Triangle Round Table November 2013

Two-sided triangle

The region leverages its workforce, educational assets and stable economy
for growth while addressing the challenges it brings.

Top-flight universities and leading research and technology institutions have created a strong business environment in the Triangle, as evidenced by the number of companies that have operations in the region. But its popularity brings challenges, such as dealing with an influx of people and spreading success between urban and rural communities. Business North Carolina magazine assembled a panel of experts to discuss the region and the opportunities and obstacles it faces. Participating were Randy Brodd, regional managing partner at Charlotte-based Dixon Hughes Goodman LLP’s Raleigh office; Steve Burriss, chief operating officer of Raleigh-based Rex Healthcare; Gene Delsener, senior vice president at Boston-based Fidelity Investments’ Research Triangle Park office; Charles Hayes, president and CEO of Raleigh-based Research Triangle Regional Partnership; Gary Joyner, managing partner of the Raleigh office of Atlanta-based Kilpatrick Townsend & Stockton LLP; John Kane, CEO of Raleigh-based Kane Realty Corp. and member of the N.C. Economic Development Board; and Randy Woodson, N.C. State University chancellor. The round table was sponsored and hosted by Dixon Hughes. Peter Anderson, BNC special projects editor, moderated the discussion. The following transcript has been edited for brevity and clarity.

The Triangle has a rich history of research and education. How will they contribute to its future success?
Woodson: Much of the Triangle’s economic success is due to the strong universities that form its base. They are a key driver, whether producing talent or conducting research. All of the universities in the region are looking to stimulate growth. It’s a big part of what we do. Cisco CEO John Chambers was the keynote speaker at a recent business forum here. He announced to the whole group that N.C. State is the largest producer of graduates that they employ. We’re generating the workforce that builds this economy. It’s critical for universities to collaborate. Duke University, UNC Chapel Hill and N.C. State, for example, each have strengths. N.C. State doesn’t have a medical school like Duke, but it does have a world-class engineering school. The opportunity to come together has never been greater.

Delsener: The education system and the other industries that are here were both important factors in bringing Fidelity to RTP. It helped with respect to the people who decided to relocate as well as the hiring we have done over the last couple of years. It’s been seamless for us.

Hayes: Forty-seven percent of Triangle adults have a college degree compared with about 27% statewide. There are 150,000 college students here and 25,000 graduate each year. So go the universities, so goes our economy.

Burriss: The community-college system and universities develop the health-care workforce. Rex is working with N.C. State on projects that it wouldn’t have the opportunity to otherwise. These have helped better assess patients as they come in, changing treatments and outcomes as a result. We also are working on wearable technology that senses a patient’s physiological changes, sending a warning to physicians that can lead to improved care.

Joyner: Universities and the private sector in the Triangle together spend $2 billion on research and development each year. That has led to collaboration between universities, government and the private sector.

What are the region’s transportation needs?
Hayes: About 23,000 people moved to the region last year. If that continues for the next 20 to 30 years, we’ll need ways to handle them. Rarely do the people we’re recruiting view the region’s transportation assets negatively. Triangle commute times are among the shortest of any U.S. metro. Our transportation challenge
is increasing destinations and frequency of flights from Raleigh-Durham International Airport. More direct flights to the West Coast and Europe are needed.

Brodd: That’s one reason corporate headquarters haven’t located here — not enough direct access to international flights.

Kane: There are more international flights here than people realize. Charlotte Douglas International Airport has more, but they’re not necessarily business flights. In the last nine months, more West Coast flights, which connect to a host of international flights, have been a welcome addition at Raleigh-Durham. A commerce reception site at the airport that would promote the region and state is under consideration, and I’m encouraging it at both Raleigh-Durham and Charlotte Douglas. Executives looking at new locations for their company have access to so much information today. Charles Hayes doesn’t hear from them until the region is on their short list. I’m sure many CEOs quietly visit potential locations to have their own look. The displays would target these CEOs.

Delsener: Fidelity senior executives say that, compared with most places in the U.S., Raleigh-Durham is the easiest because it’s just a few minutes from most places here. Everyone says the airport is beautiful, and the infrastructure being added to Terminal 1, which will open in March, will encourage more flights. As a global organization, Fidelity needs those connections.

How will the region handle its growing population?
Burriss: There are a number of health-care projects in Wake County. Holly Springs, an underserved part of the county, needs a hospital. Rex is going through the certificate-of-need process to address that. Adding enough people to fill a small city every year strains health-care resources. Rex has tried to take health care to patients by creating suburban campuses that get them in and out. You don’t need a big hospital to do that.

Kane: We’ve got to adapt to the people drawn to the region’s universities and RTP. They’re moving from Boston, Chicago, New York or wherever and are used to living like that, where everything — from housing to groceries to work — is close by. There seems to be less desire to own a home. We’re trying to meet those expectations in North Hills, downtown Durham, downtown Raleigh and other places.

How can economic development spread to the rural parts of the region?
Hayes: It’s the potbelly-stove strategy. The three major research universities, RTP and Centennial Campus, the airport, Raleigh and Durham are the stove. If it is stoked, its economic-development power will radiate out. Semprius Inc., for example, which does research and development in Durham, where it is based, has its pilot manufacturing plant in Vance County. And there are others: Denmark-based Novozymes North America Inc.’s headquarters is in Franklin County, and British drugmaker GlaxoSmithKline has a manufacturing plant in Zebulon, a rural part of Wake County. Campbell University opened the first new medical school in the state in 35 years in Harnett County this year.

Joyner: People can live 60 miles from RTP and still be there for work within an hour. Charles has inventoried the assets of rural parts of the region, and some might make good homes for suppliers for other companies here. He recently signed Nash County to the partnership. It’s expanding.

Burriss: Health care has played out differently. The development of the hub strains rural providers, and then you add health-care reform pressure. Rural providers are seeking shelter from the folks in the hub. We’ll see a period of consolidation with rural providers. The university-based system is a natural to train physicians to work in rural communities.

What role has biotechnology played in growing the region?
Hayes: Industries cluster, and one of the strongest clusters in this region is biotechnology. North Carolina as a whole is third in biotechnology after California and Massachusetts. But if you just look at this 60-mile radius that we call Research Triangle, it would still be third. It’s clustered here, but it’s still important in Wilmington, Asheville and other places in the state. N.C. State, along with the other universities, is leading research in agriculture biotechnology. We have to learn how to feed the world’s growing population.

Kane: There is opportunity for biotech in the rural counties, where land and labor is less expensive. The world needs more food, and there is land here to grow that food.

Woodson: It also is spreading to rural counties because of biotech manufacturing. It’s a growth sector for North Carolina and something the universities need to prepare a workforce for. That’s key for us, collaborating with the private sector to develop educational programs that change with needs. N.C. State has a biomanufacturing master’s degree program that produces talent for Novartis and similar companies.

What other clusters could be developed in the region?
Joyner: Clean technology — cleantech — is one. It deals with water, transportation and other things that support sustainable living. Some of the technology is being researched and developed at N.C. State, and we’re getting more companies in that cluster including multinational ones.

Hayes: Eleven companies are founding members of the Research Triangle cleantech cluster, which is a member of the International Cleantech Network. The expertise and research in cleantech as it relates to smart grid, smart water and smart transportation at our universities led
to the invitation. The region is a world leader in big data too.

Woodson: Increasingly companies are moving here because of our strength in data analysis. Duke, Carolina and N.C. State are the only collection of universities in the country that have top 10 applied-math and statistics and analytics programs. It started with Cary-based SAS Institute Inc. New York-based MetLife Inc. is putting an office in Cary because of the workforce and nearby research, which turns data into decisions. It’s why the National Security Agency is joining Centennial Campus. It will be a cluster.

What about entrepreneurs?
Delsener: These clusters need something else — support for startups. I’ve seen it in New York and Boston. Clusters need that connection between universities and enterprising companies. It can be infrastructure, buildings or networking opportunities. There are great opportunities for entrepreneurs here, and they are an important ingredient of growth.

Woodson: The region needs more serial entrepreneurs who feel it’s a place to start, grow, sell and move on, and when they move on, they move next door. I asked Cisco CEO John Chambers what is needed to keep his company here. He said it needs startups because that’s what Cisco does — acquire companies.

Joyner: The universities generate intellectual property, but much of it is commercialized elsewhere. Creating an entrepreneurial environment here changes that. Venture capital, angel capital, money to fund startups is needed. The universities could collaborate. It’s been done in other parts of the country. Emory University, Piedmont Healthcare and Georgia Tech University, all in Atlanta, created a collaboration within which they agree up front who owns each part of the IP and who’s going to benefit from it. That allows them to collaborate and talk freely to each other instead of operating under the protection of independence, which
can slow development.

How important is quality of life to the region’s economic growth?
Brodd: RTP was started to keep jobs here. The region has jobs, and the next stage is promoting and sustaining the market. It has quality of life and affordability. If we can’t figure out how to grow graciously, we’re going to end up like places in the country that we’re competing against.

Hayes: An exciting development that hasn’t got much play is Chatham Park. It will be a 7,000- or 8,000-acre city built from scratch near Pittsboro. It’s going to be cutting edge. It’s a 30- or 35-year project, and it will have housing, medical, schools, research parks and business parks. UNC Health Care already announced that it will be there.

Burriss: The growing population of older residents creates challenges and greater needs on the health-care system, but they’re an important
part of the region. They follow their children here, and that’s part of keeping the folks we want from leaving. At Rex alone the Medicare population grew 3.5% last year to 45%, which is an enormous change.

How are the economic-development changes made by state government viewed in the Triangle?
Kane: The personal- and corporate-income tax being reduced, with further reductions coming, is a step in the right direction; it’s tough to recruit against Florida and Texas, which don’t have an income tax. Recommendations are being made to Gov. Pat McCrory on what needs to be adapted and what is working in regards to incentives. He signed a regulatory-reform bill that will lead to less red tape. He wants a customer-friendly state. That’s important because the companies Charles recruits need to know that any problem can be solved. Many times commerce is work-
ing in a silo and not collaborating with Charles or whoever. Think how effective we would be if we put our collective best foot forward for that potential client. We need to be better at that.

Hayes: Recently I was in New York making calls, and one of the first things out of their mouths was how great the news about tax reform was. Anything we can do — and we’re doing a lot — to make North Carolina more business friendly is an asset.

Joyner: We have done well playing together within the Triangle, whether it’s Wake County, Durham, Chapel Hill or the universities. That’s a strength that we’ve had in the past in going after good citizens. People used to come to the region for RTP, but that’s been expanded to the region. That is something that we can’t lose.