Connecting CommerceBusiness confidence in the United State’s digital environment A report from The Economist Intelligence Unit

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United States

US business leaders have a famous reputation for being optimists. That shows through in the Digital Cities Barometer, in which the three US cities included—San Francisco, New York and Chicago—figure in the top 20 when it comes to overall confidence in the local environment for digital transformation. Perhaps not surprisingly, considering their city’s identification with Silicon Valley, executives in San Francisco display the greatest degree of confidence of all but one city in the study. “San Francisco’s digital ecosystem is the best in the world,” maintains Zac Bookman, founder and chief executive of Opengov, a Bay Area start-up providing software to government agencies. “Technology is everywhere here.”

The barometer readings for the three US cities are broadly similar to another ranking of digital hubs, the Global Startup Ecosystem Report, an annual study that in 2017 rates Silicon Valley (including the entire Bay Area) the world’s foremost digital ecosystem, followed in second place by New York and in 18th place by Chicago.1

1 Startup Genome, The Global Startup Ecosystem Report 2017.

Figure 1: Barometer readings—US cities

Score (out of 10) Rank (out of 45)

San Francisco

New York

Chicago

Score (out of 10) Rank (out of 45)

7.71

5.65

7.03

6.87

6.11

6.22

2nd

11th

43rd

31st

37th

40th

15th

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Ecosystem buzzTransformation is arguably a greater challenge for larger, more established businesses that need to overcome not just legacy technology but also ingrained practices and attitudes in order to place digital at the centre of their business. Like start-ups, big firms look to the local ecosystem for ideas, advice and other forms of assistance to help drive through their own digital initiatives.

All three US cities boast a plethora of formal and informal networks, communities and other support structures that can provide such assistance, and the surveyed firms make active use of them. In San Francisco, more often than not companies turn to innovation labs and centres for this purpose. University networks and business associations—and the events they organise—are also used widely here as well as in New York and Chicago. Accelerators are another

2 “Accelerating growth: Startup accelerator programs in the United States”, Brookings, February 17, 2016.

Figure 2: The most helpful external groups in assisting firms’ digital transformation efforts

0 5 10 15 20 25 30 35 40

San Francisco

New York

Chicago

Innovation labs and centres

Business associations and events

University networksand events

26%

24%

24%

13%

10%

17%

32%

5.65

6.11

6.22

37%

43rd

31st

37th

40th

37%

important source of digital ideas, advice and talent in San Francisco, which may be no surprise given that it boasts the largest concentration of accelerators in the country, and the Bay Area is home to some of the world’s oldest and largest accelerator networks, such as Y Combinator, 500 Startups and Angelpad.2

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Figure 3: The toughest challenges organisations face in pursuing their digital transformation initiatives

23%

21%

40%

Limited funding for investment

28%

17%

22%

Talent/skills shortages

8%

10%

15%

Inadequate ICTinfrastructre

San FranciscoNew YorkChicago

Removing shacklesThe chief constraints on companies’ digital ambitions in two of the US cities appear to be more external than internal. One-fifth of Chicago executives point to internal resistance to change as a transformation difficulty, but their peers in the other two cities believe shortages of key resources are bigger challenges. In San Francisco, limited funding for investment is a major constraint for 40% of companies. The other major shortage, in San Francisco and New York (cited by 22% and 28% of respondents, respectively) is that of talent.

All three American hubs are home to world-class universities and technology institutes that are proven training grounds for digital talent. These are relatively well regarded by businesses operating in each of the cities. Nearly three-quarters (73%) of respondents in San Francisco, for example, and three-fifths (61%) in New York rate their educational institutions as effective in preparing people with the right digital skills. The supply of such talent, however, cannot keep up with growth in demand. “There is a fierce, brutal competition for talent here,” says Mr Bookman, speaking of the Bay Area. “It is very hard to recruit because there is a shortage on the order of tens of thousands of highly skilled engineers.”

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Figure 4: Digital skills most needed by organisations to support their digital transformation initiatives

The “boot camp” is a uniquely American phenomenon. First used for military recruits, the term has come to describe a short, intensive period of training in a particular discipline, such as entrepreneurship. Originating in the US early in this decade, “data boot camps” are a recent manifestation of these rigorous training programmes (running anywhere from three weeks to three months) designed to teach participants skills in advanced data analysis and management. Given the pressing need that survey respondents in US (and other) cities have identified for expertise in analytics, businesses look to boot camps to fill their most immediate talent gaps. All profess to be preparing the next generation of data scientists and engineers. Their courses include training in specialised coding such as Hadoop and Python, machine

learning techniques, data visualisation as well as user experience (UX) and user interface (UI) design.

There are now dozens of such programmes in the US, training mid-career IT specialists as well as recent university graduates entering the workforce. Amongst those figuring near the top of many review lists3 are programmes operating in San Francisco, New York and Chicago. All offer common sets of courses but have distinctive features. The NYC Data Science Academy and The Data Incubator (the latter offered in New York, San Francisco and Washington, DC) act as trainers of graduates, trainers of corporate employees and also recruitment sites for companies looking to hire. Springboard, based in San Francisco, provides training

in digital marketing as well as data science. It offers full tuition refunds to any graduate that fails to land a job within six months of course completion. General Assembly, which started in New York, is now global as well as nationwide, operating courses in London, Hong Kong, Singapore, Sydney and Melbourne.

Chicago, meanwhile, is home to a boot camp offering a different experience. The Eric & Wendy Schmidt Data Science for Social Good Fellowship trains its students in similar disciplines as the programmes described above (data mining, machine learning and advanced analytics, for example) but it encourages them to put their skills to work for governments and not-for-profit organisations, rather than in the business world.

Data boot camps

3 “ For example, www.switchup.org/ research/best-data-science-bootcamps; https://techbeacon.com/complete-guide-data-science-bootcamps; https://www.cio.com/article/3051124/careers-staffing/10-boot-camps-to-kick-start-your-data-science-career.html

San Francisco

New York

Chicago

Digital security Business network Big data analytics

35%

28%

17% 15% 28%

23% 26%

22% 19%

The situation is similar in New York, says Peggy Sullivan, chief of staff of Vela Trading Technologies (and formerly director of strategic analysis and market data with the New York Stock Exchange). The biggest gaps, she says, are people with expertise in data science as well as security skills, a view that is broadly confirmed by the survey results (see Figure 4). Ms Sullivan also believes that, although training in technology skills has improved considerably in New York’s tertiary and secondary institutions in recent years, all could do better in teaching coding to young people. It does not help that San Francisco and New York are two of the world’s most expensive cities to live in, factors that discourage younger talent from seeking employment there. Nevertheless, they remain magnets for technology-oriented professionals from around the country and around the world.

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Data-driven transformationWhen governments and other organisations make their data available publicly, digital innovators are often quick to benefit by building services based on it. Examples in US cities include San Francisco-based BuildZoom, a platform linking homeowners with remodelling contractors, and Chicago’s Purple Binder, an app providing a comprehensive listing of social services available in the city (see “Connecting Commerce”). A New York example is DontEat.At an app that uses public data about health code violations to inform users about the hygiene standards of city restaurants.

Infrastructure and policy worriesMs Sullivan’s comment about the need for greater infrastructure digitisation reflects a concern shared by surveyed executives in all three cities about the adequacy of their local ICT infrastructure. Only small minorities in each believe their governments have been effective at providing such infrastructure to meet their companies’ digital objectives. In San Francisco, inadequate ICT is fourth on the list of the toughest digital transformation challenges that firms experience (cited by 15% of respondents there).

These views may reflect frustration with what is perceived to be the slow deployment of fibre broadband networks or delays in implementing “smart city”

More than seven out of 10 survey respondents (72%) in New York, two-thirds (66%) in San Francisco and six out of 10 (59%) in Chicago say that the availability of open government data provided by city departments is important to their organisation. Six out of 10 in New York and 55% in San Francisco (though considerably less, 41%, in Chicago) report that their firms make frequent or periodic use of government data. “New business opportunities” are at the top of the list of benefits they gain from it. As actively as their municipal governments are cleaning, organising

initiatives. But such views are also likely connected with broader concerns about a lack of co-ordination of digital policies at different levels of government. For example, two-thirds of executives in San Francisco and Chicago, and 57% in New York, believe there is a “disconnect” between the city and federal governments when it comes to supporting innovation. The digital ecosystems in each city have risen from grass-roots efforts and do not rely on government support to thrive. Policy uncertainty, however, is never conducive to an ecosystem’s growth.

and publishing the data they hold, executives feel there is much more that cities can do in this area. Ms Sullivan, for example, believes that the New York authorities are not doing enough to digitise transport infrastructure. More and better data need to be generated and analysed from the subway, rail and bus systems, she says. Almost half of New York survey respondents (49%) appear to share her view, stating that the city government makes poor use of the data it collects. Just over half of San Francisco respondents (52%) and 48% from Chicago say the same.

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