Superstar Effect: Children’s Hospitals, Pharmaceuticals

Lurie Children’s Hospital (tallest building near center). Photo credit: Ala1188, CC BY-SA 4.0

Here are a couple more small news items in my “superstar effect” series. The first shows the superstar effect within cities. It’s a piece about how Chicago’s Lurie Children’s Hospital, one of the best in the country, is growing at the same time other hospitals in the area are cutting back on beds and services for children.

As smaller area hospitals close or consolidate their pediatric wards, Lurie Children’s Hospital is doing the opposite: launching a high-profile fetal surgical center—one of only a few in the world—and, separately, beginning a $51 million project to add 48 beds for critically ill kids and newborns. Meanwhile, executives are gearing up to pitch a second expansion phase to the board later this summer.

Lurie’s pedal-to-the-metal approach stands in stark contrast to what’s happening at many community hospitals, most recently Mount Sinai Hospital on the West Side. Among those sitting on the wrong side of a decades-long shift in pediatrics toward high-end specialty care for complicated cases—and cheaper outpatient care for everything else—Sinai announced in June that it will close its 24-bed children’s ward due to lack of demand. The Chicago area has lost 140 children’s beds over the past four years, by Lurie’s count.

Meanwhile, the Streeterville-based powerhouse keeps growing, reporting an 8 percent increase in 2016 operating revenue, to $922.5 million. Five years ago, it opened a shiny new lakefront campus—adjacent to Northwestern Memorial Hospital, Northwestern’s Feinberg School of Medicine and the new Shirley Ryan AbilityLab—and it is now ​ luring big-shot faculty from the nation’s best children’s hospitals. “We’ve really created a crown jewel of an academic medicine center,” says Lurie COO Michelle Stephenson.

Here again we see the absolute best getting stronger while everyone else declines.

The second piece is also out of Chicago. It’s about how Japanese pharmaceutical firm Takeda is shrinking in Chicago while expanding in Boston.

Over the past two years, Takeda has also gradually moved its global research and development and vaccine business units, which were headquartered in Deerfield, to Cambridge. As many as 600 Deerfield-based R&D employees and 150 vaccines employees were required to relocate as a result, sources say. A spokesman declines to confirm that number or say how many employees made the move.

The shift to Boston reflects a global consolidation in business operations and the need to be close to the nation’s top biotech talent. Takeda first established a presence in Cambridge in 2008, when it purchased Millennium Pharmaceuticals for $8.8 billion. The smaller Cambridge-based company, which manufactures a type of chemotherapy used to treat the blood cancer multiple myeloma, changed its name to Takeda Oncology in 2013. In January, Takeda acquired another Cambridge-based cancer drug maker, Ariad, for $5.2 billion.

“We are committed to our Deerfield location as it is home to our commercial organization, the largest of the three business units,” the company said in a statement. “In addition to our sales and marketing teams, medical affairs and clinical operations teams also work out of the Deerfield site.”

Here we see the key R&D functions getting sucked into the Boston region, where biotech has been consolidating for some time. However, you’ll note sales, marketing, and other business functions – areas where Chicago excels – are remaining in Deerfield.

This last story is very aligned with the findings of a new study from Boston Consulting Group’s Chicago office called “Four Imperatives for Well-Being in Chicago.” They note that Chicago has underperformed on GDP relative to coastal cities. One reason is that the highest productivity workers, like pharma R&D, are more coastally based, whereas Chicago’s knowledge workers are high value, but not the highest value in many cases.

Finally, in other Chicago news, Bon Appetit magazine just named Chicago its “restaurant city of the year.”

from Aaron M. Renn

Can Small Rust Belt Cities Survive?

The Wall Street Journal just ran a feature by Jon Kamp on the struggles of small Rust Belt cities, focusing on struggling Springfield, Mass.

The city of 154,000 is about 90 miles west of Boston, too far to double as a bedroom community, and New York City is also remote. For decades, Springfield had chugged along as a dynamo of innovation, with inventions ranging from gasoline-powered cars to adjustable wrenches to the sport of basketball. Now it is among many small and midsize cities dotting the Northeast and Midwest that have struggled to rebound from industrial decline and reap the same benefits as large cities from the U.S. economic recovery.

“We’ve been left out of the red-hot gains that you’ve seen in Boston,” said Eric Lesser, a Democratic state senator from the Springfield region. In Ohio, cities like Dayton and Canton haven’t shown the same hints of momentum of larger peers like Cleveland and Cincinnati, according to the nonpartisan Greater Ohio Policy Center.

A lot of people don’t realize that most of New England is basically Rust Belt. Western Mass is a good example of what I’m talking about.

I’ve long said that as a heuristic you need a million or more people in your region to really be viable in the Rust Belt. (Alternatively, you need half a million if you’re a state capital).

The metro areas with more than a million to a million and a half people have the major airports, thick labor markets, cultural institutions, amenities, etc. to be viable business markets. They also tend to have some corporate HQs or major assets that operate in the tradable sectors. Whatever the challenges in a Detroit or Cleveland, they’ve also got very powerful assets they can point to and build on for their future (large pools of engineering talent, the Cleveland Clinic, etc).

Smaller places have much more difficulty. They are often more purely branch plant towns. They are increasingly losers as success pools in larger places in these shrinking markets.

There are big differences between Detroit and Flint, between the 3Cs of Ohio and places like Youngstown and Toledo.

There are definitely exceptions. College towns like Champaign-Urbana, thriving industrial centers like Columbus, Indiana, etc. As I said, this is a heuristic, not a hard and fast rule.

It also doesn’t seem to apply outside the Midwest and Northeaster Rust Belt. There are plenty of thriving smaller places elsewhere: Provo, Fargo, Chattanooga, Asheville, Lexington, etc.

These small Rust Belt cities face major structural challenges and are a big part of what I’m thinking about these days. We’ve done a decent job at turning around some of the major cities. How can we now look at some of the next tier of places? What can be learned from the ones that are successful?  What can we learn from those who are making big efforts to transform their cities, such as what’s going on in Kokomo, Indiana?

These cities get less media coverage than the bigger ones, but are where a lot of the current urban challenges face us.

from Aaron M. Renn

Changing the Narrative in Cleveland

Cleveland, like many Rust Belt cities, has both an image and a self-image problem. It’s residents have simultaneously had passion and loyalty for the city, while also being filled with shame about it and relentlessly negative and fatalistic about its future. Again, this is something that is the case for any number of places.

This is a problem because the economy runs on expectations. Why do you start a business doing X? Because you expect to make a profit at it. Why move to city Y? Because you expect the job you have there will be a good fit or you otherwise expect that you are going to find personal satisfaction there.

If we expect the economy to do poorly, we tighten our belts and help create the weakened demand conditions that bring that economy about. If we have positive expectations about the future we behave differently.

Any number of cities seemed to be created from nothing much out of sheer boosterism, a sort of fake it till you make it approach that generated expectations that ultimately became a self-fulfilling prophecy. Houston may be a good example of this.

So in a sense the real future of a place depends on people’s expectations about it in the future. That’s not to say that any expectation can simply be willed into being. Just because you expect to win the Super Bowl doesn’t mean it will happen. But positive expectations play a critical role in creating positive realities.

Expectations are simply beliefs about the future, and thus can be shaped by sales and marketing techniques. This is part of what the city branding business is all about.

Traditionally, marketing folks in Midwest cities have struggled to definite a positive aspirational identity and sell it to the world. Cleveland falls into this category. But a recent article in Cleveland Magazine talks about how the narrative and expectations about the city have changed in light of recent developments such as the return of LeBron James and the resulting NBA championship.

“It got to the point where we began to believe the negative side of our image, to the point where we ourselves began to reinforce that,” says Mayor Frank Jackson. “When we did that, it became true, not only what the world thought we were, but also what we thought we were.”

Research by Destination Cleveland showed that in 2012, only 34 percent of locals would recommend Cleveland to friends and family. Consider that for a second. Only five years ago, 66 percent of Clevelanders were so down on their town they couldn’t even bear the agony of putting in a good word with their college pals or Uncle Al. Other similar cities would usually have positive numbers in the mid-60s.

Well, we’ve got a problem, thought David Gilbert, Destination Cleveland president and CEO.

Five years later, amid an avalanche of good news, our chests swell with civic pride. LeBron came back. We won an NBA championship and made it to the World Series in the same year. We hosted a major political convention. The renovated Public Square opened. The lakefront is blossoming. Health care technologies and professional services are opening a connection to the globalized economy. We are, proportionately speaking, drawing more than our fair share of millennials to the region.

The article goes on to describe the various ways in which Clevelanders are much more optimistic about the future of their city than they were in the past. That’s great news and a sign of shifting internal expectations.

It’s hard to convince the world your city is great if you don’t even believe it yourself. I myself have had the experience in other cities of having people berating their own town and wondering why people who had moved there had done such a darned fool thing. Changing the internal narrative really helps set the stage for changing the external one.

The article rightly highlights the risk facing Cleveland and other cities in the region. Namely that this expectations turnaround has been based on events like the NBA win, the GOP convention, etc. Previous Cleveland renaissances flamed out when those externals changed.

The challenge for Cleveland is to create something durable that carries them through the difficult challenge of long term change and dealing with some of the challenges they face. But for now the fact that the spirits of residents have been lifted – and not without cause – and that there have been some events that generated positive national press is good news for this long-struggling city. It’s right and proper to celebrate it.

from Aaron M. Renn

The Importance of Cities Finding Their Cultural Matches

Dewar’s Profile of Jerry Orbach, via The Hip Flask.

My latest column is now online from the July issue of Governing magazine. It’s called “The Importance of Cities Finding Their Cultural Match” and talks about how cities, like companies, have their own culture. And just as workers and firms need to have a cultural match, the same is true of cities and their prospective residents. Here’s an excerpt:

Economic development consultant Rod Stevens has suggested that communities could start unearthing and articulating their culture by creating “Dewar’s Profiles” of the kinds of people who are flourishing there. He took this idea from an old advertising campaign for Dewar’s scotch, in which the company ran full-page print ads featuring the creative, stylish, interesting people who enjoyed its product — fashion designers, wildlife conservationists and even lion tamers.

In repurposing a whisky ad as an economic development tool, the idea is to build profiles of the kinds of people who are succeeding in a community — high-impact entrepreneurs, for example, or community development people or civic leaders — and try to figure out what the common traits and experiences are that made them such successes there.

This isn’t just about collecting a matrix of data points, though it could include that. It’s also to tell the story of those people. How did they get to be where they are? How did they end up in the community? What experiences shaped them and helped them to succeed?

Click through to read the whole thing.

from Aaron M. Renn

Regional Travel Mindsets and Limiting Beliefs

I’m back with a new edition of the podcast where I talk a bit about something I highlighted in my monthly newsletter, namely regional travel mindsets and how they functionally become limiting beliefs for cities. I realized this over the summer when it occurred to me that I was not really taking advantage of being in the Northeast Corridor.

If the audio player doesn’t display for you, click over to listen on Soundcloud.

Subscribe to podcast via iTunes | Soundcloud.

Cover image by Alan Turkus, CC BY-SA 2.0

from Aaron M. Renn

A Little Bit of Penn Station Comes to Grand Central

Walking to the subway the other day I noticed that a long line (pictured) had formed in the corridor leading into Grand Central Terminal.

That’s odd, I thought to myself.  You don’t see lines like this at Grand Central.

It turned out that the line was a queue of people waiting to board an Amtrak Empire Service train to Albany.

After several derailments at Penn Station, Amtrak had to bite the bullet and close tracks there for over a month to make repairs. This has been dubbed the “Summer of Hell” in local media.

With capacity reduced, Amtrak, New Jersey Transit, and Long Island Railroad were forced to cancel some trains into Penn. As part of this, Amtrak re-routed six of its Empire Service trains to Grand Central, their former home.

This re-routing gave Albany passengers direct access to East Midtown and a much more pleasant station environment to boot. A friend of mine who regularly rides this train calls it his “Summer of Hell, Yes!”

But seeing this line, I realized that part of the problem at Penn Station is not caused by its dreary architecture and low grade retail services, but Amtrak’s operating practices.

I used to regularly ride via Metra commuter rail in Chicago. In Chicago, trains are mostly sitting on the platform ready to go, and you just walk up to your train and get on it when you get to the station.

When I moved to the East Coast, I got to experience the standard practice here: you have to wait in the station until they formally announce boarding about 10-15 minutes before the train. So you have tons of people standing around staring at the board waiting for their track to be posted, then a mass of people rushing for the platform.

Chicago’s stations are all terminal stations. Even Union Station is a double-ended terminal with only two through tracks. Penn Station is a through-running station with limited capacity, so you can’t just park a train on one of the tracks for an extended period of time.

But even where there’s a terminal station with ample track capacity, Amtrak still insists on Penn-like boarding procedures. This was even true in Chicago on the Hiawatha train to Milwaukee, which like the Albany trains are quasi-commuter. You’d have to hang out in Amtrak’s waiting room, get in a big line, then board shortly before departure, which tickets checked prior to boarding (though again on the train too).

Grand Central is a similar situation. I believe it has more tracks than any other rail station in the world. There’s no reason people couldn’t just walk right out and get into a waiting Amtrak train instead of having to stand in some huge line indefinitely. The customer experience would be better, as would the station experience.

Given that commuter rail systems can manage to provide a more pleasant boarding experience, I see no reason why Amtrak shouldn’t be able to as well, certainly for semi-commuter services at terminal stations.

These long, Penn Station like lines at Grand Central are an Amtrak self-inflicted wound.

from Aaron M. Renn

Superstar Effect: High Paying Tech Jobs

Apple’s new campus. Photo Credit: Dicklyon, CC BY-SA 4.0

I’ve been documenting the superstar effect. This certainly isn’t the only effect driving our economy. I plan to highlight come contrary trends in the near future. But I am constantly coming across articles that suggest superstar effects in action, and plan to keep highlighting them in this mini-series.

While much is made of the so-called “rise of the rest” in tech, a recent Wall Street Journal article noted that the bulk of high paying tech jobs, those with salaries higher than $100,000 per year, are being heavily created in just eight cities:

In theory, the high-wage jobs of the technology industry could be filled by people working anywhere. But in practice, the best tech jobs in the U.S., offering salaries in excess of $100,000 a year, are becoming increasingly concentrated in the metropolitan areas of just eight cities, according to new research.

The eight leading U.S. tech hubs account for slightly less than 10% of U.S. jobs and about 13% of overall job postings. But the cities — Seattle, San Francisco, San Jose, Austin, Raleigh, Washington, Baltimore and Boston — account for more than 27% of the listings for U.S. tech jobs, research from Jed Kolko, the chief economist of the job-search website Indeed, shows.

That’s already a striking concentration, but tech jobs with the highest salaries are even more centralized. Among jobs that typically pay over $100,000, nearly 40% of openings are in those eight cities.

Click through for more.

from Aaron M. Renn