January 2018

It’s critical that community leaders understand our region’s workforce trends. A recent workforce report from LinkedIn is essential reading.

 With more than 143 million individual members in the United States and 3 million job postings a month, LinkedIn has a large and current data base to use in identifying employment trends.

LinkedIn’s report shows that of the 20 largest metropolitan areas in the United States, Washington, D.C. and its suburbs have the slowest percentage increase in hiring during 2017. Measured against an average hiring increase of 10.8 percent, our region had a hiring increase of only 3.5 percent. That’s worse than the San Francisco Bay area, which had a hiring growth rate of 3.9 percent. Places with diversified local economies and affordable housing performed much better than the national average, with the three fastest growing areas being Houston, Phoenix and Dallas-Fort Worth.

LinkedIn also follows migration of workers and population based upon the profile locations of its members. This effort highlighted the troubling fact that nationally two of the 10 largest losers of workers were nearby: Norfolk was fourth and Baltimore was ninth. The areas with the largest number of lost workers were Providence and Hartford.

Meanwhile, no locality in our region was among the top locations for inward job migration. Places like Austin, Denver and Seattle were top destinations. Our region did rate as one of the most active job markets from the standpoint of inbound and outbound migration taken as a whole, with Washington, D.C. and its suburbs being the sixth most-active region. Austin, San Diego and Orange County, California led the way in migration activity.

LinkedIn also tracks what it describes as emerging jobs–careers where the worker’s skills and role are directly relevant to the growth of technology-driven businesses. Our region attracted workers in many of the emerging job categories, including data mining, business development and relationship management, and sales. It was not alone in looking to attract these workers, however, as our region faced strong competition for these valuable workers from the San Francisco Bay area, New York City, Los Angeles and Dallas.

Unfortunately, according to LinkedIn, we are not winning this competition.

Our region is not attracting workers at the rates of competing regions. In fact, we are losing workers. The top three locations for outbound migration from our region were the San Francisco Bay area, Denver and Seattle. Observers who have suggested that we are losing people who want to be software product entrepreneurs will likely find vindication in this data. Meanwhile, within our region, Washington, D.C. and its suburbs gained workers through inbound migration from Baltimore, Norfolk and Charlottesville. Redistributing workers may create pockets of growth, but does not provide for regional growth overall.

What is clear from the LinkedIn data is that we have jobs going unfilled because we are not attracting, retaining, or training a sufficient number of workers, particularly in emerging job categories. This conclusion is consistent with a recent report produced by the Greater Washington Partnership, as well as past reports prepared by regional experts such as Steven Fuller.

At some point we must acknowledge what data and experts are telling us: without concerted action, our region will have a continued mismatch between our workforce and available jobs. In the long term, employers will either find the workers they need here, or they will relocate their businesses to elsewhere. In the near term, every available high-paying job that is unfilled is an economic opportunity lost.

Unless we ensure that our region is focused on being an enticing place to live, and develop effective processes to develop the skilled workforce we need, we will continue to lag behind competing economies around the nation and the world. And over time we will likely fall further and further behind.

If you aren’t concerned, you aren’t paying attention.

 

 

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The federal government is the primary customer of a substantial portion of our region’s technology businesses. So it bears watching what it does. Industry participants tell me that the coming year looks promising, but even so, there are reasons for concern.

Bobbie Kilberg, president and chief executive of the local trade group, the Northern Virginia Technology Council, and someone with her finger on the pulse of our region’s technology economy, is optimistic that 2018 will be a good year for the government contracting industry. She points to the Trump administration’s attention to IT modernization and innovation, focusing on what she describes as the “plumbing of administration.”

This modernization trend dovetails closely with areas where our local businesses have proven technology expertise. John Wood, CEO of Telos, a company that focuses on data security and integrity, said the federal government’s rapid adoption of cloud-based software should play to a regional strength. Michael Isman, managing director of Deloitte Consulting, said there will likely be opportunities in digital reality, blockchain data storage, and automation.

Anita Antenucci, senior managing director at the law firm Houlihan Lokey, a mergers and acquisitions expert, points directly to our local expertise in serving the specific needs of the government customer. Emerging technologies that are driving changes in the private sector are just as necessary to the government, if not more so. When the government has what Antenucci describes as “demanding and urgent” challenges, it is our local businesses that satisfy the need. She points to cybersecurity as a specific example of this phenomenon. Chuck Brooks, a nationally-recognized observer of technology trends, agreed with Antenucci, adding that “the growth in both the number and quality of cybersecurity companies in greater D.C. has been amazing.”

Owners of businesses that deliver technology solutions and products that government needs will have an additional opportunity: the potential to sell their companies to motivated purchasers. Kevin DeSanto, managing director and co-founder of KippsDeSanto and an expert on mergers and acquisitions, sees current stock market and interest rate trends as providing strong incentives for larger companies to be aggressive about purchasing smaller businesses in 2018. Antenucci strongly echoed this sentiment.

Although reasons for optimism abound, there are also reasons to fear that the pace of government purchasing might be slower than the urgency of the need for new technologies would suggest. Paul Leslie, CEO of Dovel, a government contractor with a focus on health care and life sciences, said in 2017, the pace of government purchasing of technology services was slowed by the steep learning curve of new political appointees getting comfortable with their roles. He was hopeful that with their greater comfort “we will see a release of that acquisition bottleneck this year.”

While that issue is important, the biggest challenge to our region’s government contracting industry is political risk. Wood spoke for many of his peers by observing that while the general public might be inured to it, the lack of a predictable annual budget is a “grossly inefficient way to operate” and makes it very difficult for companies that sell to the federal government. Kilberg agreed this was a serious issue, explaining further that “the serial adoption of continuing resolutions to fund our federal government rather than federal budgets has impeded the ability of businesses to plan or expand with confidence.” Continuing resolutions that extend funding for short periods, and don’t provide for funding for new programs, can be as harmful to our local economy as sequestration or budget cuts.

Based on what I learned, the prospects for government contractors in 2018 reflect both the best and worst of our region’s close relationship with the federal government. This year will provide many of our region’s most entrepreneurial businesses with the revenue opportunities to grow their businesses, while leaving our region more open than are competing regions to economic hardship resulting from political dysfunction.

While some will say that the outlook for our government contracting industry should remind us that diversifying our innovation community is an important goal, I also take it as a reminder that it is essential for those of us who care about our region’s future to remain politically engaged.

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New Year’s Day offers an opportunity to reflect on lessons learned from the prior year. So last week I asked members of the business community the biggest lesson last year had taught them.

For many, the biggest lesson involved politics in some way. Some saw this as a positive thing, pointing out that bringing people together to achieve a goal, a behavior characteristic of successful entrepreneurs, had become a part of politics. Fran Craig, chief executive of Unanet, a software product business, pointed out this similarity: “Everyone can contribute so all can win. This was true in getting out the vote and [in] moving a technology business forward.” This sentiment was shared by Shekar Narasimhan, founder of the real estate investment firm Beekman Advisors, adding that taking an entrepreneurial approach to political action means that “business people can engage in the political arena without fear and can make a difference.”

There were limits to this view, though. A number of respondents thought the polarization of our political discourse meant that business people should be careful to separate what they did personally from their business operations. Chris McAuliffe, CEO of Theragen, a medical device startup, raised the concern that if a business itself became politically active in the current political environment, it risked alienating a significant portion of its market. He advises businesses to “remain politically agnostic in favor of delivering value to your customers.”

Another theme that surfaced was the importance of continued progress in regional coordination. Bob Sweeney, managing director of the Global Cities Initiative, and an expert on our region’s economic development activities, pointed to how greater Washington region’s pursuit of Amazon’s second headquarters  highlighted our region’s ability to collaborate. Sweeney worked with representatives of eight different jurisdictions to promote our region to Amazon, and he was pleased with their ability to find commonality in how they described our region’s assets, providing what he described as a “fantastic regional story.”

Bob Buchanan, chair of the 2030 Group, a regional advocacy group, echoed the lesson learned from the Amazon bid. However, the bigger question for him was whether our region’s political leaders truly listen to the business community or just give the appearance of engagement. His concern is that the “business community does not carry much weight” with our political leaders when it comes to addressing the region’s significant transportation and housing challenges.

Some respondents focused more narrowly on their own experiences and shared lessons for other entrepreneurs. Tien Wong, chairman and CEO of Opus 8, a technology investment firm, shared that his most important lesson of the year was to “always see the positive in every situation, even when it seems to be bad,” because doing so allows more creativity in responding to challenges. Ben Foster, a serial software product entrepreneur, pointed out that even as technology allows businesses to be buried in data about customer behavior, there is still no substitute for actually talking with customers if you wanted to understand them. Jamey Harvey, CEO of Courage, a software services business, added that it was essential to “never take the most important partners in your life for granted.”

What I learned from these responses is that the unique tapestry of our region – the proximity to the federal government, an economy that stretches across multiple political jurisdictions and a diverse range of entrepreneurial opportunities – draws to it many interesting and thoughtful people who get up every morning and make great things happen. It’s why I am happy to live here and why believe that our region is one of the leading entrepreneurial communities in the world.

Happy New Year, everyone. Let’s make 2018 a year to remember for good things.

 

 

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