IVCA Feature: Highlights of the IVCA Spring Luncheon, Penny Pritzker and Chris Gladwin on the new P33 Chicago Tech and Industry Cluster InitiativeMay 15, 2019 The IVCA Annual Spring Luncheon is the opportunity for members of the association to hear the latest on issues in the industry, and this year’s event – which took place on April 16th, 2019, at the Chicago Club – was of particular importance. Entrepreneur Chris Gladwin (Cleversafe, Ocient) and Penny Pritzker, a Chicago entrepreneurial, civic and philanthropic leader who served as Secretary of Commerce under President Obama, are co-founders of the new Chicago Tech and Industry “Cluster” initiative, “P33.”
The name refers to the 1933 World’s Fair of Chicago, where the gathering focused on Chicago as the “World’s Brightest Spot” for technological discovery. P33 seeks to regain that signature by 2033, the city’s bicentennial, by bringing together Chicago’s tech, business and civic communities to supercharge innovation and leadership for the Windy City by promoting/strengthening specific clusters of technologies and industries.
The 2019 Spring Luncheon was sponsored by accounting/advisory firm Baker Tilly and the law firm of Ropes & Gray. The moderator for the event was IVCA Executive Director Maura O’Hara, and the following is the highlights of her conversation with Chris Gladwin and Penny Pritzker regarding P33.
INTRODUCTION & ORIGINS of P33
Penny Pritzker defined the “P” in P33 as People, Purpose, Plan and Progress. Acknowledging the disruption and fast pace of current technology, she noted that this is not a short term initiative, but a comprehensive overview and plan.
Chris Gladwin added that when Chicago was ranked in the past regarding its tech ecosystems, capital interactions and reputation, it would always come up in the top three. But currently, while the rank is still top ten, it averages around six or seven.
Ms. Pritzker spoke of the early idea of P33 and how it gained momentum very quickly through a gathering and resourcing of around 200 people in various categories of tech commerce, businesses, the markets and academia. The basic question was how do we establish leadership here, and how do we sustain economic growth in technology? She talked about the research behind P33 ... if they didn’t get the diagnosis correct, the solution would also not be correct.
THE MAKE-UP OF COMMITTEES IN P33
Maura O’Hara remarked about the diverse make-up of the committees within P33, that she has observed that there are as many Corporate Executives in Chicago businesses serving in P33 as investors and entrepreneurs. Penny Pritzker added that by going back to the disruption of technology and how businesses must adapt ... it’s an issue with every boardroom and every CEO, and the participant Corporate Executives are expressing how shareholders and their boards are bluntly asking if Chicago is the best place for them to be, despite it being their longtime home. So within the P33 goal to supercharge the innovation and leadership, it is about not only being left behind, but maintaining significant business presence in Chicago.
Mr. Gladwin added that how well we adopt technology will determine where the innovation and leadership will come from, whether it’s in any other type of business such as transportation, insurance, food, etc. This traditional commerce have experienced or observed the disruption of other businesses, and they obviously don’t want it to happen to them ... the measure for how much a business will prevent disruption is how well they are embracing technology today.
WHAT GOT THEM INVOLVED AS CO-FOUNDERS
Penny Pritzker simple said it was home, number one, and she wants Chicago to remain contemporary and influential. And when she was Secretary of Commerce, she traveled all over the country seeing what was possible, planned for, purposeful and followed through to get results. And in that sense, if there was disruption there, she gained knowledge from that as well. She continued by observing that we have all the ingredients here, but we’re just tend to be in separate “silos.” Mr. Gladwin added that he felt he was in a unique position for the timing of the initiative.
FINDINGS FROM THE FIRST PHASE OF P33
Chris Gladwin emphasized that we have a solid foundation, and that Chicago – because of the influx of midwestern college graduates – is one of the most educated cities in the country. But given the level of capability and infrastructure, we should be doing better, actually two to three times better in elements of ROI, employment/talent and economic activity. One tech study surveyed cities on their impressions of their inside tech strength, and they all ranked themselves high on the scale, except in Chicago. Not only is the reputation low, but the gap between what Chicago thinks of themselves versus other cities, the gap is the highest.
He continued by saying that innovative technology is becoming the primary driver of growth of all industries. Chicago has that “everything” in its diverse economy. and the opportunity of P33 goals align very well with the broader industrial base.
IT IS A MARKETING/POSITION PROBLEM RATHER THAN A STRUCTURAL ISSUE?
Penny Pritzker acknowledges a marketing problem, but emphasized that Chicago also had a structural problem. She focused on two areas of weakness. One, it involves collaboration and commercialization, as well as cooperation in both. Chicago is not taking advantage of the fact that is has an extraordinary university system with great research, that is not being commercialized. Secondly, it is in the word collaboration. For example, logistics is second-to-none in the Windy City, but instead of shared collaboration to make it stronger, the businesses are in their own silos.
She also reflected on talent pathways ... younger talent is not on the right path to local education, exposure to the city and experience, so they can participate here. She complimented the talent being developed in Illinois at the various academic institutions of learning, but at least 50% are leaving the state. They are leaving for the other coasts, because that is where they think their bonafide career path is.
IDENTIFYING THE CLUSTERS OF MARKET & INDUSTRY ATTRACTIVENESS
At the event, a handout was given that identified “clusters” of Chicago market potential in industry and technology. Chris Gladwin emphasized that clusters create economic positions that can be leveraged, and defines a leadership position. To lead nationally, and globally, Chicago has to lead in clusters. So as part of Phase One for P33, the committees identified which three clusters would make sense for Chicago.
There were a couple criteria for cluster identification and priority ... first was having second or third tier structure in place to be in the right position for leadership (the “right to win”), a solid foundation to build upon. The other criteria was the that the identified clusters have the right amount of size. Within the trillion dollar economy of Chicago, there needs identifying in the future in trillions of dollars of new growth – and a goal of 20-30% in market share (out of a potential 100%) in any cluster is a solid leadership position, for example.
WHERE HAS THE CLUSTER STRATEGY WORKED?
In her capacity as Secretary of Commerce, Penny Pritzker was able to experience a broad overview of how different geographical areas strategized in cluster economies. She brought up Pittsburgh, where the leadership of that community came together and identified the areas where they could lead. Pittsburgh focused their education systems, even at the primary and secondary levels, on forwarding their cluster strengths, and made local laws to help businesses develop from those strengths ... so for example, if you are intent on developing autonomous (driverless) vehicles, you are intent on going to Pittsburgh.
Another example was Wichita, Kansas, which focused on aviation. They created an “innovation station” for aviation technology that could be shared by Airbus and Boeing. They could solve problems in a timely fashion using the researchers at the university there, collaborating on IT and R&D. At the Department of Commerce, this was called “pre-commercialization.” This evolved into a “tech college,” a community of colleges all based around aviation training. That ecosystem works in such a way where one in five jobs are in aviation.
Ms. Pritzker noted that Chicago is too big, we’re not going to be noted for just one area of focus, and that led to the three clusters that P33 chose – #1 Industry 4.0 (Making and Moving Things), #2 Life & Health Sciences (Improving Health and Sustainability) and #3 Business IT (Managing Information).
HOW P33 IS ABOUT DIRECT PLANNING RATHER THAN ORGANIC GROWTH Chris Gladwin observed that growth can happen organically, and that’s great, but to achieve long lasting success the plans have to come from business and commerce ... as opposed to the organic development came after World War II from government funding. The better Chicago is on realizing the plan of P33, he added, the more likely the city will be successful. To put it another way, the level of success that could have come from organic evolution will be accelerated through the direct planning of P33. THE ROLE OF VC & PE IN THE P33 INITIATIVE, RIGHT NOW Penny Pritzker said that understanding their role within P33 is what Venture Capital and Private Equity can do now. The VC/PE industries can get involved in the committees that are working on this effort in three areas. One, it’s making sure that Chicago connects with the talent already in Illinois’ pipeline. Two, what does collaboration and cooperation mean within the context of the cluster focus ... it is about shared spaces, meeting, projects and solving common problems. And finally, she emphasized, being an ambassador for Chicago. It’s about talking up Chicago’s success stories, she asserted. There are no better ambassadors than the investment community for promoting the assets of the city in collaboration and problem solving. P33 will be a conduit for those promotions, with the three major clusters, emphasizing that the ideas from the community will be the driver for the initiative. With P33 making major steps – becoming a 501(c)(3) and about to announce executive leadership – now is the best time for contributing ideas. And also within the clusters, Ms. Pritzker pointed out that there are capital opportunities for funding. For example, in Cluster #3 (Business IT), there are calls for Series A funding. For Cluster #2 (Life & Health Sciences) there is a need for growth funding. And in Cluster #1 (Industry 4.0) they feel there is a lack of early stage funding. She added that a local funding concentration is advantageous over outside-the-area funding, which is also happening now, in the sense that outside funding is working with local academia to lock into these opportunities. Chris Gladwin added that local VC and PE firms should prioritize the companies in Chicago within the Cluster categories that they invest in. For those companies, P33 can connect senior level executives with local VC/PE funding, observing that it is in their best interests. That is part of what the P33 organization can also help to do. AUDIENCE QUESTIONS Q: With the recent change in administrations at the city and state level, what do you think will be the impact of the political and fiscal changes, and what will P33 with the government do to address that? Penny Pritzker indicated that government need plans to put us on a fiscal path, while cautioning that they are not as motivated as a business to accelerate such a path. What P33 needs to do is lobby with their plans, and not expect a bandaid from state and city government in return. There must be hard decisions made and then implemented. Q: If you’re going to use 2033 as a goal for P33’s plans, what would they like to see happen by that year? Ms. Pritzker pointed out that in the three prioritized clusters of P33 – Industry 4.0, Life/Health Sciences and Business IT – can’t afford not to pay attention to what is going on here. P33 is a means to bring a team together of problem solvers, and if those businesses are to be a part of it ... they can be aspirational and be ambitious. Q: Companies like Amazon have expressed interest to headquarter here. What is the city and state doing to lure those companies, which would increase interest in Business IT talent? Mr. Gladwin expressed that governments can be helpful, but they also can create counter-intuitiveness when luring companies here. It is about the people, as these companies are looking at workplace statistics and talent. In the case of Amazon, the story was very strong on the college graduate pool, but weak in mid-career talent (like project management, an average of 15 years of experience). Q: Are their plans for marketing this initiative to outside cities, such as an ad campaign to boost the area’s profile? Mr. Gladwin opined that he feels ultimately it will be about people and not any campaign of sorts. During the Amazon bid, the stats and facts about our area became evident, and he recommended that everyone should know them. We should have our talking points as a community, and express them as often as possible. Having the community understand itself and be able to communicate a brand message collectively will be a big step forward. Q: What are we missing here that other areas have stakes in, and we can embrace? Ms. Pritzker asserted that what P33 has been doing is a “gap analysis” on the prioritized clusters. Who are the players not at the table? How can we identify who those players are and how to connect them? Let’s find the weaknesses and understand what we need to do about them. One thing that has been discovered, in area of the stakes that other areas apply themselves to, is that Chicago is too diverse an economy to focus on one just one stakeholder area. The focus has to be different, for example, on talent pools for Life/Health Sciences than Business IT, and the messaging around each is different. For the most part, this area has the assets. We either need to scale them much bigger, and/or create partnerships. How can we bring those partnerships to scale so investors can take advantage of it? Q: What is next? Ms. Pritzker spoke of funding to find a paid Executive Director for P33 as a priority. But also she emphasized that the business/investor community can come together behind P33, by understanding how they can individually benefit from this initiative. To more information on P33, click P33Chicago.com |