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Summary of Findings
McKinsey & Company’s blueprint to help engineer economic development and growth.
This West Virginia Forward collaborative is the result of an effort jointly conducted by West Virginia University and the State of West Virginia to identify new opportunities to diversify and strengthen the economy of West Virginia to enable economic growth and job creation. The work is meant to build upon existing analyses and ongoing endeavors in the State to offer ideas that can complement, enhance, and catalyze the impact of current initiatives. The West Virginia Forward effort analyzed the current state of West Virginia’s economy, proposed new sectors into which it can diversify in the future, and assessed opportunities to improve the underlying competitiveness of the State by looking at four economic enablers: ease of doing business, innovation and business development, human capital, and infrastructure. The purpose of this document is to outline a summary of the findings and offer a blueprint that West Virginia Forward and different State stakeholders can implement in the future.
This document summarizes top-line findings from the research. However, the effort goes beyond this specific document, and includes outreach and syndication activities that ensure findings are actionable, a clear path forward on each dimension examined is defined, effective support among stakeholders is built-up, and the right conditions for implementation are set up.
The West Virginia Forward effort and the findings presented here are the result of a thorough fact-based research and analytic approach that brought together best practices and expertise from around the world, coupled with deep contextual knowledge of the State. West Virginia Forward’s team was based in Morgantown and Charleston, and traveled across the State, supporting data analysis, trend assessments, financial modeling, and research. The team also hosted 10+ workshops, organized and led meetings with stakeholders across the State, and provided capacity building assistance via training anddevelopment of tools.
This strategy document synthesizes findings from 30+ national datasets from government and thirdparty sources, 80+ industry experts and researchers across topics as diverse as carbon fiber reinforced plastics, tourism, automotive manufacturing, energy, cyber security, broadband, human capital, innovation, infrastructure, project finance, and rural development, and more than 60 interviews with community leaders across West Virginia. The results are solutions that are validated by extensive outside data and comparisons with peer states, and tailored to the unique characteristics of West Virginia, with sensitivity to the unique qualities of the local context in which they will function.Comparative analyses with other states and regional peers were performed to understand areas ofstrength as well as opportunities for improvement to further strengthen West Virginia’s competitiveposition. Findings were shared and discussed with a West Virginia Forward working group of 12members from WVU, Marshall University, and the West Virginia Department of Commerce. The working group met regularly to discuss findings and align on the most impactful solutions for West Virginia. Key decisions were also shared with a Steering Committee composed of senior leadership from the institutions and other stakeholders.
The approach followed five guiding principles:
- Build on the existing assets and value proposition that differentiate West Virginia from neighboring states (e.g., workforce loyalty evidenced by low turnover, low cost of doing business)
- Prioritize solutions that create economic growth1 and diversification
- Look for disruptive trends that create opportunities for differentiation
- Tailor opportunities to the assets and challenges of the different regions of the State
- Focus on opportunities to deliver near-term job growth
Four economic sectors were highlighted as promising for West Virginia:
- Maintain and Support Existing Industries With Growth Potential: Examples include mining, agriculture, aerospace maintenance, repair, and overhaul automotive parts manufacturing, metals manufacturing, fulfillment distribution, and the manufacture of building products.
- Sectors with a current West Virginia presence that the State can retain or grow through differentiation: Examples include downstream oil & gas manufacturing (carbon fiber reinforced plastics (CFRP)5 and fine chemicals). The sector will benefit from the ongoing upstream developments arising from the shale gas development.
- New sectors that have high growth prospects that West Virginia can capture: Examples include cybersecurity, cloud services, and data centers, and higher end tourism.
- Sectors with distinct opportunities that West Virginia can consider for longer-term growth opportunities: Examples include life sciences and automotive assembly.
Since accessing all of these opportunities hinges critically on West Virginia’s competitiveness, West Virginia’s performance was benchmarked against regional peers. Areas of strength to leverage were highlighted, while opportunities for improvement were identified based on analysis of how WV compares to its neighboring states.
Key findings across the four economic enablers include:
1. Ease of doing business: Although the State has made recent changes to its tax environment and passed civil justice reforms seen as favorable by the business community, rising electricity prices are affecting the competitiveness of its cost of doing business, while below average “quality of life” outcomes, like health and educational attainment, affect its attractiveness for talent. The state needs to make a concerted effort to better market West Virginia’s favorable environment compared to its neighbors, as well as the recent improvements that were undertaken.
2. Innovation and business development: There is an opportunity to better attract new businesses to the State by:
- Enhancing the role and resources of the West Virginia Development Office,
- Launching a site certification program, and
- Recalibrating the current mix of incentive types offered to businesses. The State can also further support local small businesses by partnering with universities to offer support services and create a one-stop-shop for businesses looking for assistance.
3. Finally, there is an opportunity to support the innovation ecosystem in the State by creating an Innovation Council, supporting startups through a “Startup Catalyst” Program, and attracting more venture funding, especially at the early stage
4. Infrastructure: West Virginia has faced challenges in improving its transportation and broadband infrastructure, given fiscal pressures. As such, the State could benefit from exploring innovative financing mechanisms that leverage private sector financing to fund capital-intensive projects, as well as leveraging its own assets to generate new sources of revenue for infrastructure financing.
5. Human capital: With multiple ongoing efforts to address the different human capital challenges across the State (e.g., workforce participation, educational attainment and number of STEM graduates), there is an opportunity to unite these efforts and ensure funding is targeted at the highest impact, coordinated programs. A human capital task force could bring together education providers, major employers, and existing institutions working within the human capital space across West Virginia to identify and launch an integrated strategy that addresses existing challenges to the labor force across three dimensions: size of the talent pool, skill level of the talent pool, and talent retention and attraction. Business leaders noted that in addition to skills-based challenges, worker health and workforce participation are concerns, which both limit the size of the workforce available and their skills. As such, efforts focused on talent could be complimented by efforts to address the health challenges faced by the State’s working population, most notably the opioid crisis. To implement effectively the economic development strategy, West Virginia Forward has outlined an implementation plan that is anchored around a memorandum of understanding (MOU) among the three partners. Through the MOU, each signatory commits to undertake a series of initiatives based on the findings of the report, and all three partners will also commit to engage the relevant stakeholders across the State to ensure successful implementation of each initiative in the coming months. Additional work to begin implementation, engage stakeholders, and expand the West Virginia Forward effort will continue in the fall of 2017.
The intent of West Virginia Forward is that the findings and initiatives outlined will give West Virginia the tools to achieve both short and long term success in revitalizing the economy, creating jobs, and priming the State for success in the changing economic and technological landscape of the 21st century.