Friday, February 21st, 2014

The Great Urban Divide, Michigan Edition

I’ve said many times that it is predominately larger metropolitan regions of 1-1.5 million people or larger that are best positioned to succeed in the global economy. This is in effect the minimum viable scale to compete. These cities have bigger talent pools, thicker labor markets, the right infrastructure (e.g., major airports) and amenities, bigger local markets, more specialized suppliers, and more entrepreneurial ferment. Smaller places that don’t have a unique asset (such as a major university) are going to struggle.

We see that on display again in Michigan, where Battle Creek based Kellogg’s is opening an operations center in Grand Rapids. This will employ 300-600 people, including some transferred from the headquarters. As the company put it:

Kellogg CEO John Bryant told The Grand Rapids Press/MLive they chose Grand Rapids for the new center after looking at nine possible locations around the U.S. as part of a new corporate restructuring initiative dubbed “Project K.”

Bryant said the company chose Grand Rapids because 40 other corporations have created similar service centers in the area, creating a labor pool from which Kellogg hopes to draw.

“We’re very excited about the Grand Rapids location. There’s a good population base for this sort of activity,” Bryant said.

Leaders in Battle Creek are angry about the company choosing to open in nearby Grand Rapids:

“This was a unilateral action by the Kellogg Company,” [former Battle Creek mayor and U.S. congressman Dr. Joe] Schwarz said Monday, “blindside, if you will. And that’s not the way people in Battle Creek, especially those that have been here a long time and worked with Kellogg on so many issues like myself, that simply is not the type of behavior we’ve come to expect from the company.”

At the time, Jim Hettinger was CEO of Battle Creek Unlimited. In a column for the Battle Creek Enquirer, Hettinger expressed his frustration over Kellogg’s announcement, saying the city has continually gone to great lengths to accommodate the company’s needs.

I understand the frustration, but at the end of the day, this is the reality of the modern world we live in. We see similar business decisions every day. Kellogg’s is in Battle Creek for historical reasons. There’s no way the company would ever choose to locate there today. The changing demands of the global marketplace create a need for skills that are easier to find in or lure to a place like Grand Rapids (metro population one million) than Battle Creek (metro population 135,000). That’s reality.

Note here that cost is simply not the issue. Both Grand Rapids and Battle Creek are lower cost locations. It’s clearly about being in a place that has better scale to serve the needs of a business serving upwards of 600 white collar employees.

This divergence understandably fuels resentment and bitterness within states, as I noted in a recent column in Governing magazine. I frequently find that to locals it’s particularly galling when a company does something like this within the state boundaries. Had Kellogg’s opened in Austin, Texas, I strongly suspect Battle Creek wouldn’t be nearly so bitter. I’ve long noted the same thing in Indiana, where smaller towns and cities would far rather see an out of state company buy their local bank or whatever than have an Indianapolis company come in. (Though I’ve also noticed this has changed for the better in the last 20 years). The reality is these jobs could have left the state entirely. Had Grand Rapids not been there, they probably would have.

This is one reason I have pounded the table for more expanded regional thinking by the likes of Grand Rapids. It’s not an easy problem, but if they can’t demonstrate that there’s a win-win in here somewhere for regional metros like Kalamazoo and Battle Creek, resentment will become entrenched. This can be difficult because the answers aren’t obvious and places like Grand Rapids – which itself is of marginal scale and what’s more not on the trade routes in the way a place like Columbus, Ohio is – are pedaling hard to just to make sure they themselves can make it. But longer term I think it’s imperative.

In the meantime, it’s important for state leaders to understand and respond to these realities. If they don’t, they will only drive business out of the state completely, just like effectively Indiana’s entire banking industry got gobbled up with little to show for it.

PS: One exception I’ve noted to this rule: Chicago. I didn’t seem to hear the same anger from Decatur over ADM that we see here. I think in part it’s because they understand Chicago is just a far different place than them. It’s such a unique city that losing a small executive headquarters doesn’t even seem like genuine poaching. Plus the entire leadership of the state is Chicago-centric, and and their top priority is building up global city Chicago.

Sunday, September 20th, 2009

Other Michigan Cities

Detroit gets almost all the national press in Michigan. While Detroit certainly deserves coverage, sometimes one can get the impression that Michigan = Detroit when in fact there is much more to the state.

I got to check one other city out last week when I spent two days in Grand Rapids as part of the CEO’s for Cities Velocity program. I referenced this before when linking to Carol Coletta’s op-ed about creating a new narrative of an American Dream, one rooted in an urban, not suburban setting. As with most good discussions, I learned a lot, but also came away with a whole new set of questions and things to ponder along with the progress made. Much more to say on this upcoming.

But I wanted to highlight a couple of Michigan related items today. First, you may recall the name Dayne Walling from a Slate article I linked to before about the race for mayor of Flint, MI. Well, Walling ended up winning the election and attended this event as well. He was kind enough to record a short statement talking about the readiness for change in Flint, its challenges, and his plans for the city. (If the video doesn’t show up, click here).

As he says in the video, Mayor Walling is very open to ideas, so be sure to send them his way.

As for Grand Rapids itself, any resident of a small Midwestern city is likely to know the meta-story. Namely, it’s a much more interesting place than its reputation would suggest. Grand Rapids is the largest city in Western Michigan. It was originally settled by the Dutch, who logged trees and grew produce to ship across Lake Michigan to Chicago, though it also grew to have industry, especially furniture manufacturing, along with some automotive and other things.

The industry is mostly gone, and Grand Rapids has suffered for it like most Midwestern cities. But there’s a lot more to the story here. The region maintained a lot of its Dutch roots and character. There are still plenty of Dutch names around, extended families are still important – many of them can apparently trace their lineage back quite some time back to the Old World, there’s a certain thrifty state of mind, and enormous charitable giving and volunteer spirit. The city is still more oriented to Chicago than Detroit.

One thing you immediately notice about Grand Rapids is that it preserved a large chunk of its building stock. This is true even outside downtown. Many old factories and warehouses have been restored and repurposed. I visited no fewer than three of them. Here’s one such, though it doesn’t look like it. It’s the headquarters of the local Catholic diocese.

Grand Rapids is home to a culinary school, which perhaps has a bearing, but there appear to be an abundance of quality restaurants there. I know the food I ate was excellent. Grand Rapids also seems to punch above its weight in green building as well. There are 44 LEED certified buildings in Grand Rapids, giving it the 8th most such buildings of any city in the country. It’s the only city in the top ten that isn’t a blue chip brand you’d expect.

Here’s one of them, the Grand Rapids Art Museum. It’s the only LEED Gold certified museum in the world.

Grand Rapids also has a sleek new JW Marriott hotel I was fortunate enough to stay at. I think you are getting the picture. This is a bigger and more sophisticated place than you might credit.

Here’s a peek at the skyline from the interior of the art museum:

People relaxing in a public plaza. You can also see some of that preserved building stock here.

There are definitely a lot of interesting things happening in Grand Rapids. Two of the big local companies are Amway and Meijer. The families behind those businesses, as well as other local philanthropists, have put tons of private money behind revitalizing Grand Rapids.

One of the current projects that has come out of this is the Art Prize. This is pretty big news so you may have heard of this one before. It’s an open art competition that anyone can enter with a first prize of $250,000 cash, making it the biggest art prize in the world. The only real requirement is that you find a local venue in Grand Rapids to partner with to show the art. This attracted a large number of artists as you can imagine. It all goes on display Sept. 23 to Oct. 10th, so if you were ever thinking of visiting Grand Rapids, that would be a good time to do it.

The name “Grand Rapids” might conjure up some majestic images of nature. Alas, the reality is much more tame, but there is a small river running through town. Here’s a shot of it with some art and an outdoor cafe along it. I’m told there’s good fishing in this river too.

Grand Rapids looks to be the emerging hub of Western Michigan. As I see it, the city will have to overcome a couple of structural challenges to really take off. One is that it is just a bit too small. While there is a goodly population in the extended region, the core of Grand Rapids and its MSA is a bit smallish at only 776,000 people. Ideally it would be more like 1.2 million to have minimum scale. You see the challenges in the small number of local flights and such. Also, Grand Rapids is off the beaten path. With Lake Michigan creating such a huge barrier, Grand Rapids is a detour from almost anywhere. It’s not on the trade routes.

I barely got to scratch the surface of Grand Rapids. It was my first trip, but I hope not my last.

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