make the region into a destination for materials development focused on design:

First, the city is a center for learning and knowledge about design and its applications,

through the School of Design at SCAD. The design program at SCAD has partnerships with

many industrial firms, both local and worldwide, and gives its students a strong practical

understanding of how design sensibility is useful in the marketplace. This existing client

base, and SCAD’s network of alumni, help to make Savannah a recognizable force in the

design movement.

Second, Savannah has a history of technical competence in new materials, stemming from

the traditional industrial base in wood products and chemicals. This expertise continues to

reside in the area, as evidenced by institutions such as Herty Advanced Materials, one of the

few facilities that can conduct applied research and prototype manufacturing for new

materials. Georgia Southern University has already started to build a center of excellence in

materials science research, by recruiting world-class scientists to the campus and investing

in new facilities and infrastructure.

Integrating these two sets of capabilities could unleash significant benefits to the Savannah

region. For example, the city can be positioned as a geographic center for understanding the

use of materials in design. One unique characteristic of design engineers is that they often need

to feel and play with new materials to understand their qualities and how they can be used in

new products. Therefore, Savannah can provide a common facility and “playground” where

those designers can visit, learn about new materials, and experiment with them. With Herty,

Savannah can also help firms to understand how to take those new materials and insert them

into their production processes so that new materials are compatible with mass manufacturing.

To create such an environment, Savannah will need to take proactive steps in building its design

capability:

Savannah needs better recognition as a center for industrial design. While SCAD’s alumni

connections can facilitate this, the region also has opportunities to reach out to professional

and trade associations in the design community, such as the American Institute of Graphic

40

Arts (AIGA).12 A logical first step would be to host industry events and conferences for such

groups, so that their members are drawn to Savannah and can see what it offers firsthand.

A physical facility for introducing designers to new materials will also serve as a natural

“magnet” for this community. A proposal exists to create a library and research center for

cataloging new materials and experimenting with their properties and potential. This facility

could be attached to a conference center to host events but also to provide continuing

education and professional development courses in design and materials research.

Furthermore, creating a research center in materials will help to attract scientific research

funding to the area, which will eventually benefit local universities as they seek to build their

own research capacity and infrastructure.

The region should convene a task force from the design community, local industry and

education to develop a business plan and a strategy for realizing this vision.

Table 12 Transportation & Logistics Opportunity

Savannah has a clear asset in the Port of Savannah and its intermodal transportation

infrastructure. This is a big draw to manufacturers with global supply chains and global

12

41

customers. Relatedly, significant investments have occurred in warehousing and distribution

facilities in the region. However, the average wages in such facilities are relatively low with

limited career opportunities.

There is an opportunity to pivot into other higher-value logistics and support activities.

Cognizant of intense global manufacturing cost pressures, manufacturers have looked to

implement more “lean” manufacturing and “real-time” supply chain management systems. For

example, all of Savannah’s major manufacturers and the Port of Savannah have implemented

SAP in order to collect and analyze orders, supply chain, and shipment data. Because of the

Oracle and SAP monopoly on this type of systems infrastructure, the one size does not fit all.

Opportunities abound in developing applications tailored to the specifications of individual

companies. One course of possible action highlighted by an external SEDA consultant would be

to develop a business plan for attracting software logistics companies that specialize in

developing applications for the SAP infrastructure to Savannah.

Leveraging the Port of Savannah, major manufacturers, and Georgia Southern’s graduate

program in logisitics, the Savannah region could become a “test bed” for supply chain and

logistics research activities.

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Table 13 Support for Startups and "Soft Landing" for International Small and Medium-Sized Technology Companies Opportunity

Small companies are an important driver of innovation and employment creation in the U.S.

economy. Yet, initiatives to support “home-grown” companies are often neglected, because of a

region’s single-minded focus on business attraction or a lack of understanding or agreement on

how to effectively support startup technology and creative companies. Nevertheless, new

business creation is as critically important to long-term regional economic development and

industrial diversification efforts as business attraction and retention efforts.

In the case of Savannah, the region has a growing cadre of innovative and creative startup

companies. However, the type of companies that are capable of being formed currently are

companies for which startup can be largely self-financed and able to generate revenue before

the entrepreneur runs out of money. The region is likely missing out on opportunities to support

the creation of companies based on a proprietary technology or trade secret that may require

additional development and investment in order to reach the market. Such companies may be

more scalable with higher employment and revenue growth potential compared to some

existing startup technology companies in the region.

The Technical Asset Assessment pointed to ATDC and The Creative Coast as important nodes in

Savannah’s existing technology community and entrepreneurial network, but more could be

43

done to build on and compliment these existing assets. The Financial Capital Asset Assessment

highlighted the critical absence of professionally managed risk capital in the region. On the one

hand, angel investors and venture capital are attracted by investable deals—startups that not

only have a proprietary technology or trade secret, but which also have a solid business plan

based on a robust market assessment, the identification of customers, a prototype of their

product and validation that cost and technical barriers to production have been overcome. On

the other, more could be done to identify, screen and promote the pool of investable deals in

the larger Savannah region. This is where the establishment of a virtual incubator or

entrepreneurial boot camp-type model and professionally managed seed or venture capital fund

could enhance the entrepreneurial environment in the Savannah region.

A virtual incubator or entrepreneurial boot camp associated with a professionally managed

venture capital fund would provide screening of business ideas and business support services to

client companies. The virtual incubator would have in-house experts or connections to experts

in market research, finance and accounting, human resources, etc. The venture fund would

invest in those deals in which additional capital is required to get to market.

In addition, stakeholder interviews point to the interest of several small and medium-sized

technology companies that have shown interest in locating in Savannah because of access to

market, relatively low cost of doing business quality of life, and hospitality and inclusiveness of

the existing tech community. Increasingly, small countries like Singapore and Israel have

implemented “soft landing” programs that make it as simple as possible for technology

companies to locate there, from permitting/zoning to staffing and office space. The City of

Savannah has shown good will and intent to be a business-friendly partner, and the various

stakeholders (e.g., SEDA, the Chamber, ATDC, The Creative Coast, etc.) should work to further

develop and strengthen their networks and “no wrong door” structure. Savannah’s small size is

an advantage to small technology companies who want to focus on their business and would

ideally like to solve problems with one phone call.

In many respects, growing your own companies and attracting small technology companies from

other parts of the country and overseas requires fewer incentives and less investment than

attracting large companies, while achieving the same goal of supporting vibrant, innovative

companies with higher-than-average wages in the regional economy. The growth of such

companies also helps to brand Savannah as a historic Southern city which is on the cusp of

dynamic growth in a number of knowledge-intensive industries.

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Table 14 Film/TV/Digital Media/Computer Animation/Special Effects Opportunity

Because of its asset base, Savannah is ripe for a wide range of film, TV and digital media

production. However, the challenges associated with supporting each type of production in the

Savannah region are slightly different.

The film service industry is dependent upon state tax credits, sound stages, crew base, variety

and uniqueness of exterior locations, mix of upscale and affordable hotel accommodation,

essential services (camera, grip, electrical, catering), and a “friendly” political atmosphere in

terms of city ordinances/permitting. Due in part to its Entertainment Production Tax Credit,

Georgia’s economic impact from the film industry grew five-fold over the past three years: from

$240 million in 2007 to $1.4 billion in 2010, according to Lee Thomas, director of the film

division of the Georgia Film, Music and Digital Entertainment Office.13 Today, Georgia ranks in

the top three for film production locations in the country.

The economic impact associated with film production stems from employment of local crew, but

also from the variety of small businesses that benefit from the significant daily expenditures of

the crew and other staff during filming—hotels, restaurants, dry cleaners, retail, taxi drivers, etc.

Savannah is a “film friendly” city with an effective film commission and assets in its local talent.

Stratton Leopold is a Savannah native who is an executive producer at Paramount Pictures.

13

See http://news.euescreengems.com/2011/05/25/tax-incentives/

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Meddin Studios is a startup digital production services company with small sound stages that

can support TV, gaming and other production.

A major challenge for Savannah in attracting film production, however, is the absence of large

sound stages: 20,000 sq. ft. stages with 40-45 foot ceilings. International Studios Group (ISG) of

Los Angeles conducted a business feasibility study in 2010 of creating a full service film and

television studio in Savannah with three large sound stages. Since this is such a critical

constraint, Savannah stakeholders should conduct due diligence and explore city/state

incentives for potential sound stage projects.

The strength of SCAD’s programs in computer animation and special effects, as shown by its

strong showing in the Student Academy Awards, and other competitions, is both a boon and a

constraint for Savannah. While SCAD launches the careers of promising digital artists, they are

frequently recruited away to work in Hollywood, Silicon Valley, or New York, rather than staying

in Savannah. This complicates any effort to attract firms in that segment to Savannah, as they

prefer to bring recruits to their site rather than open a new location in a remote city.

The evolution of this market segment could provide a new opportunity for Savannah, however.

Many of the pioneers in digital media for film and television are reaching the pinnacles of their

careers, and are likely to consider moving to a city with less stress and demand than Los Angeles

or New York. If the Savannah region could target SCAD alumni who fit that profile, and convince

them to relocate back to Savannah while launching their own firms. This would enable Savannah

to grow a new industrial cluster in this market, thanks to the reputations of those alumni and

their access to the stream of new project opportunities coming out of media centers like LA.

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OVERARCHING PRINCIPLES

Savannah is on the cusp of tremendous growth and vibrancy, and could easily be one of the new

breed of transformative Southern cities driving innovation and economic growth in the greater

Southeast region over the next 20-30 years. However, agreement on a long-term vision (2030)

of what Savannah can and should be must start today in order to coordinate and align regional

stakeholders, initiatives, and investments.

SRI recommends that key components of this vision should be:

Act and compete globally: Aging populations and government austerity measures to

tackle growing debt problems in the U.S. and Europe mean that the engines of growth in

the global economy will be in countries like Brazil, China, and India, which have both

strong and growing government and private sector consumption of goods and services.

Savannah’s companies will need to connect to global markets and export to achieve

sustainable growth, and Savannah leaders will need to have a global mindset to help the

region compete and succeed. In this regard, SEDA’s World Trade Center license initiative

will support the region’s established companies in expanding internationally, assist

international companies in looking to establish in the U.S., and help elevate Savannah

on the world stage.

Work regionally: The new Boeing plant in Charleston benefits Savannah’s aviation parts

manufacturers; risk capital provided by angels in Hilton Head can support Savannah

startups; and the growth of research activities that are aligned with industrial activity at

Georgia Southern and other regional universities can contribute to the region’s

workforce and technological competitiveness. The Savannah MSA has 350,000 people.

What is difficult to achieve as a city or three-county region is not as insurmountable as a

larger geographical region. However, Savannah stakeholders must continue to develop

strong partnerships with other regional stakeholders and work collaboratively to

succeed.

Collaborate on workforce pipeline: The education and skill set of the regional

workforce is a major competitiveness issue for all of Savannah’s industries, and it begins

at the pre-K level.

Make investments that benefit multiple industries: In the near term, Federal and state

government will have more limited resources to make major infrastructure investments.

Stakeholders should focus on investments that improve the business environment fo

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multiple sectors of the economy. Such investment include roads, port deepening,

research, the technical college, the convention center, affordable housing, and public

transit.

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BENCHMARK INDICATORS

As SEDA further develops and implements its strategic plan, it will want to measure its

performance in helping to move the economic dial in the region. The challenge with

benchmarking is always to select useful indicators that capture meaningful information without

the benchmarking activity becoming an overly cumbersome, time-consuming activity that takes

on a life of its own.

SEDA has internal indicators for measuring its organizational performance. However, in this

section SRI proposes some high-level indicators that SEDA and other business and community

stakeholders can use to measure progress towards the end goals of generating a higher rate of

economic growth that creates higher wage jobs and improves the livelihoods of people living in

the greater Savannah region.

SRI recommends, as a starting point, a small number of indicators in three categories: Economy,

Workforce, and Innovation. For this list of indicators, it makes sense to benchmark the Savannah

MSA against the state and the national average. The goal is to eventually surpass both.

Economy

- Per capita GDP

- Exports

- Job growth

- Business creation

Workforce

- High school graduation rate

- Post-secondary educational attainment

Innovation

- NSF competitive awards

- Patents

- SBIR awards

- Venture capital

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ECONOMIC INDICATORS

A key objective of economic development is to raise income levels for residents, and this is

largely a function of the rate of regional economic growth, the impact of national/international

business cycles, and the level of educational attainment of the population. Changes in the

standard of living in a region can be measured roughly by change in per capita personal

income—total wages, transfer payments, dividends, interest, and rental income divided by

population—or by change in per capita GDP—a region’s total productive output divided by the

population. SRI recommends using per capita GDP as a core indicator, since it conveys the

economic productivity of a region and its population. The table below shows that the Savannah

region’s real GDP per capita ($35,106) lagged both the state and national GDP per capita in

2010.

Figure 11 Comparison of Real GDP Per Capita: Savannah MSA, Georgia, and the US, 2010

Source: 14 US Bureau of Economic Analysis

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Since a key SEDA focus is business startup, retention, and attraction, regional new business

creation is an important economic indicator. Unfortunately, data that track the startup of new

businesses in a region are only available at the national, state and Top 50 MSA level. However, a

good proxy for new business creation is the net change in business establishments in the

Savannah MSA. This tracks the opening of new establishments minus the closure of existing

establishments between two time periods. From the data in the table presented below, one can

see that Savannah’s regional economy tends to perform better than the U.S. during national

economic expansions and worse than the U.S. during recessions. The Savannah MSA had a

larger net increase in new business establishments in 2004-05 (34.4 new establishments for

every 1,000 establishments in the region) and a larger net decline in 2009-10 (16.6

establishment closures for every 1,000 establishments) compared to the state and national

situation.

Table 15 Change in Establishments, Total and Relative to Size of Company Base: Savannah MSA, Georgia, and the US, 2004-05 and 2009-10

Region Net Change in

Establishments,

2004-05

Net Change per

1,000

Establishments

Net Change in

Establishments,

2009-10

Net Change

per 1,000

Establishments

Savannah MSA 281 34.4 -145 -16.6

Georgia 6,709 27.3 -3,449 -13.4

US 201,520 24.3 -3,974 -0.5

Source: 15 US Bureau of Labor Statistics, Quarterly Census of Employment and Wages

Employment growth reflects the rate at which the regional economy is creating and filling new jobs.

Over the past decade, the Savannah region’s employment growth has outpaced the state and national

average during economic upswings and performed worse than the national average during the most

recent recession. Employment growth was negative for the most recent Aug. 2010 - Aug. 2011 period,

contracting by 0.2%. By comparison, the national employment rate grew by 1.0%

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Figure 12 Annual Percent Change in Employment: Savannah MSA, Georgia, US, 2001-11

Source: 16 US Bureau of Labor Statistics

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More than 70% of the world’s purchasing power today is located outside of the United States, and the

share of purchasing power concentrated in other countries is only going to increase over the next 20-30

years. Several studies have shown that U.S. companies that export are more competitive—they grow

faster and are less likely to go out of business than non-exporting companies. Therefore, the Savannah

region’s export of goods and services is a critical indicator of competitiveness and outward orientation

of Savannah area companies. From the data in the table below, exports of goods and services from the

Savannah MSA significantly lag exports at the state and national level relative to the size of the regional

economy. It is important to remember that the Savannah region’s export of services is nearly equivalent

to the value of its export of goods.

Table 16 Value of Goods Exports, Gross and Relative to Size of Economy: Savannah MSA, Georgia, and the US, 2009

Region Goods Exports

($ billions)

Goods Exports

as % of GDP

Goods &

Services

Exports ($

billions)

Goods &

Services

Exports as % of

GDP

Savannah MSA $.021 0.2% $.039 0.3%

Georgia $23.7 6.0% n/a n/a

US $1,069.5 7.7% $1,575.0 11.3%

Source: 17 US Bureau of Economic Analysis and Brookings Institute for Savannah MSA export data

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WORKFORCE INDICATORS

Workforce is a critical competitiveness issue in the Savannah region for the foreseeable future.

With regard to useful workforce indicators, the educational attainment of the adult population

(25 years and older) is a good measure of the investment that a region has made in developing

and attracting human capital. The figure below compares educational attainment in the

Savannah MSA relative to the state and country overall. Ideally, over time, one would want to

see a larger share of the adult population migrating from the left hand side of the figure (no high

school degree or only a high school degree or equivalent) to the right hand side (associate’s and

higher degrees).

Figure 13 Educational Attainment of 25+ Year Old Population: Savannah MSA, Georgia, and the US, 2009

Source: 18 US Census Bureau

Census data indicates that the Savannah MSA lags slightly the state and national average in

terms of the population’s attainment of college degrees and higher—with the exception of

Associate’s degrees. On the left hand side of the figure, the Savannah MSA has a higher share of

the population with only a high school degree or equivalent. The Savannah MSA performs better

than the state and national average with a lower share of the population with no high school

degree. The table below presents educational attainment of the adult population in the

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Savannah MSA, Georgia, and the country overall in 2009. As noted earlier, this will tend to limit

the employment prospects for Savannah’s residents, and also constrains the pool of talent

available to fill higher-skilled positions at local employers.

Table 17 Educational Attainment of 25+ Year Old Population: Savannah MSA, Georgia, and the US, 2009

Region No HS Degree HS Degree Only Associate’s Degree

Bachelor’s Degree

Grad or Prof Degree

Savannah MSA 11.7% 55.2% 6.7% 17.3% 9.2%

Georgia 16.1% 49.9% 6.4% 17.6% 9.9%

US 14.7% 49.8% 7.5% 17.6% 10.3%

Source: 19 US Census Bureau

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INNOVATION INDICATORS

Patents are a measure of the overall level and type of inventive activity occurring in a region. Patents do

not necessarily convey a particular commercial value or level of innovation, since many patented ideas

or processes never reach the market place. On the other hand, since the purpose of patenting is to

protect ownership of an invention with potentially large commercial value, patenting is an important

indicator of one type of innovation output.

There are many challenges related to the analysis of patent data. One major challenge with corporate

patents is corporate patenting policy and parent-subsidiary relationships. For example, SRI’s search of

Gulfstream patents turned up only one patent awarded to Gulfstream from 2008-10. However,

Gulfstream is a subsidiary of General Dynamics which is headquartered in Falls Church, Virginia. If

General Dynamics’ policy is to have all of its subsidiaries’ patents assigned to the address of the parent

corporation, then one cannot distinguish between parent and subsidiary patenting activity. It’s not clear

if Gulfstream was awarded only one patent from 2008-10, or if the Savannah address for this patent was

an outlier—the inventor forgot to follow General Dynamics’ corporate patenting policy.

This can also be a problem with educational institutions. For example, most universities have a research

foundation or corporation through which all of its patents, including those of branch campuses, are

assigned. Another challenge is that certain types of patents may run into USPTO bottlenecks at different

points in time. This could be caused by staffing issues or by large fluctuations in the number of

applications in a particular patent category in a given year. Therefore, looking at patents for a single year

may be misleading.

SRI analyzed USPTO data from 2008-10 and totaled the patents awarded nationally, in the State of

Georgia, and in the Savannah MSA over this time period. Patenting activity in the Savannah MSA was

approximately a third of that in Georgia and a quarter of that nationally on a per capita basis from 2008-

10. The table below presents inventor companies or inventors that received two or more patents over

this three-year period and the types of patents that were awarded.

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Table 18 Patents Awarded, Total and Per Capita: Savannah MSA, Georgia and the US, 2008-10

Region Total Patents Awarded

2008-10

Patents per 1,000

People

Savannah MSA 79 0.23

Georgia 6,918 0.71

US 267,267 0.87

Source: 20 US Patent & Trademark Office

The Small Business Innovation & Research (SBIR) Program aims to promote technological innovation and

economic growth through the investment of Federal research funds in small U.S. companies. This is a

competitive, set-aside program for small businesses that are engaged in R&D with the potential for

commercialization. All Federal agencies with a budget greater than $100 million per year must set aside

2.5% of their extramural research budget for SBIR awards. Phase I SBIR awards provide up to $150,000

for 6 months, and Phase II SBIR awards provide up to $1 million for 12 months. Only Phase I winners

may apply for a Phase II award.

As venture capital funds have migrated from seed stage to later stage investment deals over the past 10

years, SBIR funding has become an increasingly important source of seed capital for small, technology-

based companies. Nationally, federal agencies make SBIR awards of between $2.2 billion to $2.5 billion

each year. Looking at the three-year period of 2008-10, companies in the Savannah MSA received no

SBIR awards compared to the 251 companies located elsewhere in the State of Georgia (mainly the

Atlanta metro area) which received a total of $80 million in SBIR awards.

Table 19 Value of SBIR Awards: Savannah MSA, Georgia and the US, 2008-10

Region Value of SBIR Awards

($ millions) , 2008-10

Savannah MSA $0

Georgia $80

US $7,250

Source: 21 US Small Business Administration

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Access to venture capital is also a challenge for Savannah area companies, and a good indicator to track

going forward. From 2008-10, Georgia technology companies attracted over $1 billion of venture

capital. However, this represents only 1.4% of all venture capital invested over this three-year period. By

comparison, Georgia’s economy represented 2.8% of national gross domestic product (GDP) in 2010,

implying that Georgia is underrepresented in the venture capital market relative to the size of its

economy.14

The Savannah MSA is too small a region to be tracked by most national data sources. However, from

stakeholder interviews and online research it appears that Savannah area companies attracted very little

venture capital investment—possibly a few million dollars total, and from outside the region—from

2008-10.

Table 20 Venture Capital Investment: Savannah MSA, Georgia and the US, 2008-10

Region Value of Venture Capital

Investment ($M), 2008-10

% of US Venture

Capital, 2008-10

% of US GDP,

2010

Savannah MSA $0 0% 0.1%

Georgia $1,028 1.4% 2.8%

US $71,303 -- --

Source: 22 PricewaterhouseCoopers/National Venture Capital Association, MoneyTree™ Report

Finally, looking to future regional technology development opportunities stemming from research, it is

useful to know what type of research Savannah’s regional universities and institutions are undertaking

and how this research profile is changing over time. One indicator in this regard is NSF competitive

research funding awards. From 2008-10 Savannah’s regional universities were awarded $17.6 million of

competitive NSF funding. For comparison, NSF granted $376.3 million of awards in the state of Georgia

overall and $21.5 billion of awards nationally over the same three-year period.

The table below presents the Savannah area institutions that were awarded NSF grants, the NSF division

granting the research award, and the total value of NSF research funding received by Savannah area

institutions from 2008-10. One can see that NSF research funding is highly concentrated in three

institutions: the Skidaway Institute of Oceanography, Georgia Southern University and Savannah State

University. Data was not available for the Georgia Tech-Savannah campus whose NSF funding was not

reported separately from the main Georgia Tech-Atlanta campus.

14

According to the U.S. Bureau of Economic Analysis, Georgia’s GDP was $403.7 billion in 2010 compared to the U.S. GDP of $14,526.5 billion, or 2.8% of national GDP.

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Not surprisingly, most of the NSF awards to Skidaway researchers were in the area of ocean sciences

research. At Georgia Southern University, NSF awards were concentrated in environmental biology and

in the provision of Undergraduate Research Opportunities. Savannah State’s NSF awards have focused

on the preparation and growth in the number of students pursuing science, technology, engineering and

mathematics (STEM) disciplines and careers, represented by the Division of Engineering Education and

the Division of Graduate Education awards. Research awards were also received in the geosciences and

mathematical sciences fields.

Table 21 NSF Awards by Savannah Area Research Institution, 2008-10

Source: 23 National Science Foundation (NSF) Awards Database