©2007 ViTAL Economy, Inc. 1 Southern Illinois: Garden of the Gods Readiness Assessment Chapter 1:...

©2007 ViTAL Economy, Inc.— 1 —

Southern Illinois: Garden of the Gods

Readiness Assessment

Chapter 1: State, National & Global Trends

December 18, 2007; revised Feb 15, 2008

CONNECT SI

ViTAL Economy AllianceFrank Knott, Project Lead; Stan Halle, Senior Editor;

Jim Haguewood, Rob Beynon, & Neil Gamroth, Principal Economic Researchers

[email protected]; http://www.vitaleconomy.com


1.01 Globalization: The World is

Flat

1.02 eCommerce & Connectivity

1.03 KBE and Innovation

1.04 Transformation of U.S.

Economy

1.05 Livable Communities & Age

of Choice

1.06 Manpower & Immigration

1.07 Aging Population

1.08 Tourism

1.09 Logistics, Transportation &

Distribution

1.10 Energy

1.11 Conclusions

Table of Contents EXECUTIVE OVERVIEW:EXECUTIVE OVERVIEW: the Big Picture & the Big Picture &

Importance of Change in Southern IllinoisImportance of Change in Southern Illinois

READINESS ASSESSMENT (RA)READINESS ASSESSMENT (RA)

1. 1. State, National & Global TrendsState, National & Global Trends

2. Indigenous Resources & Industry Asset Mapping

3. Enabling Environment

4. Climate of Innovation, Incubation & Entrepreneurship

5. Southern Illinois Competitiveness

6. Regional Perspectives

7. Roadmap to Success

APPENDICES


Chapter 1:State, National & Global Trends

1.01 Globalization: The World is Flat …….. 5

1.02 eCommerce & Connectivity ………… 16

1.03 KBE and Innovation ………………….. 26

1.04 Transformation of U.S. Economy …… 39

1.05 Livable Communities & Age of

Choice …………………………………. 56

1.06 Manpower & Immigration ……………. 67

1.07 Aging Population …. 74

1.08 Tourism ……………. 87

1.09 Logistics, Transportation

& Distribution ..…….. 106

1.10 Energy .……………. 118

1.11 Conclusions ………. 133

Rural communities typically focus on their local geographic area and have limited insight into the larger world around them. This chapter provides key trend information and what this means

for Southern Illinois. Each of these trends represents potential opportunities for Connect SI.

Southern Illinois — "Garden of the Gods"


Understanding Trends is Critical: Assumptions are Often Wrong

“I think there’s a world market for maybe five computers”

- IBM Chairman, 1943

“I think there’s a world market for maybe five computers”

- IBM Chairman, 1943

“American business must embrace globalization as the new reality or risk losing their place in the economy of the future. There are others out there willing to do the work if we aren’t.”

- - “Globalization: The New Reality” - Univ. of Wisconsin Journal Of Management In Engineering / Nov/Dec 2000

“American business must embrace globalization as the new reality or risk losing their place in the economy of the future. There are others out there willing to do the work if we aren’t.”

- - “Globalization: The New Reality” - Univ. of Wisconsin Journal Of Management In Engineering / Nov/Dec 2000

"The range of what we think and do is limited by what we fail to notice. And because we fail to notice that we fail to notice, there is little we can do to

change, until we notice how failing to notice shapes our thoughts and deeds.” - Dr. Ronald Laing, Scottish Psychiatrist & Philosopher

"The range of what we think and do is limited by what we fail to notice. And because we fail to notice that we fail to notice, there is little we can do to

change, until we notice how failing to notice shapes our thoughts and deeds.” - Dr. Ronald Laing, Scottish Psychiatrist & Philosopher

Chapter 1: Perspective



1.01 Globalization: The World is Flat


Certain events, new technology and other shifts over the last two decades have fundamentally changed the rules of competition world-wide. Southern Illinois (SI) is now a virtual neighbor

with every corner of the globe — and, as such, can do business with any and all of them.


Globalization: The World is Flat — Overview

Tom Friedman’s book “The World is Flat” provides many insights about how dramatically the world has changed over the last two decades

While any one of the ten (more recently eleven) flatteners could be viewed as a notable trend, it is the cumulative effect of the whole set that is truly profound

Taken together, these flatteners have opened up the world to everyone Barriers to entry have all but disappeared regarding almost any business,

particularly those knowledge-based Size doesn’t matter as much as what the Region brings to the table Combining the unique assets of a region, packaging these in a compelling

manner, using connectivity to its fullest — are the key enablers Moving goods & services has become far easier than moving people — a

Thai farmer can sell mangos to Carbondale, but may find it rather difficult to visit


Every business in the world is now competing with each other in a closer and more intimate wayEvery business in the world is now competing with each other in a closer and more intimate way


Results of Not Playing on the Global Stage

SI’s economy has not achieved potential due to not effectively participating in the Global Economy

SI’s economy has not achieved potential due to not effectively participating in the Global Economy

Source: “State of Working Illinois”, by Northern Illinois University (Nov 2005); “21st Century Workforce” (May 2004); IMF

0

1

2

3

4

5

6

AAGR 1977-2001

Worldwide USA State-wide Southern Illinois

Ave

rag

e A

nn

ual

G

row

th R

ate

%

3.14%

2.19%

1.34%

5.62%


Reduction of trade barriers & increased capital investment flow internationally have fueled this dramatic growth

AAGR = Average Annual Growth Rate


Ten Flatteners: Intro

Source: “The World Is Flat”, by Thomas Friedman

The following five slides explain each of the Ten Flatteners in more detail

Global unification under the auspices of capitalism

Global unification under the auspices of capitalism

Web-Browsers equals technology for grandmothers

Web-Browsers equals technology for grandmothers

Web-based standardsWeb-based standards

Self-organizing collaborative communities

(Apache, Wikipedia)

Self-organizing collaborative communities

(Apache, Wikipedia)

Turbo-charged by the

dot.com bubble

Turbo-charged by the

dot.com bubble

China joins WTO

China joins WTO

Horizontal collaboration

(Wal-Mart)

Horizontal collaboration

(Wal-Mart)

Third-party managed logistics

Third-party managed logistics

Ability to build & maintain your own

supply chain (Google)

Ability to build & maintain your own

supply chain (Google)

Computing speed,file sharing, wireless

Computing speed,file sharing, wireless

SupplyChaining

Off-Shoring

Outsourcing

Open-Sourcing

WorkflowSoftware

New Age ofConnectivity

Fall of theBerlin WallAmplifying

Technologies

Informing

Insourcing

Ten FlattenersTen Flatteners

1

2

3

4

56

7

8

9

10



The World is Flat: Ten Flatteners

1. Berlin Wall Comes Down November 1989

• Millions of highly skilled engineers, scientists and technicians became available to serve the global market at bargain prices

• Human resource marketplace became global. Firms access best practice skills at competitive prices anywhere at any time. SI workforce supply chain must benchmark its performance against global best practice education & training

2. When Netscape Went Public, August 1995 from PC-Based to Internet-Based Platform

• The Internet became the medium for electronic communication. Anyone could communicate with anyone else on the planet without regard to boundaries

• Vertical, hierarchical control is gone. Geo-political boundaries became barriers to progress. The world became flat. Individuals communicating with each other, regardless of boundaries, create new ideas faster and cheaper. SI success will be directly related to how effectively it moves away from boundary-based policies and hierarchical organizational control




The World is Flat: Ten Flatteners

3. Workflow Software Enables a Global Supply Chain

• Workflow software seamlessly connects applications to applications, so that people can manipulate all their digitized content using their computers and the Internet — “People all over the world can now shape, design, create, buy and sell things, track inventories, prepare tax returns, read X-Rays from half a world away using a common software platform”*

• SI is competing in a world without boundaries, which uses workflow software to improve productivity and increase prosperity. SI’s economy will only be transformed when it encourages investment in workflow software to improve the efficiency and effectiveness of every citizen, business, NGO and government entity

4. Open Sourcing-Shareware

• Free tools from software (Linux) to servers (Apache) and encyclopedias (Wikepedia) enable millions of people and firms to compete with bigger organizations on a level playing field and get to market faster

• SI firms, governments, NGOs and citizens have the opportunity to leap frog traditional development timeframes and become global competitors through the savvy and effective use of Open Sourcing


Source: *“The World Is Flat”, by Thomas Friedman


5. Outsourcing, Y2K, Using Telecom to Contract to Another Firm in Another Country

• Y2K proved that firms could access well developed intellectual capability in developing countries 24 hours per day without owning the capacity or reducing quality. Production is no longer limited by time or geography

• SI’s mid-U.S. location and its significant educational resources positions SI to be a potential outsourcing hub for the “Heartland of America” to the world and the world to the Heartland of America. SI collaborating with next door neighbors’ resources versus competing with them is a critical step in making Outsourcing an opportunity rather than a threat

6. Off Shoring — Moving a U.S. Operation to Another Country • All prior flatteners prepared global firms to be able to produce the same product or service in

the same way to serve local markets and expand global capacity. Off-Shoring is occurring from U.S. locations to the world and from global locations to the U.S.

• Off-Shoring is as much an opportunity as it is a threat to SI. The key is to identify those indigenous human, natural, geographic location and knowledge resources that enable SI to offer products and services to the global marketplace at higher value rather than at commodity prices

The World is Flat: Ten Flatteners1.01 Globalization: The World is Flat



7. Supply Chaining — Connected Throughout the Chain Without Owner Control• Elements of the supply chain from raw material to customer are connected, resulting

in on-demand production and logistics resulting in increased efficiency and lower costs (Wal-Mart, CISCO, etc)

• Effective supply chaining requires that SI know what elements already exist in the region as well as where gaps exist. There is Supply-Chaining opportunities for SI in every field of economic output (tourism, healthcare, government services, agriculture, energy, healthcare products and services, etc). Expanded markets and increased numbers of higher value jobs resulting from effective supply chaining strategies

8. In-Sourcing — UPS into Your Company• Logistic companies (UPS, FEDEX) enter into a brand new market of relieving major

product producers of non-core competencies. This results in improved quality and speed of service to the customer. It enables customers to go global faster using proven logistics resources

• SI has an opportunity to become a global logistic services hub for logistics firms because of its geographic location. SI business and government entities can identify In-Sourcing opportunities for improving customer service, quality and speed to market




9. Informing: The Ability to Build and Deploy Your Own Personal Supply Chain — of Information, Knowledge, and Entertainment (Google, Yahoo, MSN Web Search)

• Informing is searching for knowledge, allies and collaborators and connecting them. Small and mid-sized enterprises (SMEs) are able to level the marketplace by being able to operate and present themselves as an equal to large multinational corporations

• SI businesses, governments, NGOs and citizens have the opportunity to create new services and products and reach broader local, regional, national and global markets through the use of informing technologies and strategies

10. The Steroids — Digital, Mobile, Personal and Virtual • Information and communication technology innovations have created the ability to

work from anywhere, anytime improving the speed of transactions whether we are at work, at home or on the go, whether we are wired or wireless

• SI, through Connect SI, is in the process of developing and implementing a broadband connectivity strategy that will enable all of SI to take advantage of these digital, mobile, personal and virtual steroids. Learning and adapting these technologies will be critical to SI economic transformation




Globalization & The World is Flat:Implications

SI is competing with World-is-Flat-savvy country economic strategies SI political/jurisdictional boundaries are a competitive disadvantage Collaboration across SI assets will be required to expand SI economy Continued internal competition will relegate SI to continued decline One of the fastest growing sectors: Logistics, Transportation & Distribution

It’s changing so fast, SI better get moving

SI broadband access, penetration and usage need to be at best practice levels

SI institutions, governments, citizens and businesses must become more knowledgeable about the value and impact of web based productivity tools to take advantage of the ten flatteners for accelerated SI economic growth

World is Flat education of SI citizens needs to become a priority strategy Wired and Wireless connectivity and applications strategy is essential

Global markets are an opportunity for SI growth, not a threat to growth SI needs to expand the percentage of its economy that is globally driven A greater focus on value added KBE growth is critical to future success of SI Public policies focused on industrial attraction must be changed



Globalization & The World is Flat: Opportunities

The Global Economy is growing at 4x’s the rate of SI — SI can literally double its economy by tapping into global markets, by fostering new working relationships with foreign companies that desire entrance to the U.S. market

This means jumping from 1.34% to 3.85% average annual growth rate (AAGR)

SI should use the ten flatteners as an opportunity to leverage its geographic location and inter-modal transportation and logistics assets to become a global logistics service center for In-Sourcing and Out-Sourcing

SI should leverage its significant research and development knowledge base as well as workforce education and training assets to develop a significant regional collaborative KBE and innovation growth strategy

SI has the opportunity to demonstrate to the rest of Illinois how to use the Ten Flatteners to develop a collaborative regional approach to economic development, 24x7 government services and industry cluster strategies that cross traditional political, industry and jurisdictional boundaries — building prosperity for all




1.02 Broadband Connectivity & eCommerce


While the Ten Flatteners have opened up access to global markets for all, broadband connectivity is the key to getting there — market access has expanded exponentially. To take

full advantage of this growing enabler, SI must learn how to maximize its usage.


Broadband Connectivity & eCommerce: Overview

Broadband connectivity is bringing the undeveloped and developing countries on even par with the industrialized nations — remoteness is now becoming an asset

Rural broadband parity with global best practice economies is as important as Rural Free Delivery was in the 19th century, electrification in the 1930’s, the Interstate in the 1960’s

Key trends to watch: Global connectivity has now put small & medium sized enterprises (SMEs) on an

equal footing with corporate giants competitively In 2006, the U.S. fell to 19th globally in household broadband penetration As of Dec 2005, 87.5% of U.S. at-work connected users had high speed internet

connections Broadband access is now one of the top ten considerations in deciding business

location Annual eCommerce growth is six-times faster than the overall U.S. economy Connectivity & eCommerce have made knowledge & human capital more

important than physical-infrastructure and financial capital

“Broadband has the power to make geographic isolation irrelevant” — Tom Friedman“Broadband has the power to make geographic isolation irrelevant” — Tom Friedman


Sources: Varied (see the rest of this Section)


ICT Makes a Disproportionate Contribution to National Productivity Growth

Country

1995-2000

Overall Economic

Growth Rate

% Contribution

of ICT

ICT Contribution to Economic

Growth

United States 4.3% 0.8 19%

Canada 4.75% 0.5 11%

Japan 1.5% 0.5 33%

Germany 2.5% 0.5 20%

France 2.2% 0.3 14%

UK 3.1% 0.6 19%

Australia 4.9% 1.3 27%

Belgium 2.8% 0.5 18%

Korea 5.0% 1.2 24%

Source: Enabling Canada’s Economic Potential: ICT and National Economic Performance, InterVISTAS, 2005

• ICT = Information, Communications & Technology

• Productivity growth is a key driver of economic growth

• Studies indicate ICT is responsible for somewhere in the region of 1/2 to 2/3 of overall productivity growth

• Evidence is showing that ICT’s contribution to economic growth is continuing to increase

•1950’s – 2%

•1990’s – 17%



Growing SI Broadband Penetration is Critical

Source: Organization for Economic Cooperation and Development (OECD) Broadband Statistics Dec 2005 (Survey of 14 Countries); Pew Internet and American Life Project — Rural Broadband Internet Use Feb 2006

% P

enet

rati

on

of

Po

pu

lati

on

0.010.020.030.040.050.060.0

2005

Southern Illinois USA-Rural France

United Kingdom USA-Average Japan

Belgium Sweden Canada

Norway Finland Switzerland

Denmark Netherlands Korea

Iceland (Best)

USAS

I

I C E L A N D


Since 2005, the U.S. has been slipping even further behind in Broadband penetrationSince 2005, the U.S. has been slipping even further behind in Broadband penetration

Technology Deployed in the U.S.

• DSL 39%• Cable 54%• Other 7%

Note: SI 12% penetration (Jan ‘06) has already increased by 1/3 to 16% due to the collaborative efforts of Network Providers COI & Connect SI

12% 24% 54%

©2007 ViTAL Economy, Inc.— 20 —Source: PEW/ Internet, “Home Broadband Adoption” 2007

Rural vs. Urban Broadband:

The Divide is Shrinking1.02 Broadband Connectivity & eCommerce

47% of all adults have a broadband connection at home (2007)

Among individuals who use the Internet at home, 70% have broadband and 23% have dialup

55% of Rural Internet users have a broadband connection at their home vs. 73% of Urban and Suburban

Rural broadband adoption at 31% continues to lag behind Urban 51% & Suburban 52%

55% of Urban and Suburban workers have hi-speed internet at their work vs. 38% of Rural workers

47% of all adults have a broadband connection at home (2007)

Among individuals who use the Internet at home, 70% have broadband and 23% have dialup

55% of Rural Internet users have a broadband connection at their home vs. 73% of Urban and Suburban

Rural broadband adoption at 31% continues to lag behind Urban 51% & Suburban 52%

55% of Urban and Suburban workers have hi-speed internet at their work vs. 38% of Rural workers

*SI

SI as of Jan ‘06 —Only 12% Penetration, less than 1/2 National

Rural Average!

SI as of Jan ‘06 —Only 12% Penetration, less than 1/2 National

Rural Average!

Quote from SI Citizen: “Connect SI has achieved morebroadband growth in one year than the previous decade!”

*SI

SI as of Nov ‘07 —Up 1/3 to 16% Penetration

SI as of Nov ‘07 —Up 1/3 to 16% Penetration


73% of American Adults Now Use the Internet

eCommerce Activity U.S. Adults Who Have Ever Engaged in Activity (%)

Researched a product or service prior to purchase 78

Obtained travel information 73

Purchased a product 71

Purchased or made a reservation for travel 63

Look for “how-to”, “DIY” or repair information 55

Online banking 43

Obtain financial information (i.e. stock quotes, mortgage interest rates)

41

Pay bills 38

Rate/ review a product, service or person 32

Use online classified ads or sites 30

Sell something 15

Buy/sell stocks, bonds, mutual funds 13

Source: PEW Internet & American Life Project Home Broadband Adoption March 2006



U.S. Online Retail Sales: More than Doubled in 3 Years*

*Excludes Travel, Prescription, and Auto*AAGR = Average Annual Growth Rate

Source: Jupiter Internet Shopping Model, 2006

0

20

40

60

80

100

120

140

1999 2000 2001 2002 2003 2004 2005 2006

U.S. Online Retail Sales

$Bil

lio

ns

$12.3

$63.9

$130.3

Since the 3rd Quarter of 2003 U.S. Economic Growth has Averaged 4.6%vs. 26.8% AAGR in Online Retail Sales — nearly 6x’s faster!

Since the 3rd Quarter of 2003 U.S. Economic Growth has Averaged 4.6%vs. 26.8% AAGR in Online Retail Sales — nearly 6x’s faster!



eCommerce Enables U.S. SMEs to Go Global

Strong U.S. growth in flexible and dynamic SMEs (small/medium enterprises) — driven by eCommerce

In 2005, SMEs employed 57 million Americans, over half of U.S. employment

65% of European Gross Domestic Product (GDP) comes from SMEs, vs. 45% in the U.S..

SMEs dominate development of new eCommerce sites: Accounted for 90% of new commercial sites in 2007 (vs. 80%

in 2006 and 75% in 2003) SMEs focus on eCommerce because it provides access to

international markets in a cost-effective manner

Small businesses turn to the Internet because: Impact – communicates a strong organizational identity Partnerships – allows companies to partner with distant

companies for product development, marketing, etc. Export Opportunities – opens up markets at lower cost of

entry Growth – replaces power in employee count with power of

technology

Strong U.S. growth in flexible and dynamic SMEs (small/medium enterprises) — driven by eCommerce

In 2005, SMEs employed 57 million Americans, over half of U.S. employment

65% of European Gross Domestic Product (GDP) comes from SMEs, vs. 45% in the U.S..

SMEs dominate development of new eCommerce sites: Accounted for 90% of new commercial sites in 2007 (vs. 80%

in 2006 and 75% in 2003) SMEs focus on eCommerce because it provides access to

international markets in a cost-effective manner

Small businesses turn to the Internet because: Impact – communicates a strong organizational identity Partnerships – allows companies to partner with distant

companies for product development, marketing, etc. Export Opportunities – opens up markets at lower cost of

entry Growth – replaces power in employee count with power of

technology

Source: SMEs rule the world. Peter Cochrane. July 2006

Export Power with eCommerce



Broadband Connectivity & eCommerce: Implications

Extreme growth in Online Retail Sales has a direct impact on Rural main-street retail as

well as entrepreneurial-generated goods and services

Broadband: key distribution channel for existing digital content & applications, driven by: Rapid diffusion of read/write storage within consumer access devices (MP3 players, PVRs)

Benefits of interactive online purchasing tools, such as search, find and compare tools

Efficiency gained in bypassing off-line old distribution channels, getting closer to “C” (Ref: P=>C)

Broadband content & applications: packaged or bundled with other services, driven by: Convenience of a single relationship for order entry, billing, & customer service,

Content & applications production stimulate significant cross-sector linkages, driven by: Sharing production costs for content across a range of broadband platforms

Broadband will stimulate new content and applications for the consumer and business

markets, driven by: Latent consumer demand for interactivity greater choices, e.g., anywhere, anytime, anything type access

Advanced user-devices, with technical capabilities approaching that of a PC, and the ability to perform multiple

functions


Broadband & eCommerce enables SI to take advantage of the Ten Flatteners to transform its economy — not be the victim of these

Broadband & eCommerce enables SI to take advantage of the Ten Flatteners to transform its economy — not be the victim of these


Broadband Connectivity & eCommerce: Opportunities

Southern Illinois Opportunity Sectors Sector Niche Applications

TourismDevelopment of a SI wide online tourism portal for one stop reservations and purchases (11 million people within 4-hrs drive)

Healthcare Utilization of a SI wide healthcare Intranet for EMR, telemedicine, etc.

International IncubationOnline access and interaction with global best practice R&D and companies desiring to enter U.S. markets

Telecommunications Creation of virtual organizations linking multiple sites using Intranets

Homeland SecurityRemote locations enable better distribution of knowledge assets that avoid “single-points-of-failure”, reducing 9/11-type impact & risk

Customer Service Development of virtual call centers for customer support

Product Design Online global collaborations for product design and maintenance

Education and Training Remote worker training for the national 10 million worker shortfall

Product ProcurementCreation of virtual buying groups, especially government for large common orders

Retail Services Online retail and service franchises for small business; mobile-IT desks

Southern Illinois Points of Light include:Illinois Virtual High School Audio-Image Marketing Shawnee Hills Wine Trail

Illinois Eastern Community College On-line Nursing

Southern Illinois Points of Light include:Illinois Virtual High School Audio-Image Marketing Shawnee Hills Wine Trail

Illinois Eastern Community College On-line Nursing






While connectivity is a great enabler, it requires knowledge, innovative thinking and entrepreneurial spirit to take full advantage of this conduit to global markets — growth,

prosperity, & economic advantage (past and future), come from innovation.


KBE and Innovation: Perspective

Every person, company or organization has IDEAS, INVENTIONS, PRODUCTS, & KNOWLEDGE with potential KBE market value

A KBE Economy is driven by the production, distribution and use of knowledge for growth, wealth creation, productivity and employment increases

KBE competition is based in innovation rather than price as in classical economies

Countries and regions that show more evidence of innovation are richer and grow faster

Companies that show more evidence of innovation post better financial performance

Source: ViTAL Economy


TIME

RE

VE

NU

E G

RO

WT

H

Traditional Economy

Innovation Economy


KBE and Innovation: Overview

KBE (Knowledge-Based Enterprise) Economies that grow as a result of innovation are transforming their regulatory and community resources to support just-in-time partnerships, lifelong learning and 24/7 global access

Trends to watch include: Small and medium-businesses (SMEs) & innovation have been key to U.S. job

growth in recent decades — many relying on unique knowledge or skills In the last ten years, 90% of all U.S. job growth has been in KBE firms of

50 employees or less Innovation is shortening the life-span of new/existing businesses — at ever

increasing speed KBE work and workers are more mobile and are choosing active lifestyle in Urban

or Rural settings … suburban living is no longer in vogue ALL Product and services have the potential to exchange ever quicker and

cheaper via the internet around the world Most SI businesses have not leveraged this opportunity Many new businesses have yet to be created to accomplish this


In a KBE Economy, the best strategy for profits isto invest in the connecting power of the internet

In a KBE Economy, the best strategy for profits isto invest in the connecting power of the internet



Knowledge versus Industrial Enterprise

Industrial Enterprise Knowledge-Based Enterprise

Economies of scale Smaller business units

Standardization of work Customization of work

Standardization of workforce Flexible, multi-skilled workforce

Financial capital as scarce resource Human capital as scarce resource

Corporate HQ as operational controller Corporate HQ as advisor & core competency guardian

Hierarchical pyramid structure Flat or networked structure

Employees seen as expense Employees seen as investment

Internally focused top-down governance Both internal and external distributed governance

Individualistic functional orientation Team orientation, emphasis on cross-functional teams

Information based on “need to know” Open & distributed information system

Vertical decision making Distributed decision making

Emphasis on stability Emphasis on change

Emphasis on vertical leadership Emphasis on empowered self-leadership


Business has shifted from where you compete to how you competeBusiness has shifted from where you compete to how you compete

Source: ViTAL Economy; 1000ventures.com


Must Haves of a KBE Economy1.03 KBE and Innovation

Education Level Percentage of college graduates is

primary indicator of higher per capita income

Science and Technology Activity 75% of personal income growth

during the 90’s tied to technology output

Export-Oriented Industries Industries oriented to

national/global markets produce higher value products and pay more

Entrepreneurial Initiative 90% of the new jobs created in the

new economy will be generated by companies of 50 or less employees

Innovation Across Industries and Sectors

Productivity gains do not depend on what region an industry competes, but rather how it competes

Talent Strategy Regions that promote talent across

industries are most likely to become economic winners

Reduction of Poverty and Inequality

Broad-based well-being of residents and decreased poverty are important for sustained increases in economic growth



Microprenuers are the Stars of KBE Economy

Micropreneurship is a business trend for individuals that falls between the traditional entrepreneur and the garage salesman

With eBay, Amazon, PayPal, low cost manufacturing in Asia, and logistical support from companies like UPS, an micropreneur can start a business even without a bank loan

These businesses run lean with very little out-of-pocket cost

New business creation is at record high levels: Over the past two years there have been between 2.3 and 3.5 million new businesses, 0.5

million per year in the 1970s — Source: NFIB Most will remain small mom-and-pop operations A small share of start-ups will grow into titans — exceptionally important: 4% of all U.S.

companies, yet create 60% of all new jobs

Technology progress stems from: New radical innovations (50%) Incremental or sustaining improvements (50%) 95% of radical innovations come from new companies, not big, established firms

R&D spending in largest companies declined from 65% to 43%, while R&D has grown in smaller companies


Source: National Federation of Independent Business


KBE Economy: Emergence of the Creative Class1.03 KBE and Innovation

The Creative Class — composed of workers whose job is to create meaningful new forms

Composed of scientists and engineers, university professors, poets and architects, to name a few

38.3 million Americans and 30% of the workforce in America identify themselves with the creative class

Grow more than 10% in the past twenty years Shaping a new culture for the America of the 21st century

The Creative Class and the Global economy Will bring any country who has them to great economic power and growth Driven by the shift towards technology, research and development, and the internet Creates new ideas, high-tech industry and regional growth Europe is now almost equal with America's numbers for this class Regions & cities compete to attract the Creative Class

Jobs follow the Creative Class!Jobs follow the Creative Class!

*Source: “Work of Nations” by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004: Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida


The Creative Class Fuels a KBE Economy

Business Trends Business, engineering and design schools are revamping curriculum within traditional

programs to meet companies demand for innovation, globalization, knowledge management and product design skills as competitive advantage

Companies are addressing customer and organizational demands for consumer power and online cultures by recruiting professionals who understand and can manage in a world where global consumers co-create goods and services in peer relationships

Businesses now recognize that a vibrant cultural arts community is critical to the development of livable communities which encourage creativity and innovation in their workforce.

Creative Worker Trends Creative workers play an increasing role in forming new jobs and companies, and helping

mature industries retool The U.S. non-profit arts and culture community grew by 24% from 2000-2005 generating

$166.2 billion in annual economic activity and supporting 5.7 million full-time jobs Creative workers thrive in an environment where there is an authentic sense of place, a

recognition of diversity and opportunities for an energetic exchange of ideas Creative workers are mobile and are attracted to areas where creativity is welcomed




SI’s Opportunity to Attract the Creative Class1.03 KBE and Innovation

Creative Class populations are converging in areas that provide them special amenities; the key is offering “the three 'T's”:

Talent — have a highly talented/educated/skilled population Tolerance — have a diverse community, which has a 'live and let live'

ethos Technology — have the technological infrastructure necessary to fuel an

entrepreneurial culture

The Creative Class is looking for regions that better accommodate their cultural, creative, and technological needs

SI can provide these qualities attractive to the Creative Class SIUC, the Community Colleges and R&D Parks are great attractors and

could be promoted to these creative people



High Performing Rural Communities

Rural communities that attract Creative Class professions have strong job growth and tend to generate more patents and adopt technology faster

Richard Florida Research defines the Creative Class as “jobs that are generated by KBE workers”

Counties with Creative Class attributes are among the top 25% highest performing in the U.S.

More than twice as many metro counties (593) have Creative Class attributes as non-metro counties (205)

Rural communities with a high percentage of Creative Class jobs had stronger job growth than Urban regions

Key to growth of rural communities, which support Creative Class professions, is the strategic role of a locally based research university

U.S.D.A. ranks Jackson and Williamson Counties as non-metro Creative Class counties;by comparison, IN had none; IL had only two others

U.S.D.A. ranks Jackson and Williamson Counties as non-metro Creative Class counties;by comparison, IN had none; IL had only two others


*Source: “Work of Nations” by Robert Reich;Advancing Vermont's Creative Economy, Sept. 2004: Arts & Economic Prosperity III, Americans for the Arts 2005; concepts by Richard Florida; http://www.ers.usda.gov/data/creativeclasscodes/


Role of Universities in a KBE EconomyT

each

ing

Res

earc

h

Ser

vice

Ivory Tower3 Pillars

Teaching to Learning

Classrooms Classrooms without walls

Teaching inputs Educational outcomes

One-way content delivery Two-way exchange

Preparation of next generation Continuous prep of all generations

Research to Innovation

Idea generation Idea application

Individual inventions Collaborative inventions

Single discipline focus Interdisciplinary focus

University-centered work Regional collaborations

Service to Shared Leadership

Episodic, short-term involvement Sustained, long-term involvement

Tactical, individual contributions Strategic, institutional commitment

Issue/cause focus Community/region well-being focus

Accountability for services rendered

Shared responsibility for results

FROM: TO:

Stewards of Place3 Pillars

Source: Collaborative Economics; 2006; Alliance for Regional Stewardship, AASCU, & NCHEMS



KBE and Innovation: Implications

No high-growth economy can maintain high wages and living standards, and hold its own in global markets, by producing standard products using standard methods

We live in an age of increasing pace of change and information innovation — healthy communities are both knowledge-centric & creative

Communities need to create a climate that encourages the development, incubation and growth of UNIQUE ideas/opportunities

Universities, colleges and incubators are critical to developing a prosperous KBE (Knowledge-Based Enterprises) economy

Effective technology transfer is key to ensuring that innovation is commercialized Productivity and prosperity cannot increase without innovation “In an age where economies are driven by ideas, universities must do more than creating &

disseminating ideas — it requires a redefinition of the university-model that fosters permanent engagement as a full partner in the viability & vitality of the region to which each university is connected, …”*

There are prerequisite elements/qualities to attract & retain KBEs in a rural community (see Section 1.05 Livable Communities)


* ©2006 Alliance for Regional Stewardship, AASCU, & NCHEMS “Tools & Insights for Universities Called to Regional Stewardship”


KBE and Innovation: Opportunities

Encourage the development of innovation-fostering incubators, knowledge transfer and commercialization systems, that lead to more local start-ups

Continually improve your ability to identify and commercialize new products, services and processes

Transform to a KBE Economy — SI has existing assets supporting innovation: SIU

research, Community College’s, Incubators, Research Parks, etc. The best opportunities will link R&D innovations with entrepreneurs and specialty finance bringing economic

benefit to the region

Over 7,000 new KBE jobs can be created by SI innovators with knowledge that can

address global trends such as: Green technologies Homeland security response and services Mining & safety-related technologies Bio-sciences, plant and animal

Existing success stories in SI are proof that this can be done: Dinger Bats — driven by individual passion to produce in SI and compete globally Dippin’ & Dots — new application for CO2 technology

Precision Mining (see Chapter 4) — innovative application of mine infrastructure Crownline Boats – innovators in recreational boating Green Locomotives – National railway CommunityLink – a service of Craig Williams Creative




1.04 Transformation of U.S. Economy


The U.S. is experiencing a profound economic transformation driven by globalization and our transition to an economy based on knowledge. Tried and

true industries of the past are shrinking and whole new ones are emerging.


Transformation of U.S. Economy: Introduction

America’s Great Lakes region, once the core of the nation’s industrial production and wealth creation, is struggling to maintain its ground

This 12-state region reaches from Buffalo and Pittsburgh in the east, to Minneapolis-St. Paul and St. Louis in the west

Some parts of the region, such as Chicago and the Twin Cities, are thriving in the KBE Economy, while other communities, like Buffalo, Detroit, Cleveland, and Milwaukee, are losing jobs, talent, and economic vitality

Great Lakes states — lots to offer, yet have suffered more than others: More than a third of U.S. manufacturing job losses from 2000 to 2005 occurred in

seven Great Lakes states Yet, colleges and universities in these states annually produce 38% of all U.S.

bachelor degrees, 36% of all science and engineering degrees, and 37% of all advanced science and engineering degrees

The Great Lakes watershed includes one-fifth of the world’s fresh water and almost 11,000 miles of coastline

Source: The Vital Center: A Federal-State Compact to Renew the Great Lakes Region: The Brookings Institution, October 2006



Transformation of U.S. Economy: Overview

KBE and innovation are fundamental driving forces changing the very basis of our economy — the rules, structure, systems have all changed

The old way: “For 25 years have only paid for my hands, when you could have had my brain for nothing” — GE hourly worker to Jack Welch, CEO

Trends to watch for: Over the last four decades there has been a monumental shift in the structure of

the U.S. Economy — from Manufacturing to Services 1997-2003 Manufacturing employment shrunk as a result of productivity improvements

due to more efficient use of labor, automation and new IT Service industries created more high-skilled occupations than manufacturing — 30%+ of

the these jobs were in the highest skill category of professional, technical, managerial and administration, versus only 12% in the manufacturing sector

Traditional commodities and services have also been transforming as new opportunities for value-added niches have emerged — e.g., in bio-agriculture creating new pharmaceuticals from tobacco

Agriculture is also declining as a % of the national economy


In ten years only one in seven businesses existing today will still be in business in the USA. Change is happening quickly, open your eyes or be left behind” - Peter Drucker

In ten years only one in seven businesses existing today will still be in business in the USA. Change is happening quickly, open your eyes or be left behind” - Peter Drucker



U.S. Economy Restructured Since the 1960s

0

5

10

15

20

25

30

Government

RetailWholesaleAgriculture

Manufacturing

ServicesF.I.R.E. Other

1960 2006

Share of U.S. Economy GDP by Economic Sector

Source: Bureau of Economic Analysis

From 1960 to 2006: Manufacturing’s share of GDP fell by more than 50%, while Service’s share almost doubled

From 1960 to 2006: Manufacturing’s share of GDP fell by more than 50%, while Service’s share almost doubled

*F.I.R.E. = Finance, Insurance & Real Estate


Biggest % Declines: Agriculture Manufacturing

Biggest % Growth: Services F.I.R.E.

Biggest % Declines: Agriculture Manufacturing

Biggest % Growth: Services F.I.R.E.


Globalization hits Manufacturing in Illinois

30%

17%

12%

0%

5%

10%

15%

20%

25%

30%

1970 1990 2006

Manufacturing sector in Illinois declined — from 30% of jobs in 1970 to 12% (2006), due to:

Increased automation requires less human labor

Difficulty finding skilled young workers

Source: sciencejobs.com, Insider Article

Manufacturing represents only 10% of jobs in the Southern Illinois region now

Net Result: traditional manufacturing is no longer a target area for growth and jobs

Manufacturing Employment as a % of IL Economy:



Manufacturing Job Loss in IL Was Worse1.04 Transformation of U.S. Economy

Illinois: Underachiever in Job Growth Illinois: Overachiever in Job Loss

IL lost 1.86 manufacturing jobs for every job lost by RMW (Rest of the Mid-West) between 1990-2006

IL lost 1.86 manufacturing jobs for every job lost by RMW (Rest of the Mid-West) between 1990-2006


U.S. Holds a Globalization Productivity Advantage

The U.S. leads all countries in the absolute level of labor productivity, both per hour and per employee

The increased productivity performance in the manufacturing sector causes optimism for the sectors ability to adjust to rising levels of competition

KBE innovations create advanced manufacturing leaders offering higher wage U.S based jobs

A 31% productivity advantage of the U.S. economy over OECD* members accounts for 3/4’s of the per capita income difference

A 31% productivity advantage of the U.S. economy over OECD* members accounts for 3/4’s of the per capita income difference

Source: Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers, 2004


*OECD = Organization of Economic Co-operation and Development


Yet Advanced Manufacturing Remains a U.S. Cornerstone

The manufacturing sector continues to account for 14% of the U.S. GDP and 11% of the total U.S. employment.

BEA analysis: “Every $1 of final demand spent for a manufactured good generates $0.55 of GDP in the manufacturing sector and $0.45 of GDP in the non-manufacturing sector”

From 1977 to 2002 productivity in the overall economy increased 53%; while manufacturing sector productivity rose by 109%

The manufacturing sector continues to account for 14% of the U.S. GDP and 11% of the total U.S. employment.

BEA analysis: “Every $1 of final demand spent for a manufactured good generates $0.55 of GDP in the manufacturing sector and $0.45 of GDP in the non-manufacturing sector”

From 1977 to 2002 productivity in the overall economy increased 53%; while manufacturing sector productivity rose by 109%

How does the U.S. compete?How does the U.S. compete?Manufacturing Industry FactsManufacturing Industry Facts

Rising productivity is the key to maintaining U.S. competitiveness in manufacturing

Innovation holds the key to productivity

Rising productivity is the key to maintaining U.S. competitiveness in manufacturing

Innovation holds the key to productivity

“A nation’s standard of living in the long term depends on its ability to

attain a high and rising level of productivity in the industries in

which its firms compete.”**

**Source: Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers, 2004



Declining Impact of Agriculture Jobs

Productivity led to resource and agricultural job losses throughout the 1900s

Farm jobs were reduced to less than 1% of all U.S. jobs in the 1980s

Reasons include: Productivity gains (doing more with

fewer workers) Consolidation of farms

Net result: traditional, commodity-based agriculture will not lead job growth or recovery

The future lies in value-added agriculture

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

1948 1977 1997

U.S. Resource Jobs Declined Steadilyas % of all jobs

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1977 1987 1997

U.S. Farm Jobs Declined to less than1% of all jobs in the 1980s

Source: BEA Note: Resource Jobs includes farming, forestry, hunting and fishing




New Forms of Ag = Value-Added Opportunities

Biotech-science refers to lab-based techniques developing biological research, that will supply goods and services for use by humans, such as:

Recombinant DNA

Tissue cultures-based processes

Biotech combines disciplines like genetics, molecular biology, biochemistry, embryology, cell biology, & seed hybridization

Linked to practical disciplines like chemical engineering, information technology, nano bio-technology and robotics

The U.S. biotechnology industry includes approximately 1,000 companies with combined annual revenue close to $50 billion

Typical bio-agriculture companies are small, averaging 30 employees

Bio-agriculture attracts venture-capital funding

SIU is a leader in these sciences and is actively transferring this research to new business start ups



U.S. Economy Growing in Value-Added Services

1800 2000

90% of the workforce was in Agriculture

90% of the workforce was in Agriculture

37% the workforce was in Agriculture

37% the workforce was in Agriculture

1.5% of the workforce was in Agriculture

1.5% of the workforce was in Agriculture

1900

4% of the workforce was in Services






Source: Richard W. Fisher, President, Federal Reserve Bank of Dallas, May, 2007

“Our per capita wealth has grown as we've moved up the value-added ladder. Most high paying jobs are in services — engineers, scientists, computer systems analysts, stockbrokers, professors, doctors,

lawyers, dentists, CPAs, entertainers and other service providers, to say nothing of the mega-compensation paid to hedge fund managers and financial engineers.…”

“Our per capita wealth has grown as we've moved up the value-added ladder. Most high paying jobs are in services — engineers, scientists, computer systems analysts, stockbrokers, professors, doctors,

lawyers, dentists, CPAs, entertainers and other service providers, to say nothing of the mega-compensation paid to hedge fund managers and financial engineers.…”



Service Exports: a Continuing Success Story

While the U.S. runs a trade-deficit on Goods, Services continue to be an export success story

U.S. service exports are growing rapidly. Between 2005 and 2006, U.S. service exports increased 12%

Service exports include: Travel Transportation (cargo) Royalties and fees Consulting

The majority of service exports are to Europe (40%), Asia-Pacific (27%), Latin America (17%), and Canada (10%)

0

50

100

150

200

250

300

350

400

450

500

$U.S. Billions

Exports Imports

Service Exports 2006U.S. Has Strong Service Surplus

Source: BEA



Shift from Industrial to Service Economies

1970 ($ Billions current dollars)

2006 ($ Billions current dollars)

Representation of Total GDP (%) 1970 – 2006

Trend

Gross Domestic Product (GDP)

$62,931 $589,598

Natural Resources $1,818 $3,761 2.9% - 0.6%

Construction $3,111 $28,041 4.9% - 4.8%

Manufacturing $18,176 $77,641 28.9% - 13.2%

Wholesale Trade $4,992 $42,284 7.9% - 7.2%

Retail trade $6,148 $33,874 9.8% - 5.7%

F.I.R.E.** $9,247 $132,963 14.7% - 22.6%

Services** $13,210 $214,214 21.0% - 36.3%

Government $6,230 $56,823 9.9% - 9.6%

Source: Bureau of Economic Analysis

Notes: Services sector includes health and educationF.I.R.E. = Finance, Insurance, and Real Estate

Illinois GDP by Industry


**F.I.R.E. and Services represent the sectors for high wage KBE jobs

**F.I.R.E. and Services represent the sectors for high wage KBE jobs


Breaking News Headlines

21st Century Economies Create Jobs DifferentlyJob growth in an economy is directly related to the percentage of your

economy that’s globally based

Economic Growth Is Global4.8% - 2008 growth forecast for the Global economy1.9% - 2008 growth forecast for the U.S. economy

-Business Week October 29th, 2007

U.S. Mega Companies Are Leading GlobalizationMega-U.S. companies are chasing global opportunities because the most growth is there

U.S. is leading globalization, not following itOff-shoring has been driven by U.S. companies not by foreign competitors

100% of Budweiser's profit gains in the third quarter came from sales in other countries -International Monetary Fund, World Economic Outlook, Oct. 2007


Connectivity enables companies of any size to access these growth marketsConnectivity enables companies of any size to access these growth markets


“This will be the 20th consecutive quarter in which foreign earnings of U.S. groups have grown at a double-digit clip; in fact, among the S&P 500, overseas profits are growing twice the rate of domestic operations profits”

- Bank of America

“This will be the 20th consecutive quarter in which foreign earnings of U.S. groups have grown at a double-digit clip; in fact, among the S&P 500, overseas profits are growing twice the rate of domestic operations profits”

- Bank of America

1999-2002 U.S. Company Profits

$149B in 18 countries; up 68% in 3 years

1999-2002 U.S. Company Profits

$149B in 18 countries; up 68% in 3 years

Successful SME’s are doing the same thingSuccessful SME’s are doing the same thing


Source: National Federation of Independent Business, Sept ‘07 Article; and Small Business Administration

Note: SBA defines Small Business as companies with up to 50 employees

Fortune 500: Chasing Growing Global Markets

• Small business** exporters account for nearly 30% of total U.S. exports, which will approach $1 trillion in 2007

• From 2000 to 2006, the number of small businesses doing exports jumped by 228%


Transformation of U.S. Economy: Implications

SI manufacturing employment has declined for 20+ years. Agriculture employment is also decreasing due to:

Increasing average farm size Productivity gains Loss of Agricultural land High rail rates for agricultural goods has reduced competitiveness

Regional and state policies as well as ED strategies need to more realistically reflect the growth of KBE firms and creative class employment in the economic growth sectors of F.I.R.E. and Services

Manufacturing and agriculture strategies need to be focused on value-added rather than commodity-based

SI has substantial and unrealized opportunity in the global economy


The Transformation of U.S. Economy continues — Southern Illinois as a whole has, in effect, been impacted by, but has not actively participated in these profound shifts!

The Transformation of U.S. Economy continues — Southern Illinois as a whole has, in effect, been impacted by, but has not actively participated in these profound shifts!


Transformation of U.S. Economy: Opportunities

Leverage the significant workforce development resources of SI to develop the Region into a global KBE workforce hub from the Heartland of America to the World

Leverage SI’s long growing season into value-added agriculture, bio-ag, etc. — applying Dixon Springs and SIU’s research & technology and its plant stress zone reputation

Develop KBE opportunities in existing SI industries — mining, bio-agriculture, waste water management, safety, advanced manufacturing, energy, etc.

Connect the healthcare sector into a comprehensive regional economic development strategy to achieve significant KBE job growth

Harvest & leverage asset mapping info to create sustainable new SI growth sectors

Examples of successes in Southern Illinois: Crownline Boats, Inc. — 150 dealers in US, Canada, Europe, South America, Russia and

Australia DBT America in Carrier Mills — Major Manufacturer and Re-builder of Mining Equipment Dippin’ Dots — Asia, Middle, East, Europe, Latin America, South America, Oceania


"There is no magic formula to get the Illinois economy moving again. The key lies in thousands of decisions made by individual firms and workers that can make the state more competitive.” *

"In the modern, highly competitive world economy, few advantages last forever. The only way to succeed in the modern economy is to constantly change to respond to competitive forces.” *

"There is no magic formula to get the Illinois economy moving again. The key lies in thousands of decisions made by individual firms and workers that can make the state more competitive.” *

"In the modern, highly competitive world economy, few advantages last forever. The only way to succeed in the modern economy is to constantly change to respond to competitive forces.” *

*Source: The Illinois Report, 2007



1.05 Livable Communities &

Age of Choice

As our economy continues to transform and businesses shift toward capitalizing on their knowledge-components, workers are also changing their loyalties and

the basis for their lifestyle decisions. These are folks who practice: “live where you want, work where you live”


Livable Communities & The Age of Choice: Overview

High skilled workers are choosing active Urban or recreational Rural lifestyle — fleeing the blighted suburbs and cities in search of cleaner, greener, smaller, safer and more neighborly communities

Trends to watch include: High skilled workers are choosing active Urban or recreational Rural lifestyle. Over

the last 10 years many rural counties have reversed decades of population decline More and more companies are embracing virtual teams collaborating across the

globe — fostered by connectivity and other supporting technologies —Employees are telling employers where they will live and work in the age of choice

Emerging KBE firms are prioritizing location decisions based on quality of life characteristics that are attractive and welcoming of the creative class workforce

As the baby boom generation begins to retire (2007-2025), a significant influx of urban retirees moving to rural communities is expected

1.05 Livable Communities & Age of Choice

“I have seen the critical role that the arts play in stimulating creativity and developing vital livable communities” — Paul G. Allen, Co-founder of Microsoft

“I have seen the critical role that the arts play in stimulating creativity and developing vital livable communities” — Paul G. Allen, Co-founder of Microsoft



Rural America is Coming Back

From 1990 to 2000, the population of non-metro counties in the U.S. increased by 10% — why?

The lower cost of living, the proximity to natural resources such as lakes and mountains and a less stressful quality of life

A significant attraction to many Americans and recent immigrants While some of these recent arrivals to rural America are retired, most of

them are still of working age — many bring wealth and a desire to remain intellectually engaged

Increased geographic flexibility for many workers, largely as a result of improved technology, has also allowed many people to move or build second homes in rural areas that are close to desirable recreation areas


Source USDA Briefing Room Report, Economic Research Service


Livable Communities: Portals to Most Cherished Places

Livable Communities offer an attractive package that makes them a community-of-choice:

Pristine environment, community appearance & proximity to natural beauty & cultural amenities

High quality, relevant education and high quality healthcare Safe & uncongested streets, building code & zoning that enhance property value Networks of like-minded thinkers which support a climate of innovation

Rural counties that had high levels of natural amenities – a mild climate, varied topography or access to surface water – averaged a 120% increase in population from 1970 to 1996

Whereas rural areas that offered few natural amenities averaged only a 1% increase in population during the same period

Rural regions that lost population in the 1990s were mostly regions dependent on agriculture or mining (and have not leveraged their natural assets)


“States with strong environmental policies have enjoyed more economic growth than those with weak ones” — Bank of America study

“States that do the most to protect their natural resources also wind up with the strongest economies and the best jobs” — Institute for Southern Studies Report

“States with strong environmental policies have enjoyed more economic growth than those with weak ones” — Bank of America study

“States that do the most to protect their natural resources also wind up with the strongest economies and the best jobs” — Institute for Southern Studies Report

©2007 ViTAL Economy, Inc.— 60 —— 60 —

Curb Appeal is Critical

Choosing a community is like buying a house; if you don’t like what you see from your car, you won’t get out

Curb appeal refers to the desirability of a community and a region when seen from the curb, from the outside

You cannot get the spouses of desired KBE workers to move to communities that do not have curb appeal

Just think about what it feels like when you drive into towns leading the way, including — Elizabethtown, Steeleville, Albion, Vienna, Metropolis, Red Bud, Fairfield — they act as gateways to SI’s Garden of The Gods

20% or less of SI counties, municipalities and townships have any form of planning, zoning or building codes or permits. Some national firms are now telling their employees not to buy homes in these communities to avoid resale problems

What do visitors see whenthey visit Southern Illinois?



Arts & Culture: Strong Attraction Potential for KBE Workers

Case StudyCase Study Key Elements of SuccessKey Elements of Success

Design – Identify what makes the community unique and appealing both to its residents and potential visitors

Adaptation rather than Replication – Success does not come from a cookie cutter approach, but rather identifying uniqueness, assessing existing programs and looking to the communities strengths and weaknesses

Involve Artists and Other Professionals – most successful revitalization programs are were developed by artists, art entrepreneurs, business owners and creative professionals

Establish Partnerships – the arts have the ability to create unique and new partnerships in the community with greater impact

Use Available Resources – under utilized or abandoned buildings, factories and historic structures become creatively woven into a revitalized area

Community Involvement – revitalization projects with the greatest chance for success are ones that target the local community and tourists

Design – Identify what makes the community unique and appealing both to its residents and potential visitors

Adaptation rather than Replication – Success does not come from a cookie cutter approach, but rather identifying uniqueness, assessing existing programs and looking to the communities strengths and weaknesses

Involve Artists and Other Professionals – most successful revitalization programs are were developed by artists, art entrepreneurs, business owners and creative professionals

Establish Partnerships – the arts have the ability to create unique and new partnerships in the community with greater impact

Use Available Resources – under utilized or abandoned buildings, factories and historic structures become creatively woven into a revitalized area

Community Involvement – revitalization projects with the greatest chance for success are ones that target the local community and tourists


Rock Island, Ill. pop. 38,714 Began with a small startup grant to construct 4x8

displays for juried Phantom Art Gallery in the windows of empty storefronts in downtown

The Phantom Art Gallery increased traffic in the downtown area, valuation of the downtown and utilized the arts as a tool for revitalization

The first festival produced by The District was “Ya Maka My Weekend”, held in the summer of 1992 with only six weeks of planning

Vacant store fronts have been filled, long dormant upper floors have been transformed into loft apartments, and more than 60 new businesses have opened

The District has propelled Downtown Rock Island from worst to first. In 1990, Rock Island was perceived as having the worst downtown in the Quad Cities and in 2000, 2002, and 2005 it was perceived as having the most active

Rock Island, Ill. pop. 38,714 Began with a small startup grant to construct 4x8

displays for juried Phantom Art Gallery in the windows of empty storefronts in downtown

The Phantom Art Gallery increased traffic in the downtown area, valuation of the downtown and utilized the arts as a tool for revitalization

The first festival produced by The District was “Ya Maka My Weekend”, held in the summer of 1992 with only six weeks of planning

Vacant store fronts have been filled, long dormant upper floors have been transformed into loft apartments, and more than 60 new businesses have opened

The District has propelled Downtown Rock Island from worst to first. In 1990, Rock Island was perceived as having the worst downtown in the Quad Cities and in 2000, 2002, and 2005 it was perceived as having the most active

This example is a “proof of concept” to the VE principles underlying Connect SI This example is a “proof of concept” to the VE principles underlying Connect SI


Leveraging Arts & Culture in Livable Communities

Local Non-Local

61% 39%

$19.53 $40.19

Source: Arts and Economic Prosperity III, 2005


Arts and Culture Audience Spending

Avg: $27.79 per person, per

event

+28%

U.S. Non-Profit Arts and Culture Industry

$53.2

$80.8

$63.1

$103.1

$0$20$40$60$80

$100$120$140$160$180

2000 2005

Audiences

Organizations


Most counties have less than 1% of their employment tied to the arts Most counties have less than 1% of their employment tied to the arts

Source: Amber Waves, 2007

Rural Counties Are Arts Magnets

• Rural communities as arts magnets demonstrates their ability to attract and retain creative talent — related to the initiatives promoting rural cultural tourism

• A primary component to creating rural arts magnets is the region’s ability to retain college educated workers


©2007 ViTAL Economy, Inc.— 64 —Source: William H. Frey analysis of 2000 U.S. Census

Livable Communities Practice Green Economics

Purchase products that have been produced using recycled materials

Apply sustainable building designs to help reduce the consumption of non-renewable resources, minimizing waste and creating healthy environments

Utilize environmentally friendly service contractors for activities such as hazardous material handling and waste management

Development and implementation of cost effective waste prevention and recycling programs including waste collection, reuse strategies and disposal of excess and depreciated inventories

Promote markets for locally grown food…will be $7 billion market by 2011

Develop innovation strategies that grow new green KBE businesses

Buy and lease environmentally friendly vehicles that use renewable fuel sources and have a lower overall consumption

Business Week 2007: “Green equals Profits; Green equals Economic Growth”Business Week 2007: “Green equals Profits; Green equals Economic Growth”



Livable Communities & Age of Choice: Implications

KBE and other high wage earners have a CHOICE were to: #1-live and #2-work

Communities that proactively seek to become prime locations for these folks will benefit the most

Standards and improvements to one community or neighborhood is not enough to be considered a Livable Community

Joining forces across a region is essential to muster the necessary resources & critical mass needed to become a true Livable Community

SI has thus far missed the ‘rural revival’ Rural areas with natural amenities, recreational opportunities and/or quality of life

advantages are seeing significant population growth (2000 Census Analysis) An active arts and culture character is a primary part of a Livable Community

with benefits including the attraction of visitors and new investment Community events and festivals highlighting unique local artisans and culture are

‘hot’ and relatively a simple way to differentiate a community

Unless Southern Illinois has ‘CURB APPEAL’ it will decay as the U.S. transient population looks for a better life for both work and active retirement

Unless Southern Illinois has ‘CURB APPEAL’ it will decay as the U.S. transient population looks for a better life for both work and active retirement



Livable Communities & Age of Choice: Opportunities

Southern Illinois has all of the attributes & assets to become a premier Livable Community — to do so, it will require:

Creating the linkage between quality of life and economic growth by adopting strategies that build upon its natural and cultural resources

Relying increasingly upon the attractiveness of your natural setting rather than only on extraction of raw materials for commodity markets

Adopting polices and initiatives that preserve the scenic, ecological and historical assets of a region

Pursuing an economic development strategy that is broader than the traditional tourism base to include high skilled – KBE workers

A Livable Community strategy is paramount to retaining the 19-40 age group In the interim, SI must capitalize on existing indigenous resources to become a major

tourist and retirement destination: Shawnee National Forest, many parks, lakes, rivers, wine-trails, bike-trails, golf-trails,

historic/cultural assets, arts centers & museums, artifacts, civil war history Outdoor — hunting, boating, fishing, birding, biking, state & local fairs/festivals, wine & golf

trails University & Community Colleges, speakers forum, significant performing arts resources Major college sports, minor league baseball Attractive climate

Successful towns that are already applying Livable principles on a local scale include, but are not limited to: Elizabethtown, Steeleville, Vienna, Fairfield, Albion, Red Bud, ….






As the global, national and local economies shift, there is a significant and rapidly growing gap between workforce supply & demand — skill sets as well as sheer number. This is both

an enormous challenge and an opportunity for Southern Illinois!


Manpower & Immigration Overview

Growth of regional economies will be more negatively impacted by long-term manpower and immigration trends than the Ten Flatteners — regional economy strategies must deal with these trends or economic growth will slow further

Workforce Trends to watch: By 2010 there will be 150 million (M) jobs in the U.S. with only 140M people to fill

them — hence the 10M worker shortage U.S. workforce grew at rate of 30% in 1970’s, at 12% in 1990’s, now slowing to 3%

and leveling off by 2010 Ever increasing need for skilled workers — U.S. businesses are requiring higher

levels of education, but workforce is projected to have declining skills 34% of adult workers in U.S. now have a bachelor’s degree or better, up from 29%

ten years ago — however, percentage of 25-29 year olds with a bachelors degree or better has actually fallen in the last ten years

Since 1970, 90% of the growth in the U.S. workforce has been filled by non-U.S.-born workers

Human Capital is replacing Physical and Financial Capital as the most important “capital resource”




Talent Supply/Demand Disconnect

Source: Global Manpower Report, 2005

Number of people of available/required by skill level

$/hour & skills

Supply of workers

Demand for workers

Men Women

Pronounced over-supply of low-skilled

labor

Lack of resources creates tension on the

high-skills market

Over-supply of low-skills resources creates

unemployment

Developed Economies Labor Market


There is an oversupply of low-skill workers and shortage of higher skilled workers There is an oversupply of low-skill workers and shortage of higher skilled workers


Aging Workforce Effect on U.S.

Since June of 2006 an average of 15,600 workers retire everyday Versus 300 per day in 1972 Number has grown 6-fold since 1991 (2,600/day)

Aging Baby Boomers — 77 million workers due to retire by 2010 Boomers make up about 33% of U.S. workforce today Through 2021 there will be no increase in native-born workers in the

prime age category of 25-54 year olds — any growth in the labor force will come from older workers and immigrants

By 2010, 35-44 age cohort in workforce declines by 19%…those typically moving into upper management

50% of the federal civilian workforce is eligible to retire by 2011 As the U.S. workforce grows older and ultimately retires, the loss of

institutional knowledge will be immeasurable

Source: Conference Board and Forbes, Aspen Institute, National Governor’s Association, BLS; AFT



U.S. Losing Competition for Skilled Immigrants

The new international labor market: OECD countries compete for the world’s most skilled immigrants, people with a university degree or more education or training

In 2000, the U.S. had 12.5 million immigrants with a high school education or higher, the highest total in the OECD

But measured by net “brain gain, ” skilled immigrants versus skilled expatriates compared to working age population, Australia and Canada out compete the U.S.

For example, a high proportion of Australian doctors are now foreign born

And the U.S. is increasingly restricting young graduate student entries

0

2

4

6

8

10

12

14

Percentage

Australia Canada U.S.


Net Brain Gain, 2000U.S. = Half of Australia and Canada

Note: Net Brain Gain is foreign skilled workers minus skilled expatriates as a % of working age populationSource: Docquier & Marfouk from David Bartlett, “U.S.

Immigration Policy in Global Perspective”


Manpower & Immigration: Implications

U.S. not producing or retaining workforce necessary for growth Regional economies who welcome non-U.S.-born workers will be better positioned to benefit

from these trends U.S. not effectively leveraging its strong workforce development assets to positively respond

to trends Educational attainment not keeping pace with job trend requirements U.S. supplying workers with qualifications that address declining demand for low skill jobs

rather than serving the expanding demand for higher skill workers Any region that can successfully produce a globally competitive workforce, will secure

the ultimate competitive advantage for the next three decades Training and education are a key workforce priority Skills gap range from basic (literacy, numeracy) to complex (computer sciences & application

knowledge) The U.S. economy will require an influx of immigrants to meet industry demands or the

economy will atrophy as a consequence Many of these workforce immigrants will require training due to lower levels of education and

skills This will require a multi-cultural understanding and management skills Regional economies who welcome non-U.S.-born workers will be better positioned to benefit

from these trends



Manpower & Immigration: Opportunities

Position SI as a national workforce development center for addressing the ten million skilled worker shortfall by 2010

Leverage 60+ years of experience at SIU with over 100 cultures to create an attractive environment for retaining and growing immigrant workforce

Improve workforce development value chain alignment and strategies (K-12, Higher Education, Workforce Development Centers, and industry etc.)

Establish measurable strategic goals for raising educational attainment levels of SI and SWI within next 10 years and link this with economic development initiatives to gain traction & funding

Embrace workers in their 50’s and 60’s now through creative approaches that move them from a mindset of wanting “freedom from work” to a desire for the “freedom to work”

Promote inclusiveness by tapping into underemployed and unemployed non-traditional labor sources

Reverse the brain drain of 20-29 year olds in SI and tap into the thousands of SIU International students who would like to stay in SI, but see no opportunity

Emphasize KBE skill focus of current and future workforce


In the next two years CHINA will graduate more MBAs than the U.S. currently has enrolled students in all our colleges today - USA Today

In the next two years CHINA will graduate more MBAs than the U.S. currently has enrolled students in all our colleges today - USA Today





There is a coming tidal wave of retirees as Baby Boomers turn 65. Those communities that position themselves as an attractive retirement setting with all the

commensurate amenities will capture a big share of this future reality.


Aging Population: Overview

In addition to the significant impact that aging has on the U.S. workforce shown in the previous Sub-Chapter 1.06, these same shifts will create enormous challenges as well as opportunities for communities across the country

Trends to watch include: As noted in Section 1.06:

Since June of 2006 an average of 15,600 workers retire everyday Versus 300 per day in 1972 Number has grown 6-fold since 1991 (2,600/day)

Aging Baby Boomers — 77 million workers due to retire between 2010 and 2030

Retirees are attracted to warmer climates with active-lifestyle amenities and lower cost-of-living

Retirees are also more attracted to graduated-care facilities, ranging from independent- to assisted-living with a variety of supportive healthcare and other services all under one roof

An increasing number of retirement-age folks are electing to stay employed (full-time or part-time), in part to continue receiving healthcare benefits and supplemental income

Over the next ten years, for the first time in U.S. history, population growth will be driven not by increase in birth rate, but by a decrease in mortality rate

Baby Boomers spend more than any other age group on travel, recreation and personal care products




From Birth to Retirement1.07 Aging Population


Some Midwest Counties are Retirement Destinations

Retiree-age newcomers to non-metro areas trend to be better educated, wealthier, and more likely to be married

They tend to relocate in non-metro areas adjacent to large cities with services

Rural Counties are Losing or Gaining 65+ populationCounties with over 18% 65+ years old population, 2000

Some Midwest countiesare retirement destinations


©2007 ViTAL Economy, Inc.— 78 —Source: William H. Frey analysis of 2000 U.S. Census

Other States Vying for Seniors

Nevada's elderly population grew by more than 70% during the 1990s Senior growth in Alaska, Arizona, New Mexico, Hawaii, Utah and

Colorado all exceeded 25% Florida, South Carolina, Texas, North Carolina and Georgia all

experienced senior growth rates during the ‘90s of 19% or greater These states are attractive to people of retirement age because of

their wide array of amenities, such as warmer climates and lower living costs

Many states in the South have made concerted efforts to lure seniors who, at least in their immediate post-retirement years, tend to contribute much more to the local economies and tax bases than they cost

Many well-off ‘yuppie elderly’ 65-74 years old have considerable disposable income, good health and remain in married-couple households



2007: Baby Boomers Turning 65 in IL & SI

2010 is the year Baby Boomers start turning 65 — representing the end of the Great Depression

The population 65+ has declined since 1990, but will now begin to quickly increase

SI’s 65+ population is about 6% higher than IL as a whole

SI may see an out-migration of the 65+ population due to a lack of services available that this segment demands

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1990 2000 2006 2010 2020

SI IL

Proportion of Population

Represented by 65+ Age Segment

Source: U.S. Census Bureau



How Retirees Impact the Economy (1 of 2)

77 million Americans were 50 or older (28% of the U.S. population) — June 2006

Source: mynextphase.com: Retirement Facts & Trends”


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

80% of all Luxury Travel Purchases

47% of all Auto Sales

61% of all Over-the-Counter Drugs

77% of all Perscription Drug Purchases

54% of all Financial Assets

77% of all Consumer Demand

Seniors Population %

Seniors represent a disproportionately high % of purchases:

Taking advantage of this economic windfall requires a regionto craft specific senior-living economic strategies

Taking advantage of this economic windfall requires a regionto craft specific senior-living economic strategies


How Retirees Impact the Economy (1 of 2)

Starting in 2010: Boomers have 70% of the nation's net-worth and control 50% of all household

discretionary spending They will spend $2 trillion annually on consumer goods and services Adults ages 45+ will out spend younger adults by $1 trillion annually

Boomers have much more education than prior generations equals much higher earning power

Will have a continued attachment to the workforce during their retirement years

Boomers have been more mobile all of their life, 60+ population migration may increase from 4.5% to 20%

Boomers have a strong preference for small rural communities offering intergenerational social and recreational activities

Rural areas with retirement communities grew 16% in 1980's versus 4% for all other rural areas

Rural retirement destinations versus all rural areas between 1980-1990 increased median household income 4.2% vs 0.6%

Source: "How the Retirement of the Baby Boomers Will Affect You, Part II, BBRED Georgia Southern University



Senior Trends

Growing trend of seniors moving to retirement communities affiliated with colleges

For many people, living on or near a campus is better than a condo on the fifth green

Senior housing communities of the future will have majority of residents with higher education degrees

They will seek communities with college or universities offering life-long learning programs

Affluent seniors, the Baby Boomer Generation, will soon inherit the largest transfer of Generational Wealth

The Silent Generation, aged 74-84, will soon pass on their wealth (est. $71 trillion) to the Boomers

Visionary communities are already crafting senior living strategies to attract affluent seniors


Source: Threshold Development, Retirement Living Information Center and The Great American Wealth Transfer...Fact or Fiction? The Sharpe Group 2007


Future Housing for Retirees

Results from the 2004 Del Webb Baby Boomer Survey: “Fast Facts About Housing”

36% will move or plan to move when they become empty nesters; one-third of whom will move more than 3 hrs away

When they retire, 55% say they will move; 51% of whom more than 3 hrs away

26% will consider purchasing a home in an age-qualified Active Adult Community (versus 51% unsure and 24% who said no)

Of those purchasing a home, 30% prefer an Urban location, 29% want a community that maximizes local natural benefits; 22% like an active adult community located within a multi-generational development

Boomers are more than twice as likely as those aged 59-70 to prefer an Active Adult Community that is part of a multi-generational neighborhood

Source: mynextphase.com: Retirement Facts & Trends”



Big Shifts in Senior Living Preferences

Mar-Aug ‘07 Survey sponsored by ERA Research; conducted by Opinion Research

75% of 50+ men & women: want to be near family when considering their next move 20% are thinking about moving in next 5 years; 65% prefer a single family home 70% of those considering an active adult lifestyle community: being near friends &

family was a priority 6% (versus 2% last year) would consider moving to an active adult community

National Investment Center for Seniors Housing & Care Industry “2007 Edition of the National Housing Survey of Adults Age 55+”

12% (versus 7% in 1998) indicated they lived in housing** planned for 55+ age group 19% of 75+ years of age households lived in age qualified communities in 2007 37% of 60+households (versus 18% in 1998) were willing to consider age qualified

housing 9% of 60+ households (versus 4% in 1998) had decided to move to an age qualified

property in the future

**Age-qualified housing refers to active adult communities, independent living, assisted living, continuing care retirement communities (CCRCs), 55+ apartments and rent-subsidized housing



Aging Population: Implications

The aging population will create new needs and pressures for nutrition, healthcare, and housing on a vast scale

Communities must prepare for the onslaught Those communities that proactively position themselves and offer a combined

package of life-style, reasonable cost-of-living, attractive facilities and other amenities will benefit from an influx of wealth and community revitalization

Communities with growing % of elderly population need to have a proactive strategy with this population to provide these services & related infrastructure:

Arts & Culture Wealth management services Retail services Recreation — amenities for active seniors Tourism Independent living through graduated care Lifelong education Catering to families with children & grandchildren (visiting & living)



Aging Population: Opportunities

SI amenity & location assets are of keen interest to 30% of 77 million Baby Boomers SI land costs and underdeveloped land areas offer opportunities for senior living communities Emerging opportunities for high-end RV developments and active mature tourists Active lifestyle amenities of golf, fishing, hiking, birding across SI will receive more support

The purchasing power of future seniors is an opportunity for many SI business sectors Wealth management services and real estate development will expand Lifelong learning, performing and creative arts sectors will be in demand Boutique shopping villages and unique restaurant venues will be desired

Aging, financially-independent retirees will have major implications for healthcare Large increase in demand for specialty medical services for aging populations Opportunities to incubate and test new services, medicines and devices for aging population Expanded and changed critical skills requirements for professionals and para-professionals

Communities with pro-active senior living strategies benefit financially Communities that end up reacting to senior living trends suffer financially Now is the time for SI to get in front of and benefit from this on coming economic

tsunami

Every day, for the next 12 years: 18,000 USA workers will retire - U.S. News & World ReportEvery day, for the next 12 years: 18,000 USA workers will retire - U.S. News & World Report



The southern 16 counties are only getting 1.5% of Illinois tourism revenue, yet have 2.9% of the population (SI has 3.3%) and most of the Tourism assets! With over 11 million people within a

4-hour drive of SI, there is a huge opportunity to capture 2-to-3 times more tourism dollars.


1.08 Tourism

Southern Illinois — “Garden of the Gods”


Tourism — Overview An aging & more mobile population travels more for experience-based

pleasure Trends to watch for include:

Adventure: Half of U.S. adults have taken an adventure tourism trip in the last five years — 31 million adults engaged in hard adventure activities: whitewater rafting & mountain biking

Educational Travel: The learning aspect of travel is important to U.S. travelers, with 20% (30.2 million adults) having taken an educational trip to learn or improve a skill, sport or hobby in the past three years

The Internet & online services are very popular with travelers, who tend to be quite computer savvy — 65% of the 98.3 million travelers used the Internet to make travel plans in 2004

National/State Park Travel: American travelers love the great outdoors — 40 % of U.S. adults in 2003 have visited a national park at least once while on a trip of 50 miles or more away from home in the past five years

Historical Places/Museums are popular attractions for travelers within the U.S. 58% of U.S. adult travelers included an historic activity or event on a trip during the past year:

84.7 million U.S. adults Their households generated 143.5 million person-trips including a visit to historical places or museums

in 2002 41% of past-year travelers say they visited a designated historic site, such as a building, landmark,

home, or monument during their trip; 28% visited a designated historic community or town

1.08 Tourism



Tourism Trends & Impact1.08 Tourism

Trends:• More local car trips two-days from home• 58% of adult travelers trips will include historical and educational site visit• 65% will book trips on line• 23% of Boomers seek adventure trips• 55% of group travelers are going to family reunions or functions • Tourism spending will increase 15% from 2006 to 2010 to $821 billion• 89% of travelers will be under 55 years old

Impact:• 7.5 million Jobs in travel industry in the U.S.• $700B will be spent in 2008• Great Lakes region overnight stays to increase 3.5 to 4.3% annually• Non profit Arts and cultural activities generate $166.2 billion/year in revenue• Arts employs 5.7 million in full-time jobs• Arts events often return 299-387% on investment costs to local cities

Source: Tourism Industry Association; Arts & Prosperity II


New Kinds of Group Travel

Median spending for group gatherings is $1,800 (not including corporate meetings)

On average, 19 individuals attend a gathering and that event typically lasts 3.5 days

55% of group travelers are traveling for a family reunion or function

Younger respondents (21-34) are more likely to plan friend reunions, school group/class reunions, bachelor/bachelorette parties, and concerts or other entertainment/spectator sport events

Travelers making up the groups and meetings segment include family reunions, sports outings (ski, golf, tennis, etc.), friends' reunions (mancations, girlfriend getaways, fraternity/sorority, etc.), weddings, association/community groups, religious events and corporate meetings

Source: PhoCusWright, Inc. Dec. 2006

1.08 Tourism


The Tourism Market is Global1.08 Tourism

Source: World Tourism Organization

020406080

100

Spending (billions of $s)

U.S.SpainFranceItalyChina

U.S. #1 Destination for Spending, 2006(by Country of Origin)

Leisure,Recreation& Holidays

51%VisitingFamily and Relatives(VFR)

27%

Business

16%

Other 6%

Leisure and Business Travel Increasing;VFR Declining in Share

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1995 2010 2020

World Tourism to Double by 2020:Annual international tourism arrivals (000’s)

6.5% AAGRAverage Annual Growth Rate


QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

International Visitors = High Spend Rates: Tourism Revenue Opportunity

European Visitors:• 45% visit historical sites• 27% visit small towns• 27% see art galleries &

museums• 24% tour countryside

European Visitors:• 45% visit historical sites• 27% visit small towns• 27% see art galleries &

museums• 24% tour countryside

The U.S. receives almost 50 million international tourist visits per year: The U.S. receives almost 50 million international tourist visits per year: projected to increase 20% in five years

The U.S. receives almost 50 million international tourist visits per year: The U.S. receives almost 50 million international tourist visits per year: projected to increase 20% in five years

Average Canadian visitor spends $695 / tripTotal visits to U.S. = 15 million

Average German visitor spends $2,200/ tripTotal visits = 1.4 million

Average Japanese visitor spends $2,900/ tripTotal visits = 3.9 million

Average U.K. visitor spends $2,500/ tripTotal visits = 4.3 million

1.08 Tourism

04/10/23 ©2007 ViTAL Economy, Inc.

$585.8$555.7 $560.1

$606.9

$653.8

$699.9$733.9

$762.9$791.2

$821.0

$544.9$546.7

$300

$400

$500

$600

$700

$800

$900

1999 2000 2001 2002 2003 2004 2005 2006 2007f 2008f 2009f 2010f

f = forecast

Billions

Source: Travel Industry Association; U.S. Department of Commerce, Office of Travel & Tourism Industries; Global Insight

All Tourism Spending in U.S. to Increase 51% Over 10 Years1.08 Tourism


The demographics of adults booking online show high disposable income and an

active age range

Demographic Profile of Adults Who Book Travel on the Internet(24.7 million U.S. Adults)

GENDER

Male 60%

Female 40%

HOUSEHOLD INCOME

Under $50,000 32%

$50,000 - $74,999 27%

$75,000 - $99,999 17%

$100,000+ 24%

Average Income $89,100

AGE

18-34 41%

35-54 48%

55+ 11%

Source: Travelers’ Use of the Internet, 2000 EditionTravel Industry Association of America

U.S. median household income was $46,326 in 2005

U.S. median household income was $46,326 in 2005

89% of the travelers are under 55 years old

89% of the travelers are under 55 years old

The Tourism Customer1.08 Tourism


Tourism Impacts: SI Growth Potential

Tourism is big business in the U.S. 7.5M jobs are generated by travel Travelers spend $700B annually Travel generated a $7.2B trade

surplus in 2006 The SI tourism industry has far less

impact than its U.S. and IL impacts Annual spending per employee

U.S.: $93,000 IL: $87,000 SI: $73,000

The U.S. to SI spending gap is $20,000, or 27%

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

US

IL

SI

Annual Spending by Tourists Per Tourism Job, 2006

— SI behind U.S. and IL —

Source: TIA

U.S. Economic Impact, 2006

Expenditures $70B

Employment 7.5 Million jobs

Payroll $17B

Trade Surplus $7.B

Increased Spending per employeesignificant tourism growth opportunity

Increased Spending per employeesignificant tourism growth opportunity

1.08 Tourism


Location, Location, Location….

What does it mean? Most vacations are now

short— proximity and ease of access is key

Nearby centers include: Indianapolis, IN St. Louis, MO Memphis, TN Louisville, KY Nashville, TN

Grey Area Shows 4-hour driving time from Harrisburg

Population within 4-hour drive: 11,303,789

Grey Area Shows 4-hour driving time from Harrisburg

Population within 4-hour drive: 11,303,789

Potential GatewayTo region

Source: Map Point and Federal Aviation Administration

1.08 Tourism


Online Bookings Surpasses Off-Line Bookings in 2007

54% of all U.S booking will be done on the Internet in 2007

U.S represented 33% of total online and offline bookings (North America, Western Europe, Asia Pacific), but 60% of all online bookings

Hotels are the fasting growing online segment, surpassing airline, which had been the fastest prior to 2006

Be aware of Travel 2.0 — the industry’s use of Web 2.0 practices will empower the online consumer; tools will include:

Tagging Social content Social networking Blogging Virtual communities people point to as examples of Web 2.0

Source: PhoCusWright, Inc. Dec. 2006

1.08 Tourism


Arts & Culture Economic Impact

Full-Time Equivalent Jobs 5.7 million

Household Income $104.2 billion

Local Government Tax Revenues $7.9 billion

State Government Tax Revenues $9.1 billion

Federal Income Tax Revenues $12.6 billion

Source: Arts & Economic Prosperity III: The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences

$166.2 billion in total economic activity has a significant national impact

1.08 Tourism

Focusing on Arts & Culture gives SI a double win — tourism revenues and Focusing on Arts & Culture gives SI a double win — tourism revenues and helping build a more attractive Climate of Innovationhelping build a more attractive Climate of Innovation

Focusing on Arts & Culture gives SI a double win — tourism revenues and Focusing on Arts & Culture gives SI a double win — tourism revenues and helping build a more attractive Climate of Innovationhelping build a more attractive Climate of Innovation


Recent results of San Jose CA festivals in 2006

Arts & Culture Economic Impact1.08 Tourism


Trails = Recreational Tourism

Heritage Rail Trail County ParkHeritage Rail Trail County Park

• 21 miles in length running from the Mason Dixon Line to the York, Pennsylvania Historic District

• 64% of the users were from York County, with a third of the users travel more that 20mi to use the trail

• Biking is the predominate form of recreation on the trail, 80%

• 72% stated that “hard goods”, mostly biking related, were purchased in the area in the past year ($367 average spending)

• 2/3 state that they purchased “soft goods” during each use ($8.33)

• 2001 annual usage 247,000 with a population of York County, 381,000

• Expenditures related to trail activities = $90 million

• 21 miles in length running from the Mason Dixon Line to the York, Pennsylvania Historic District

• 64% of the users were from York County, with a third of the users travel more that 20mi to use the trail

• Biking is the predominate form of recreation on the trail, 80%

• 72% stated that “hard goods”, mostly biking related, were purchased in the area in the past year ($367 average spending)

• 2/3 state that they purchased “soft goods” during each use ($8.33)

• 2001 annual usage 247,000 with a population of York County, 381,000

• Expenditures related to trail activities = $90 million

Virginia Creeper TrailVirginia Creeper Trail

• 34-mile trail near Damascus, Virginia. Damascus is know as “Trail Town, USA” with the convergence of five major trails touching the Jefferson National Forest and Mount Rogers National Recreation Area

• Winter visitation projections = 24,000 and Summer visitations projections = 106,500

• 112,400 person trips per year

• 85% of all visits are by day users, 45% of the users are non-local

• The average distance traveled to utilize the trail was 154mi.

• Non-local day users expenditures per trip = $103

• Non-local overnight users expenditures = $120

• Total economic impact: Day users = $23,600/per 1000 trips. Overnight users $114,400/per 1000 trips

• 34-mile trail near Damascus, Virginia. Damascus is know as “Trail Town, USA” with the convergence of five major trails touching the Jefferson National Forest and Mount Rogers National Recreation Area

• Winter visitation projections = 24,000 and Summer visitations projections = 106,500

• 112,400 person trips per year

• 85% of all visits are by day users, 45% of the users are non-local

• The average distance traveled to utilize the trail was 154mi.

• Non-local day users expenditures per trip = $103

• Non-local overnight users expenditures = $120

• Total economic impact: Day users = $23,600/per 1000 trips. Overnight users $114,400/per 1000 tripsSource: National

Trails Partnership

Nature trails and biking paths can

be major attractions to

areas resulting in economic

benefits

1.08 Tourism


Growth Sectors Rating Assessment Rationale

Heritage Tourism SI is a historic region but lacks a name (e.g. Gettysburg) which attracts national attention

Festival TourismThe State Fair and festivals in the region are developed but are individual community focused

Hard Outdoor AdventureAttractive to Generation-Xers; mountain biking the only hard adventure opportunity.

Soft Outdoor Adventure SI offers a wide range of soft outdoor adventures now – hiking, camping, birding

Wine & CulinarySI has a growing wine and culinary sector, but lacks national recognition

Hunting and FishingRegion offers a wide variety of hunting and fishing experiences, including Sparta Shooting Complex and Rend Lake

SI Tourism Growth Sectors: Assessment

Source: InterVISTAS

1.08 Tourism

= Weak to None = Improving = Average = Good = Strong


Infrastructure Rating Assessment Rationale

Regional Internet Portal No easily discovered, one-stop portal for regional tourism information and bookings exists

AccommodationsLimited number of rooms, beds and campsites with infrastructure in SI, predominant in North-South

Attractions Few attractions with recognition outside the region

Transportation Lack of scheduled air travel into region inhibits national/international tourism potential

WorkforceSmall tourism workforce with relatively low pay. Relatively little 4-season business

Food ServicesLocal wineries, a few award winning BBQ & specialty restaurants offer culinary destinations

SI Tourism Infrastructure: Assessment

Source: InterVISTAS

1.08 Tourism


SI Tourism Opportunity

Projections:

1. Overall SI tourism industry increases by $300-$400M/year

2. SI tourism employment reaches Illinois state levels of 4.4% of total employment = 9,121 employment with an increase of over 3,500

3. SI tourism expenditures per job reach Illinois state levels of $87,000 per job

Projections:

1. Overall SI tourism industry increases by $300-$400M/year

2. SI tourism employment reaches Illinois state levels of 4.4% of total employment = 9,121 employment with an increase of over 3,500

3. SI tourism expenditures per job reach Illinois state levels of $87,000 per job

Expenditure Categories New Facilities and Business Opportunities

Transportation 50+ transportation companies, major increase in air-traffic, 100’s of charters

Lodging Estimate thirteen 80-room hotels

Food Service 25+ restaurants and specialty food service outlets

Entertainment 35+ venues

General Retail 25+ retail outlets, especially specialty goods

Other Business 100’s of businesses will experience growth and expansion opportunities

Specific SI Tourism Opportunities

SI Tourism Expenditures

1.08 Tourism


Tourism: Implications

Visitors are seeking new and adventurous/educational experiences largely within the U.S.; foreign travel to the U.S. is also growing

Niche markets like birding, culinary travelers, mountain bikers, and other “theme-based” packages are high growth markets

Communities/regions with user-friendly and integrated online presence have a competitive advantage over those that do not

Numerous tourism regions are branding themselves in a unique fashion — only the ones that deliver authentic experiences that lives up to the brand, will achieve long-term benefits

Major investment needed in tourism infrastructure and customer service resources, such as regional airports, new hotels, restaurants, etc., to support increased overnight-tourists

Rural economies successful at growing their tourism business move to a “four-season” industry with packages lifestyle offerings

1.08 Tourism


Tourism: Opportunities

Catering to international visitors — seeking quality experiences, accommodations and meals

Integrated “theme packages” across the 20 counties that leverages the history, culture, mild-climate, and natural beauty

Access greater overnight stays Southern Illinois already has

several notable successes: Wine Trail B&B Association in Southeast Encampment at Ft. Massac Bocce ball in Herrin World Shooting Complex Gold Trails

1.08 Tourism

TIA projected new tourism business areas

Generation-Xers & Millennials Travelers with disabilities Girlfriend getaways Mancations Destination weddings Procreation vacations Babymoons Medical/life-enhancement travel Voluntourism Pet travel Space tourism Culinary travel Higher-education travel



1.09 Logistics, Transportation & Distribution


As more and more global opportunities open up, logistics, transportation and distribution increase in importance — Southern Illinois is truly at the

crossroads of virtually all modalities.


Logistics, Transportation & Distribution: Overview

Globalization and the Ten Flatteners open substantial doorways Trends to watch for include:

Logistics and transportation is an exploding global market opportunity due to shifts in supply-chain management

Work has begun on doubling the capacity of the Panama Canal — this $5.5B project will provide access to wider ships to the East Coast and Texas/Louisiana harbors to feed the Trans-Mexican-Canadian superhighway with Chinese goods

Due to capacity constraints, security risks and weather vulnerability at North American coastal ports, trans-loading/intermodal facilities enable the effective use of smaller ships via inland waterways

The NAFTA Super-highway is a venture unlike any previous highway construction project — it is actually a daisy chain of dozens of corridors and coordinated projects that are expected to stretch out for several decades, cost $100’s billions and end up radically reconfiguring not only the physical landscape of these U.S., but our political and economic landscapes as well — Kelly Taylor, 8/06 “New American”


Sources: Varied (see the rest of this Section); US Department of Commerce, Menlo Worldwide, Plunkett Research, Ltd.


Key Transportation Trends

Transportation is one of the world's largest industries — sectors range from taxis to trucks to airplanes, trains, ships, barges, pipelines, warehouses and logistics services

In 2006, the U.S. Transportation Industry was about $1.6 trillion Includes for-hire and not for-hire sectors, support & repair Transportation directly employs about 4.5 million Americans — >10% of

U.S. economy In the U.S. alone, total freight shipment volumes are expected to

increase by 70% between 1998 and 2020 Texas A&M University, analyzed traffic patterns and delays in 85 U.S.

major metropolitan areas Total annual cost of traffic congestion in these cities was $63 billion 3.7 billion hours of traffic delay and 2.3 billion gallons of fuel consumed by

delays

Well-positioned rural regions have a strategic advantage in becoming a “traffic-free” hub

Well-positioned rural regions have a strategic advantage in becoming a “traffic-free” hub


Source: U.S. Department of Transportation




The World and Southern Illinois: Rail

From a regional network …

… to a North American one

SI is now the center of a rail network stretching to the Pacific, Atlantic and Gulf of Mexico SI is now the center of a rail network stretching to the Pacific, Atlantic and Gulf of Mexico


• When originally built in 1850’s, it’s goal was to connect Chicago with the Mississippi

• Modern rail is truly trans-continental, triangulating major seaports


U.S. Sea Container Traffic:Base of Globalization

Six-fold increase in U.S. container traffic since 1980 By 2010, containerization will be 50% greater than 2005 rates and by 2020, they will

more than double This indicates strong growth in international trade Container traffic already exceeds port and rail carrier capacity

Source: Cambridge Systematics


Over 10 million TEUs (20 foot-equivalent-units), are annually shipped back to Asia empty — a significant opportunity for SI to fill

Over 10 million TEUs (20 foot-equivalent-units), are annually shipped back to Asia empty — a significant opportunity for SI to fill




Container-On-Barge via Inland Waterways

Increasing sea container numbers, lack of U.S. truckers, cost of fuel among the factors driving containers to barges

This creates SI Mississippi and Ohio River terminal opportunities

Container on barge is developing on the Mississippi (Houston-Memphis) and will expand

Barges are less expensive because a barge can move 45 full-sized sea containers

These rivers have been key transportation systems for over 300 years

A ton of cargo can be moved 514 miles by barge on a gallon of fuel as compared to moving that same ton only 60 miles by truck or 202 miles by train

A ton of cargo can be moved 514 miles by barge on a gallon of fuel as compared to moving that same ton only 60 miles by truck or 202 miles by train

Source: Transportation for Illinois Coalition Press Release, Investment needed in Upper Mississippi-Illinois waterway for economic growth and jobs. September 15, 2006


SI centrally located on

the Mississippi & OhioRiver Systems


The Rhine as a Comparison

Rhine River container traffic increased from 10,000 units in 1975 to 2.3 million units in 2003

Container barges travel as far as Switzerland

Cost-of-labor favors barge over truck; albeit somewhat slower

Like the Mississippi, the Rhinestretches from ocean ports to the

Continent’s interior

The Swiss Rhine Container Terminal



SI Airports have capacity to accept large, jet aircraft & air-taxi service

Two major SI airports located near interstate highway and rail junctions, create the possibility of intermodal freight

Two major SI airports located near interstate highway and rail junctions, create the possibility of intermodal freight

Source: airnav.com

SI Has Significant Aviation Infrastructure

Southern Illinois aviation infrastructure includes: Three airports with instrument landing systems and runways over 6,000 ft Nationally acknowledged SIU School of Transportation

Including Aviation Management and Technology

Planned new Transportation Education Centre (TEC) at Southern Illinois Airport U.S. Transportation Command logistics specialist pool at Scott Air Force Base, an

SI neighbor — major “information exhaust” opportunity

AirportLargest

Runway

ILS

(Instrument Landing System)

Airframe/

Power Plant

Services

Scheduled

Passenger

Services

Mt. Vernon 6500 x 150 ft YES YES Not now

Southern Illinois 6500 x 100 ft YES YES Not now

Williamson County 8000 x 150 ft YES YES YES



Warehousing & Distribution: Trade Growth Area

Transportation and warehousing continues to grow, supporting international trade

Between 2004 and 2014, the U.S. economy will add half a million transportation jobs

The number of distribution centers is increasing

A typical center has over 200,000 square feet, part of an international chain, focused on key market sectors, and offers value-added services

Distribution Centre services include: Pick & pack Consolidation Customer system order processing Returns processing Quality inspection Assembly Damaged returns management Exporting packing & order processing Bar code processing Labeling EDI services Kit assembly Sub-assembly Build to order Facility management Transportation management

SI is situated in the population centre of the U.S., near where FedEx and UPS both decided to establish their national hubs — Distribution is an investment opportunity

SI is situated in the population centre of the U.S., near where FedEx and UPS both decided to establish their national hubs — Distribution is an investment opportunity


Source: U.S. Department of Transportation


Logistics: Unmet Opportunity

Growth of U.S. population for 2006 = 0.9%

California, Texas, Florida contained most of the fastest growing centers in the U.S.

Several centers within a day’s drive of SI included in 50 fastest-growing centers for 2000-2006 at growth rates of 12% to 98% (e.g., Red Stars)

Source: U.S. Census Bureau and Map Point

Note: Map shows calculated 8 hour driving time from SI

Illinois in Relationship to Nearby 50 Fastest Growing U.S. Cities



Logistics, Transportation & Distribution: Implications

Dramatic reductions in shipping costs via containerization has enabled globalization of manufacturing

Distribution is conducted close to end markets — Southern Illinois is near the population center of the U.S.

124 milion people reachable within 12-hour drive Distribution requires good rail and truck connections

Trade and distribution is projected to grow rapidly Will grow rapidly in the Midwest because of its central location

Southern Illinois sits on the ultimate U.S. logistics sweet-spot, the intersection of major North-South and East-West trade routes:

Will these bypass SI or will the Region be a substantial player? Through CN (was Canadian Northern RR), SI can potentially

interact with three U.S. and two Canadian coasts SI aviation assets have the potential of serving as a niche market

player within a mid-America Intermodal Logistics strategy



Logistics, Transportation & Distribution: Opportunities

Globalization has increased importance of transportation and logistics

SI is currently below national and state averages

CN has transformed the Illinois Central from a North-South operation to a strong East-West orientation serving three North American coasts via one railroad

SI global reach potential has significantly increased

SI has strategic geographic location especially to Eastern and Central U.S. Distribution centers favor center-of-population location Multimodal transport: Interstate/Rail/Barge

Opportunities: For multimodal/transload facilities — address 10 million TEU/year East-West deficit To attract distribution centers Range in complexity from simple distribution, to assembly and customization Explore niche-market opportunities for aviation assets

With the dramatic increase in the cost of fuel: Waterborne traffic becoming increasingly more attractive Key to keeping Illinois grains competitive in the world market Inland waterways re-opening as a major logics solution for East-West port congestion


SI infrastructure contains HUB facilities for ALL forms of transportation and distributionSI infrastructure contains HUB facilities for ALL forms of transportation and distribution



1.10 Energy

With global demand for energy ever on the rise, and renewable/alternative energy sources playing an increasing but still minor role, U.S. coal —

especially clean-coal — becomes increasingly important.



Energy — Overview

The World’s and U.S. appetites for energy continues to grow in all forms, and without a major technological breakthrough, carbon based sources will continue to supply the vast majority of raw material

Trends to watch include: 70% of world energy demand is specifically tied to economic growth in

developing countries If the price of crude oil stabilizes at $75 or greater, new technologies and

alternative sources of energy will emerge and impact markets U.S pubic policy decisions have the ability to influence markets quickly

and direct R&D investments Regions that can balance their consumption of resources with economic

growth will have a competitive advantage in the 21st century economy U.S. coal demand production grew only 5.4% between 2000 & 2005;

while prices went up 32.5%

1.10 Energy

Source: EIA (Energy Information Administration)


0100200300400500600700800

2004 2010 2020 2030

Developed Developing

0100200300400500600700800

2004 2010 2020 2030

Developed Developing

Projected World Energy Consumption in Quadrillion BTUs Global energy demand is projected

to increase over 50% by 2030, an average annual growth rate of 1.6%

70% of the increase coming from developing countries with China alone accounting for 30%

Fossil fuels will remain the dominate fuel source by 2030, 83% of the increase by 2030

The world’s growing hunger for energy will require massive capital investment; $20 trillion by 2030 (2005 dollars)

Power sector will require 56% of the capital investment cost Over one half of the energy investment will be in developing countries

Source: World Energy Outlook 2006

One quadrillion BTUs is equivalent to two million barrels oil per day

1.10 Energy Global Energy Demand Ever Increasing

Coal will see the largest increase in demand primarily for electricity

production — China and India will account for 80% of the demand

Coal will see the largest increase in demand primarily for electricity

production — China and India will account for 80% of the demand

©2007 ViTAL Economy, Inc.— 121 —Source: Global Energy Network Institute & Exxon/Mobil

1.10 Energy

How Global Energy Demand is Being Met

Although use of alternative energy sources are growing dramatically, coal and other fossil fuels continue to dominate


Liquid Energy Fuels Growth: 950% in 30 years

Source: Business Week, October 29, 2007; Energy Information Administration

0

2

4

6

8

10

12

1980 1990 2000 2004 2010 2015 2020 2025 2030

Canadian Oil Sands Ultra-Heavy Crudes Biofuels

Coal-to-Liquids Gas-to-Liquids Other

Unconventional liquid fuels will help compensate for an expected shortfall in ordinary oil

Mill

ion

s o

f B

arre

ls O

il E

qu

ival

ent/

Day

History Projected

1.10 Energy

SI has the opportunity to play a key role in coal-to-liquid and biofuels

2000-2030 Growth

Coal-to-Liquid

+138%

BioFuels +66%

Heavy Crude +65%

Canadian Oil Sands

+260%


U.S. = 51% increase in consumption = 17% of world totalU.S. = 51% increase in consumption = 17% of world total

China = 131% increase in consumption = 47% of world total India = 88% increase in consumption = 8% of world total Rest of the World = 38% increase in consumption = 37% of world total

Projected Coal Consumption: Next 25 Years1.10 Energy

0.0

50.0

100.0

150.0

200.0

250.0

2004 2010 2015 2020 2025 2030

Year

Quadrillion Btu

China

United States

India

Rest of World

Total

0.0

50.0

100.0

150.0

200.0

250.0

2004 2010 2015 2020 2025 2030

Year

Quadrillion Btu

China

United States

India

Rest of World

Total

74% Increase

World-Wide

Source: National Mining Association


Source: Energy Information Administration, Annual Energy Outlook 2007

1.10 Energy

U.S. Demand for Electricity Keeps Growing

2005 - 2030 Sector Demand Growth2005 - 2030 Sector Demand Growth

39% increase in the Residential Sector39% increase in the Residential Sector

17% increase in the Industrial Sector17% increase in the Industrial Sector

63% increase in the Commercial Sector63% increase in the Commercial Sector


Coal Nuclear Natural Gas Renewables Petroleum

2005 50% 19% 19% 9% 3%

2030 57% 15% 16% 9% 3%

Coal-fired power plants (including utilities, independent power producers, and end-use combined heat & power) continue to supply most U.S. electricity through 2030

Source: Energy Information Administration, Annual Energy Outlook 2007

1.10 Energy

Coal’s Role in Electricity Generation Increasing


Alternative Energy is Creating Ag Opportunities

Product / Ingredient

Product / Ingredient

Ethanol/CornEthanol/Corn

Bio-diesel/Soybean

Bio-diesel/Soybean

WindWind

U.S. Plants Owned

By Farmers

U.S. Plants Owned

By Farmers

70%In rural areas

70%In rural areas

40%40%

35%35%

Projected New Jobsby 2015

Projected New Jobsby 2015

203,879203,879

39,10039,100

12,50012,500

Projected GDP Increase

Projected GDP Increase

n/an/a

$46 billion$46 billion

$24 billion$24 billion

Even though renewable energy will be playing a relatively minor role over the next several decades, the opportunity for SI is still significant — agriculture, fuel production, distribution

Source: Business Week, Renewable Fuels Assoc., LECG, American Wind Energy Assn

1.10 Energy


The Real Price of CornThe Real Price of Corn

• Current price of U.S. corn is not even close in real dollars to the price in the 1970’s

• Recent price increase is still not close to the returns needed to provide farmers with an adequate income without government subsidies

• June 1, 2007 the U.S. ethanol industry had 120 active plants

• Capacity of 6mm gallons/year

• 6.4mm gallons of capacity under construction

• 2009 prediction – 1.3% of U.S. corn crop will be used for ethanol

Impressive Ethanol Production

Impressive Ethanol Production

Corn: Expanding as a Consumer Products Staple & Transportation Fuel

Corn Production to Meet New Demands

Corn Production to Meet New Demands

• Corn has become a staple in a variety of products:

• Soda sweetener

• Additive in animal feed

• Dextrose in jams & jellies

• High fructose corn syrup

• New technology has raised yield to meet rising demands

1.10 Energy


CleanTech is Attracting Venture Capital (VC) Investment

United Nations Environment Program Headline:

Investors Flock to Renewable Energy and Efficiency Technologies; Transactions Leap to Record $100 Billion in 2006 with $71 Billion into companies and new sector

opportunities

1.10 Energy

26.0%

10.0%

16.0%

38.0%

4.0% 6.0%

Biofuels Biomass & Waste

Solar Wind

Other Renewables Other Low Carbon

Global Investment in Renewable Energy

by Technology, 2006

Source: SEFI, New Energy Finance

27.5

49.6

70.9

0

10

20

30

40

50

60

70

80

2004 2005 2006

Global Investment in Renewable Energy 2004-2006

+80% +43%

$ B

illi

on

s


1.10 Energy

Energy: Implications (1 of 2)

Demand for sustainable and non sustainable energy is increasing in the U.S.

For strategic reasons, the U.S. would prefer to source more energy within the U.S.

Coal represents continued economic opportunity New coal opportunities are related to new technology

and knowledge based enterprises (KBEs) The new industry is knowledge intensive and require

workers with knowledge skills Alternative Energy offers Agriculture opportunity and jobs

New technology in bio-fuels could increase yield per bushel


1.10 Energy

Energy: Implications (2 of 2)

Breaking News: Clean-Coal has a long way to go to overcome it’s past ‘dirty image’

Maine still battling acid-rain Number of states have continued to reject coal-energy generation projects Potentially offsetting the above:

Clean-Coal technology is receiving major investment Bolstered by continued high cost per barrel for oil Breakthroughs could open the doors wide for existing Southern Illinois coal extraction,

transportation & labor

Breaking News: Ethanol in Illinois not keeping up with demand: Ethanol plant construction has stalled in Illinois; 38 permits issued since 2006 with

only five plants under construction Primary challenge facing new ethanol plants is the increasing cost of construction,

raising concerns about investor return on investment

“SI’s energy strategy should include processing of the raw material in the region, not competing in the commodity markets specifically in the area of transportation fuels” - RA interview

“SI’s energy strategy should include processing of the raw material in the region, not competing in the commodity markets specifically in the area of transportation fuels” - RA interview


1.10 Energy

Energy: Opportunities

Given the demand and cost of energy, opportunities exist for oil, methane, coal, ethanol, as well as coal gasification & CO2 sequestering

SI has the potential to develop coal, oil & gas, and agriculture product related energy Opportunities relate to mining, agriculture and manufacturing

Coal opportunities are related to new technology and knowledge based enterprises (KBEs) — e.g., export coal processing & safety “knowledge” to China & India

Even coal demand is projected to grow At SIU, the region has educational resources which specialize in alternative energy

development Rail and marine access can support large energy developments

SI has had a long history of contribution & knowledge-base from the Electric Coops Collaborating with other extractors & generators will help implement a Regional Energy

Strategy

“SI has coal reserves totaling an estimated 181 billion short tons — enough to electrify the eastern half of U.S. for 80 years” - U.S. Dept of Interior

“SI has coal reserves totaling an estimated 181 billion short tons — enough to electrify the eastern half of U.S. for 80 years” - U.S. Dept of Interior


1.10 Energy

Energy: Opportunities

The future will not focus on traditional energy, but rather alternatives uses and sources SI has a variety of assets that support a diversified energy strategy, opportunities exist for

oil, methane, coal, ethanol, as well as coal gasification & CO2 sequestering A diversified energy strategy will allow SI to have greater control over their future to better

temper energy cost cycles SI has the potential to link its energy assets with its transportation and logistics assets to

develop transportation fuels and technologies Processing proximity to raw materials such as coal and corn or cellulosic materials supports

feasibility Leverage the energy knowledge infrastructure and asset base

Coal opportunities related to new technology and knowledge based enterprises (KBEs) — e.g., export coal processing & safety “knowledge” to China & India

At SIU, the region has educational resources which specialize in alternative energy development; Clean Coal Research Center, National Ethanol Research Center

Create a Southern Illinois University Energy Technology Center of Excellence SI has had a long history of contribution & knowledge-base from the Electric Coops

Collaborating with other extractors & generators will help implement a Regional Energy Strategy Major energy projects such as FutureGen and Prairie State will have significant economic

impact and will expand the regions energy knowledge base


Chapter 1: Conclusions

SI has assets to connect with economic trends and their related implications and opportunities Include the region’s natural setting and recreational

opportunities, existing universities and colleges, and geographic location

Challenges for the region: lack of clear Pan-regional leadership Skilled human resources Financing Internet infrastructure (improving)

1.11 Conclusions


Trends, Implications & Opportunities (1 of 4)

Trends Implications Opportunities

Globalization: The World is Flat

• SI is competing with savvy country economic strategies

• Business competition is much more intimate

• Increase flow of business capital to international growing markets

The world economic growth rate is 4 times the rate of SI – “go get it”

SI can leverage its central location and inter-model transportation assets to become a logistics service center

Utilize the “ten flatteners” to create a collaborative regional economic development strategy

Broadband Connectivity & eCommerce

Broadband capacity and connectivity is a “must have” infrastructure to compete

On-line retail sales have a direct impact on rural Main Street America

Broadband allows SI to take advantage of the “ten flatteners”

Internet sales and distribution A region wide broadband infrastructure

strategy Apply best practice connectivity

applications to improve efficiencies Global R&D collaborations

KBE: Innovation and Knowledge Drive Jobs and Wealth Creation

90% of all new jobs will be created by companies of 50 employees or less

Innovation and commercialization of knowledge is key

KBEs: “work where they live rather than living where they work”

Link SIU research to business incubator, expertise and capital

Green technologies Homeland security response and

services Mining & safety-related technologies Life sciences, plant and animal

1.11 Conclusions


Trends, Implications & Opportunities (2 of 4)


Transformation of the U.S. Economy

SI manufacturing job base has declined for 20+years

Commodity production will be replaced with knowledge based enterprises

U.S. companies will need to be nimble and adjust to the global economy and pursue growing markets

KBE potential in mining technologies, bio-agriculture, waste water management, safety, advanced manufacturing, energy, etc.

Leverage the workforce development resources to create a world class KBE workforce

Livable Communities Jobs migrating to attractive smaller communities

Boomers retiring moving to rural small communities,

Recreation and natural environment is a priority

Recreational services and products, tourism, attractive communities

Senior living strategies KBE creation and attraction Visual and creative arts

Global Workforce Shortage and Immigration

2010 there will be a 10 million worker shortage in the U.S.

Need for “smarter” workers Since 1970, 90% of the growth in the U.S.

workforce has been filled by immigrant workers

Regions competitiveness will be at risk due to lack of workforce

Transform SI into the “corporate casting agent for the 21st century

Leverage over 60 years of SIU with students from over 100 cultures

Embrace workers in their 50’s and 60’s create a climate of “freedom to work.

1.11 Conclusions



Aging Population 15,600 workers retire everyday, 77 million workers due to retire by 2010

Increased demands for nutrition, healthcare and housing requirements

Consumer markets will follow the baby boomers generation

Healthcare Products and Services Senior Living Nutraceuticals ¾’s of the countries wealth is residing

with active adults desiring many of the attributes of SI

Active Tourism Visitors to the U.S. seek unique, historic, cultural visits

Resources needed to support language, customs and dietary requirements of international travelers

Shorter trips within 4 hours of home

Niche markets: Eco, culture and adventure tourism

SIU international student population linked with tourism

Recreational tourism focusing on SI unique qualities

Growing Logistics and Transportation

• Movement of goods and services is far easier than moving people

Logistics and distribution will continue to grow with imports from China and India

Mfg jobs will continue to shrink Distribution is close to end markets

SI is in a prime geographic location to seize the logistics and distribution markets

With in ever increasing cost of fuel waterborne transportation is attractive; marine transportation services

Trends, Implications & Opportunities (3 of 4)1.11 Conclusions



Energy Demand Energy costs will rise with increased demand especially in the U.S.

Alternative energy will receive policy support and increasingly in demand

Coal as a fuel source and clean coal technologies will have strong demand

Coal will have to fight the a “dirty image”

Coal mining Clean coal technologies Regional energy strategies Alternative energy innovations Transportation fuels sources

Sustainable Communities Attention on global warning and pollution, Concern about healthy foods and the growth

of locally produced products Access to water is a strategic advantage

Carbon offsetting (growing trees) in rural regions,

Locally grown organic foods Nutraceuticals, Alternative green energy Regional recycling businesses

Trends, Implications & Opportunities (4 of 4)1.11 Conclusions


Potential SI Jobs by Sector (1 of 2)

• Global growth opens up opportunities to expand SI economy beyond its traditional growth rate

• 10 million U.S. worker shortage is an opportunity for SI workforce development resources

• Growth in services exports enable SI to move away from uncompetitive legacy economic activities

• Global growth opens up opportunities to expand SI economy beyond its traditional growth rate

• 10 million U.S. worker shortage is an opportunity for SI workforce development resources

• Growth in services exports enable SI to move away from uncompetitive legacy economic activities

ICT* investments contribute 33% to U.S. productivity

growth…this validates importance of NP-COI

SI’s 64% increase in broadband access can better

leverage six-fold increase in e-commerce activity

4 of 5** factors in rural KBE growth are SI strengths

— need to be leveraged for SI economic growth Livable community assets present in SI are an

attraction asset for KBE, Senior Living and Tourism Alternative energy, global warming and “greening”

of society is creating innovation opportunities

ICT* investments contribute 33% to U.S. productivity

growth…this validates importance of NP-COI

SI’s 64% increase in broadband access can better

leverage six-fold increase in e-commerce activity

4 of 5** factors in rural KBE growth are SI strengths

— need to be leveraged for SI economic growth Livable community assets present in SI are an

attraction asset for KBE, Senior Living and Tourism Alternative energy, global warming and “greening”

of society is creating innovation opportunities

See: RA Chapter 1 ICT = Information & Communication Technology

**Five Factors are: • High Quality Workforce• College or Universities• Local Amenities• Transportation Infrastructure• Size

KBE

8,023New Jobs

KBE

8,023New Jobs

Global Workforce

Opportunities

18,750New Jobs

Global Workforce

Opportunities

18,750New Jobs

1.11 Conclusions


Potential SI Jobs by Sector (2 of 2)

Climate of Economic Opportunity = an additional 10,210 new jobsNEW GRAND TOTAL = 50,789 Jobs (vs. 27,298 Jobs Feb ‘07)

Climate of Economic Opportunity = an additional 10,210 new jobsNEW GRAND TOTAL = 50,789 Jobs (vs. 27,298 Jobs Feb ‘07)

See: RA Chapter 1

• 77 million retiring baby boomers present an affluent

senior living growth opportunity for SI

• 77 million retiring baby boomers present an affluent

senior living growth opportunity for SI

• Preferred tourism growth sectors indicate SI is

positioned for accelerated tourism growth

• Preferred tourism growth sectors indicate SI is

positioned for accelerated tourism growth

SI energy assets and knowledge are in the sweet spot of energy priorities for growth

SI energy assets and knowledge are in the sweet spot of energy priorities for growth

Significant transportation labor shortages are moving transportation and distribution centers from the coast to the center of North America. SI location and logistics assets position it for growth

Significant transportation labor shortages are moving transportation and distribution centers from the coast to the center of North America. SI location and logistics assets position it for growth

Senior Living

3,676New Jobs

Senior Living

3,676New Jobs

Energy & Mining5,680

New Jobs

Energy & Mining5,680

New Jobs

Tourism4,450

New Jobs

Tourism4,450

New Jobs

Log/Trans//Dist1,675

New Jobs

Log/Trans//Dist1,675

New Jobs

1.11 Conclusions


Carpe Diem — Seize the Day!

Opportunity is just opportunity, unless you cease it, then it becomes reward

1.11 Conclusions

A changing economy impacts the way we live, work, learn, govern and connect

We can’t run a 21st century business, community or government on 20th Century rules

A changing economy impacts the way we live, work, learn, govern and connect

We can’t run a 21st century business, community or government on 20th Century rules

The Reason for Action

©2007 ViTAL Economy, Inc. 1 Southern Illinois: Garden of the Gods Readiness Assessment Chapter 1:...

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