Diversity and Specialization Among Cities
Today, leaders in my adopted hometown of Austin, in the Research Triangle of North Carolina, and in California’s Silicon Valley talk with enthusiasm about their regions’ critical role in the new information age, at the leading edge of high technology. But, having grown up in a General Motors factory town, I have seen the dark side of employment that is dependent upon technology. In 1920, the high-tech center of America stretched across the “machine tool belt” from Cleveland to Detroit. In 1880, our technological innovators worked in Pittsburgh’s great steel mills. Now those same regions struggle. Technology, by definition, moves on. New technologies will come along and they will be based in new cities.
The real basis of city strength is not in high-tech, it is in diversity. If you study Chicago, you find a town that has always kept building, kept moving ahead. With solid roots in a superstable industry – food manufacturing – Chicago also became a service and transportation center. When the meatpackers like Swift and Armour moved out of town to be closer to the farms, the city kept on making candies and canned goods. When the railroads lost market share, Chicagoans got their share of freight with trucking and of passengers with O’Hare Airport, the world’s busiest.
We think of New York as the ultimate services city – banking, television, consultancy. But New York is also a shipping center, a manufacturing center, and more. Both of California’s great metropolitan areas have very diverse economies. Dazzled by the glitter of high tech and Hollywood, we too readily forget San Francisco’s giant car factories and Los Angeles’s aerospace plants.
As much as high-tech employment may boost our cities today, for the long run we need some good old stable industries: insurance companies, a restaurant chain, maybe even a big UPS facility, and – my favorite – a potato chip plant (especially if it’s operated by Pepsi’s super-successful Frito-Lay division).
Having said that, let me offer two cheers for specialization. As time goes on, it is likely that successful smaller cities, and even to some degree the giants, will need to differentiate themselves. Just as the world has shifted from three look-alike TV networks to 500 channels reflecting an amazing diversity of special interests, more cities may have to carve out unique niches. In other words, while all our cities may compete for airline service and company headquarters, many cities may need to deliberately develop and exploit special images and strengths. Berlin may want to emphasize its role as the city of smoky cabarets, while Singapore, at the opposite end of the scale, brags about its squeaky-clean sweetness. Esthetic and architectural distinctions may loom large: New York is the vertical city, Paris the horizontal city. Through such stylistic nuances, even large, diversified cities can differentiate themselves.
But for the smaller cities, specialization may be required. This is in some ways a return to patterns of old. There was a time when our shoes came from St. Louis, our cigars from Tampa, our perfume from Paris, and our swords from Seville. Even today, our earth moving equipment comes from Peoria and our cola comes from Atlanta.
Specialization is most powerful if your city focuses on a category that is likely to keep growing steadily over the long term, without sharp ups and downs. History shows us that American university towns have done well economically, as have state capitals. They are inextricably linked to two growth industries – higher education and local government.
Today, there is no stronger long-term global industry than tourism. Those cities with a strong, lasting tourism base should be in a good position for the future. Thus, one great place to be is near a physical sight that is not going to move. If I could own any businesses in the world, my list would probably include Ruby’s Inn outside Bryce National Park in Utah and the Sheraton Internacional at the Iguazu Waterfalls (among the world’s largest) in Argentina.
But even without God’s assistance, you can create your own tourism, and that leads me to my next topic.
The World’s Two Most Amazing Cities
There are two cities that I love to visit that may surprise some readers: Las Vegas and Orlando (including Disney World). Some of my well-traveled friends, who share my love of Italy and of such further-off-the-beaten-trail places as Indonesia and Morocco, think I am crazy when I promote Vegas and Orlando. So let me tell you why I find these cities so worth visiting.
Stimulation. Vegas and Orlando are the two most successful purpose-built tourism cities on earth. They have based their economies totally on the provision of fantasy for large numbers of people. Therefore, you can see architecture, decorative motifs, light shows, fountains, and live shows like nowhere else on earth.
Operations. As much as I love vision and strategy, the ultimate success of any enterprise depends on the execution of details, of “making it all work.” Vegas and Orlando each draw over twenty million visitors per year. There are probably no two cities in the world that work as well. From your arrival at the airport to the local transportation system (including taxis) to personal safety, these cities are well-oiled machines built to handle huge numbers of people with minimal inconvenience and maximum speed and comfort.
Economics. In the old days, it didn’t take much to excite people, to put on a memorable show. Think back to the simple chorus-girl shows of Vegas in the 50s or the relatively old-fashioned amusement-park ambience of California’s Disneyland when it opened in 1955. Today, many people have surround sound and DVD players in their homes. Television, cable, and movies like Titanic give us exhilarating, out-of-the-world experiences. So to give us something we can’t get at home takes a huge imagination and a budget to match.
Only Vegas and Orlando have figured out how to finance such huge demands. Both do it by assessing a “cover charge.” In the case of Orlando, Disney charges visitors about $60 per day per park. With annual revenues in excess of $3 billion, Disney World Orlando is one of the world’s biggest “factories” – that is, one of the world’s biggest single-enterprise, single-location economic units. In Las Vegas, the cover charge is assessed by the slot machine, and you pay whatever you feel like paying. The totals generated are even greater than they are at Disney World.
Change. The status of both cities is defined by continuous evolution. Disney World gets a major new ride or major new section of the park each year; Las Vegas adds one or more new theme casinos annually. Thus, each repeat visit offers new images, new thoughts, new horizons.
Vision. While Disney World is the vision of a single corporation, a vision first ignited by a single man, Las Vegas has an equally powerful and consistent vision, although it is guided by the invisible hand of a multitude of independent enterprises each realizing the value of a shared vision. In some ways, Orlando and Las Vegas are extremely different from each other. One serves primarily adults in one of America’s driest spots and the spirit is “Anything goes.” The other serves couples and families in one of the wettest places in America and only very controlled things “go.” But they have both continued to build for over thirty years on a clear and unique vision of their role in the world. It would be hard to find any other cities on earth of which you could say the same.
Global draw/appeal. A diversified economy is usually a requirement for creating a great city, but the concentration of Orlando and Vegas on tourism has served them well. Eventually, almost the whole population of the world will cycle through these cities, drawn by giant conventions in one case and by the tugging hands of small children in the other. They are truly modern-day Mecca’s, as indicated by the number of nonstop international flights going to Orlando and the number of international conventions and trade fairs held in Las Vegas. While external factors like gasoline prices, fears of aviation terrorism, or foreign currency exchange rates may cause occasional economic bumps in the road for these two cities, tying their fortunes to tourism will continue to pay off for them as long as they remain true to their vision while continuing to evolve.
By now, you may be asking, “How does this relate to my city or my enterprise?” I think there is much to be learned from these two cities that has parallels in your enterprise. These lessons include:
¨ The power of vision
¨ The need to stick to that vision, even when everyone else says you are nuts
¨ The value of staying current and interesting, of always moving forward
¨ The importance of operations – of paying attention to details, of making it all work
Finally, the success that these cities have achieved through differentiation of their brand images and appeals can serve as a model for every enterprise, from General Motors to your corner dry cleaning shop.