Hampton Roads Business Environment Improvement recommendations IBMPlant Location

Hampton Roads Business Environment Improvement recommendations IBM-Plant Location International

Table of Contents 1. Introduction 2. Identify priority areas for business environment improvement 3. Assess improvement potential through sensitivity analysis 4. Recommendations to support sector development and action plan 2 2 WWW. IBM. COM/GBS/PLI

Introduction § This report contains the findings of Step 4 of the project by IBM-PLI for Hampton Roads Economic Development Alliance. It is focused on defining a set of recommendations to enhance the competitiveness of Hampton Roads in key sectors and sub-sectors. § The analysis and recommendations build on the findings of the competitive positioning analysis conducted in step 2 and the findings and insight obtained from the analysis and consultation in earlier and subsequent steps. § A sensitivity analysis is presented in this report which is designed to ascertain the most appropriate improvements to the Hampton Roads business environment. It will assess the impact on Hampton Roads’ competitive position of improving the key weaknesses identified in the competitiveness analysis in Step 2. § Directional recommendations are then developed as to the type of improvements and interventions that are most suitable for each sector. § These directional recommendations have been further validated and refined through consultation with key stakeholders in Hampton Roads. This has resulted in key recommended actions to improve the business environment in Hampton Roads, which are presented in the last section of this report. 3

Project approach Main methodological steps 1 Kick-off and sector selection Activities • Kick-off call • Collect and review existing literature and data sources • Agree on sectors and competitor locations 4 3 2 4 Competitiveness Analysis Activities • Define location drivers and criteria for main (sub-)segments • Collect comparative data for Hampton Roads and competitor locations • Perform comparative location benchmarking analysis • Define competitiveness, key strengths & weaknesses • Progress review meeting (conf call) Smarter Cities discussion 4 Go To Market Strategy Activities • Develop value proposition per sector • Assess current efforts • Define marketing channels • Define target company profiles • Input for implementation workplan Competitiveness Improvement Actions Activities • Identification of improvement needs • Gap and sensitivity analysis • Assess current efforts • Directional recommendations • Best practice insight • Stakeholder consultation • Regional implications • Draft improvement plan • Presentation and discussion • Finalize improvement plan

Table of Contents 1. Introduction 2. Identify priority areas for business environment improvement 3. Assess improvement potential through sensitivity analysis 4. Recommendations to support sector development and action plan 5 5 WWW. IBM. COM/GBS/PLI

Identify priority areas for business environment improvement § The weaknesses in Hampton Roads’ subsector specific competitive position as identified in step 2, can be grouped thematically by business environment area. Our objective is to test the sensitivity of Hampton Roads’ competitive position to improvement actions in each of these areas. 6 Business environment area Key improvement needs Talent - Limited pool of experienced and niche skills - High competition for skilled staff due to mismatch in supply and demand Cluster - Small cluster presence and limited existing knowledge and research base in several segments - Limited knowledge sharing between universities, research institutes and commercial sector Infrastructure - Real estate - Limited availability of suitable and shovel ready sites Cost - High transportation costs - High real estate costs, notably for industrial sites - Higher utlity costs than some leading competitors Relatively weaker road connectivity than other regional competitors High road transportation costs and limited presence of road haulage service providers Few international and domestic air connections Limited commercial redundancy and use of renewable energy

Table of Contents 1. Introduction 2. Identify priority areas for business environment improvement 3. Assess improvement potential through sensitivity analysis 4. Recommendations to support sector development and action plan 7 7 WWW. IBM. COM/GBS/PLI

Sensitivity analysis Assess improvement potential through sensitivity analysis § The objectives of the sensitivity analysis in this section are two-fold: 1. Ascertain whether the competitive position of Hampton Roads can be improved by altering the performance on selected key location factors for which the benchmarking analysis has revealed relative weaknesses. 2. Establish which types of improvement interventions are likely to yield the greatest return in terms of improving Hampton Roads overall competitive position. § This analysis provides directional guidance as to the type of policy interventions that will be most effective in enhancing the competitive position of Hampton Roads for each sector. Accordingly, the results are translated into a rating of the effectiveness of each policy scenario for each sector. A high policy effectiveness means that the scenario is considered highly effective for enhancing Hampton Roads’ competitiveness in that sector while a low policy effectiveness indicates a low contribution to enhancing Hampton Roads’ competitiveness. § The improvement scenarios that were tested are listed on the next slide. 8

Sensitivity analysis Improvement scenarios Scenario Sectors Skills 50% improvement in availability of sector relevant skills* 50% improvement in competition for skills All Cluster 50% increase in cluster presence Software development, biotech, transport technologies, data center Innovation 50% increase of specialized R&D base Software development, biotech, transport technologies, data center Real estate 50% increase of real estate availability 10% reduction in real estate cost All 50% improvement in road connectivity 50% improvement of public transport network Shared services 50% improvement in road and rail connectivity 50% improvement in port and waterways connectivity Food processing, distribution center 50% improvement in energy sustainability potential Data center Attractiveness 50% improvement of quality of living 50% improvement of cost of living Shared services, biotech Access to raw materials 50% improvement in volume Food processing 10 year corporate state tax holiday All 10, 000$ per job (job creation grant) All Transport costs 50% improvement in logistics cluster 10% reduction in transport costs Distribution center Utility 10% reduction in power, gas and water costs Food processing, data center Infrastructure Incentives 9 Improvement * Scenarios are deliberately set as very ambitious in order to ascertain if substantial improvement will generate significant impact. They are not indicative of what is expected to be achieved in the short to medium term.

Sensitivity analysis Software development § The sensitivity analysis tests the different qualitative policy scenarios for improving Hampton Roads’ competitiveness, as indicated by the changing position of the Hampton Roads in the cost-quality map. The graphs below and on the next slides show the scenario having the largest impact. In this sector, scenario ‘Skills’ is most effective in improving Hampton Roads’ competitive position. Baseline 10 Skills

Sensitivity analysis Shared services Baseline 11 Skills

Sensitivity analysis Biotech production and R&D Baseline 12 State corporate tax incentive

Sensitivity analysis Food processing Baseline 13 Access to raw materials

Sensitivity analysis Distribution center Baseline 14 Infrastructure

Sensitivity analysis Transport costs Distribution center Baseline Real estate 15

Sensitivity analysis Transport technologies Baseline 16 Skills

Sensitivity analysis Data center Baseline 17 Infrastructure

Sensitivity analysis Overview 18

Sensitivity analysis Conclusions § The sensitivity analysis has shown that improvement measures focused on skills are effective across most of the sectors analyzed. Such improvements therefore need to be a key consideration for enhancing the attractiveness of Hampton Roads for investment in the future. The effectiveness of other policy interventions varies by type of sector and activity. The main conclusions by sector can be summarized as follows: 19 Sector/sub-sector Effective improvement scenario Software development Improvement focus on skill and cluster development and enhancing the innovation environment. Incentives and real estate play a limited role in improving competitiveness. Shared services Improvement focus on skill development, improving the attractiveness and accessibility for staff. Incentives and real estate play a limited role in improving competitiveness. Biotech Given the relatively poor competitive position, a combination of policy actions across all scenarios is required to have a substantial impact. State corporate tax incentives can be beneficial for this industry combined with wider cluster, skills and innovation improvement efforts. Food processing Policy focus on increasing the access to raw materials, road/port connectivity and skills availability. Job creation grants and state corporate tax incentives can be beneficial for this industry. Transport technologies Improvement focus on skill (including transferability of skills across segments within the cluster), cluster development and enhancing the innovation environment. State corporate tax incentives can be beneficial for this industry. Distribution center Targeted actions improving multimodal connectivity, real estate availability and logistics services supply and cost are most effective. Data center Improving the access to skills, real estate availability and the energy mix are considered to be the most effective policy interventions.

Observations from stakeholder consultation Key lessons learned § Current economic development efforts in Hampton Roads suffer from fragmentation and lack of coordination in regional development efforts § Individual communities and actors focused on individual tactical opportunities rather than longer term strategic priorities § Several initiatives taking place across a number of domains, e. g. skills and cluster development, but much of it is fragmented with lack of overall perspective on what is available and taking place within region. § Need to create greater visibility and awareness of existing initiatives and actors. Collaboration and knowledge sharing needs to be formalized and structured. These regional capabilities and initiatives also need to be promoted more effectively. § Some assets and capabilities are insufficiently leveraged for wider economic development, such as the Port and Navy presence. The region needs to find ways of making better use of these assets for sector development and investment attraction, and promote these collective capabilities more effectively. § Examples of successful regional cooperation exist in the area of transportation. Need to translate lessons learned from these experiences for regional economic development. § Important to appreciate that successful economic development for the region includes a combination of inward investment and development of local companies and start-ups. These two strands are sometimes viewed as alternatives, but should be seen as complementary efforts for economic development. Emphasis in approach will vary by sector and segment. 20

Table of Contents 1. Introduction 2. Identify priority areas for business environment improvement 3. Assess improvement potential through sensitivity analysis 4. Recommendations to support sector development and action plan 2121 WWW. IBM. COM/GBS/PLI

Recommendations to support sector development § The sensitivity analysis in the previous section has shown that improvement measures focused on skills and talent development, attraction and retention are very effective across several of the different segments. Such improvements therefore need to be a key consideration for enhancing the attractiveness of Hampton Roads for inward investment in the future. § The impact of infrastructure improvement measures is different across the subsectors with higher expected effectiveness in manufacturing , distribution and data centres. For these segments, improvements in the availability and cost of real estate are also important. § In addition, the consultation with stakeholders highlighted the importance of supporting local clusters and innovation across a number of segments. Such efforts will encourage the growth and retention of local companies as well as help with the attraction and retention of inward investment. § The analysis further illustrates that for multi-functional SSC, transport technologies, data centres, software, distribution and food processing it will be more feasible to close the qualitative gap with key competitors. § In contrast, biotech activities require a different development approach focusing on long term cluster development and the support of strong local champions and new start ups to grow and compete (inter)nationally. As such different sectors required different development strategies. § Moreover, measures influencing key cost disadvantages related to transport are effective in improving project profitability in the distribution segment. 22

Recommendations to support sector development § In addition to addressing particular weaknesses identified in the competitiveness and sensitivity analyses, it is important to recognise that we recommend distinct development paths for different sectors analysed. § Four segments (SSCs, software, distribution, food processing) merit immediate pro-active investment promotion coupled with efforts to address particular weaknesses in the operating environment. These sectors can be grown by leveraging inward investment as a key catalyst, while supporting the growth of local companies. Moreover, it is important to address key improvement needs for these segments in order to further improve the competitiveness of the region. § For data centres, there is an emerging opportunity linked to the development of new digital cable infrastructure (international cable connections). This represents an opportunity for inward investment to be exploited by the region, but it should be recognized that the overall volume of investment to be attracted is likely to be fairly limited compared to other segments analyzed. In addition, it is important that key improvements in the business environment (utilities, infrastructure, sites etc. ) are addressed. § For transport technologies, the aim should be to leverage the presence of existing local anchor companies/actors (notably the Navy and Huntington Ingalls) to further develop commercial activity in this segment. This will involve supporting the growth of new and existing local companies in addition to the attraction of niche actors in the relevant supply chain. In addition, there will be opportunities for attracting investment in segments that can leverage the transferability of skills in the large maritime segment in Hampton Roads. Indeed, improving the possibilities of leveraging the large talent pool within the maritime segment and the military for other segments (such as auto, rail, aero) in the transport technologies cluster could unlock substantial inward investment and wider growth opportunities for the sector. Such efforts should be complemented with actions to address the key identified weaknesses in the operating environment for this segment. 23

Recommendations to support sector development § For biotech and the wider life sciences sector, the emphasis should be on supporting the development of the local cluster, in order to establish and grow companies and commercial activity in Hampton Roads. The actions required for supporting this development are primarily focused on helping entrepreneurs and start-ups with the development of new products and services and grow their businesses. Creating the right eco-system for entrepreneurs and start-ups should also help attract entrepreneurs and small companies from other parts of the US and abroad. This should include efforts to improve the support and financing mechanisms for start-ups and SMEs. § In the pages that follow, we illustrate the different development paths in further detail. This is followed by recommendations on specific actions to address the identified improvement needs in the areas of talent, infrastructure and logistics, real estate and sites and cluster and innovation. As part of the infrastructure recommendations we also look into specific opportunities for better leveraging the port as a catalyst for economic development, notably by fostering more value added activities. § In making the recommendations we have not considered where the responsibility for implementation sits should the Hampton Roads region choose to implement these, as we do not have a close enough knowledge of structures and responsibilities across government and the private sectors. They are thus not targeted specifically at HREDA but rather for the Hampton Roads region as a whole. Furthermore, the region should, where appropriate, align the recommended actions with supporting initiatives taking place at the level of the Commonwealth, e. g. through VEDP or the Virginia Port Authority. Indeed, ownership of some of the suggested actions may be better placed at Commonwealth level. It is therefore critical that HREDA works closely with VEDP and other Commonwealth actors as these actions are taken forward. § Moreover, we recognise that the implementation of the recommendations will be subject to the prevailing resource constraints, and the availability of budget will impact the prioritization and implementation of recommendations. 24

Recommendations to support sector development Competitiveness improvement Sector development roadmap: Inward investment driven sectors* Medium term (12 -36 months) Short term (<12 months) Strategic site development and marketing Identify target companies Strengthen sectorteams and coordination Long term (36+ months) Sector-skills consultation program Host sector events Improved road Talent eco- connections system program P-TECH for Hampton Roads Digital Port and Logistics Platform Living lab for port and logistics technologies Norfolk airport expansion Logistics services strategy Sector-skills Mapping § Pro-active marketing efforts to attract investment § Focus on key markets § Improvement initiation § Grow sector presence (regional focus) § Start skills alignment and development § Initial infrastructure improvements * More details on individual initiatives and actions are provided in subsequent pages 25 Aligned research and innovation programs between industry, government and academia § Extent sector range and capabilities § Broaden geographic scope of investment § Continuous skills alignment § Infrastructure needs continually assessed and addressed Time

Recommendations to support sector development Competitiveness improvement Sector development roadmap: Transport Technologies* Short term (<12 months) Medium term (12 -36 months) Promotional tours and Sector-skills campaigns for local Skills mapping and consultation companies transferability assessment Targeted investment Transport. Tech Hackathons Engage local attraction champions Strengthen skills-transfer facility from military/Navy Establish cluster support function and scale ongoing initiatives § Grow skills base § Map and engage cluster capabilities and actors § Facilitate collaboration and targeted investment attraction § Establish cluster support mechanisms Long term (36+ months) P-TECH for transport technologies Living lab for port and logistics technologies § Extended investment attraction and support to existing companies § Connect domestic companies with international companies and players * More details on individual initiatives and actions are provided in subsequent pages 26 Aligned research and innovation programs between industry, government and academia § Regionally recognised hub for transport technologies § Triple-helix alignment for clusters Time

Recommendations to support sector development Competitiveness improvement Sector development roadmap: Cluster driven sectors (Bio-tech)* Long term (36+ months) Medium term (12 -36 months) Short term (<12 months) Extend associate degree program Skills and competency mapping Strengthen knowledgetransfer facility at universities and colleges Support Virginia Beach cluster development § Map and engage cluster capabilities and actors § Facilitate collaboration § Establish cluster support mechanisms Promotional tours and campaigns for bio-tech cluster Hampton Roads Crowdfunding list (Angel. List) Review pro-active FDI attraction Scale accelerator and entrepreneurship program § Grow skills base § Support existing and new companies § Connect domestic companies with international companies and players * More details on individual initiatives and actions are provided in subsequent pages 27 Aligned research and innovation programs between industry, government and academia § Regionally recognised hub for Biotech § Pro-actively attract investors to cluster § Triple-helix alignment for cluster Time

Recommendations to support sector development § In the following sections, recommendations linked with each of the improvement scenarios analyzed in the sensitivity analysis will be framed in an action plan. The recommendations are developed based on the analytical outcomes from the initial location benchmarking and subsequent sensitivity analysis, IBM’s experience with and insight into international case examples of good practices, recommendations highlighted in previously performed studies / policy papers and extensive consultation with stakeholders in Hampton Roads. § To provide strategic guidance into the main areas for which policy actions are required, we have structured the recommendations according to four main themes, as follows: A. B. C. D. Talent Infrastructure and logistics Sites and real estate Cluster development and innovation § It is important to note that each action is given a priority according to time (short-medium-long term), degree of effectiveness, segment (focus first on segments with highest potential to close competitiveness gap) and implementation effort (e. g. link with current initiatives, feasibility, etc. ). 28

Action plan A. Talent The action plan for talent sets out to create the right conditions for greater alignment between skills demand supply and collaboration between relevant stakeholders. In addition, actions relate to concrete programs or initiatives that will enhance the skills provision. The objective is to create the right dynamic processes for continuous collaboration between industry and education providers, and in so doing ensure that skills supply meets the changing needs of companies in the key sectors. Key actions relate to: • Greater awareness of and collaboration between different education providers and stakeholders. While coordination efforts are currently done by organizations like Opportunity Inc. there is a pressing need to formalize, map and institutionalize knowledge of education and training offers, initiatives and organizations in the region. • Collaboration between education providers and industry to facilitate greater alignment between skills supply and demand. This is particularly an issue in the areas of Engineering, ICT and Life Sciences, where some companies are currently frustrated by lack of access to required skills. • Creating greater opportunities for mixing the worlds of work and education for students, aimed at giving students the opportunity to get exposed to work experience and industry while studying (e. g. internships, apprenticeships, P-Tech etc. ) • Create alternative skills and career routes to traditional higher education, to offer more options for a larger group of students to gain relevant skills and qualifications. This includes greater coop education, apprenticeships, joint business/military training-transition programs and other opportunities for leveraging the talent pool within the military. • Attract and retain skilled people in Hampton Roads, with a view to making sure that the region maintains its skills base. The action points that are being recommended range from the development of strategies and insight, to the introduction of new coordination mechanisms and tools and investment in new or improved education programs. 29

Skills supply and alignment with sector needs 30 Sector-Skills Consultation and Coordination For each target sector, HREDA should define sector representatives/teams. The sector representatives/teams should work closely with organizations like Opportunity Inc. and coordinate regular sector specific consultation with the relevant business community, educational institutions and education policy makers. The objective is to facilitate information sharing on sector specific labor market needs to define priority educational programs, to facilitate the alignment of curricula and content of courses with the needs of employers and to organize a structured and sustainable partnership between the education providers and the business community. This should not be limited to current skills needs but also prepare for future skills requirements within particular sectors. Specific efforts are required by the Virginia and regional governments to incentivize all relevant sections within the educational institutions to enable a collaborative approach with industry, including setting up a network of corporate partners, simplifying relevant administrative requirements, etc. In taking on this role, it is important that sufficient resources are allocated to these tasks. Whether this is feasible within current HREDA budgets should be reviewed. Priority Issue Action plan A. Talent Short term High effectiveness Cross segment but with focus on multifunctional SSC, IT, transport technologies and life sciences Aligns with current efforts by Opportunity Inc.

Case example Ireland – Expert Group on Future Skills Needs The Expert Group on Future Skills Needs In Ireland workforce development is fully integrated into national policies and strategies with the roles and responsibilities of key stakeholders in workforce development institutionalized. Businesses and industry have executive and advisory roles in shaping and implementing workforce development priorities based on well-informed analysis and recommendations on future skill supply are implemented and policies routinely reviewed and updated. Stakeholders have influence over training curricula and advisory and decisionmaking roles in the operations of public training institutions, while incentives are in place to ensure that private and NGO providers meet quality standards. A culture of routine monitoring and evaluation—one aided by reliable and freely available data—is well-developed. A key vehicle for aligning skills supply with current and future industry needs is the Expert Group on Future Skills Needs (EGFSN). The EGFSN advises the Irish Government on current and future skills needs of the economy and on other labour market issues that impact on Ireland’s enterprise and employment growth. It has a central role in ensuring that labour market needs for skilled workers are anticipated and met. Established in 1997, the EGFSN reports to the Minister for Jobs, Enterprise and Innovation and the Minister for Education and Skills. The Department of Jobs, Enterprise and Innovation, in conjunction with SOLAS, provides the EGFSN with research and secretariat support. The SOLAS Skills and Labour Market Research Unit provides the Group with data, analysis and research and manages the National Skills Database. The Department of Jobs, Enterprise and Innovation provides the Group with research and secretariat support. The Group’s work programme is managed by the Head of Secretariat based in the Department of Jobs, Enterprise and Innovation. The EGFSN’s budget comes from the National Training Fund. 31 Functions The Expert Group on Future Skills Needs provides advice to Government on skills issues impacting enterprise through: • Skills foresight & benchmarking • Strategic advice on building skills through education and training • Data collection and analysis on demand supply of skilled labour • Influencing and monitoring implementation 31 WWW. IBM. COM/GBS/PLI

Action Issue Skills supply and coordination Skills supply and alignment with sector needs 32 Transfer program and up-skilling for military personnel Enhance current transfer programs for military personnel to target them at least 6 months prior to leaving service, and provide them with career guidance and insight into opportunities for employment in Hampton Roads. Work closely with skills providers and companies to offer relevant training and upskilling programs. Priority Talent collaboration platform Set up a collaboration platform that takes stock of and continuously monitors all relevant talent actors and the education and training programs on offer. This platform should be available to all skills providers, companies and individuals interested in education and training opportunities in the region. The platform can be managed by Opportunity Inc. or another organization with regional reach. Short term High effectiveness Cross segment Aligned with Opportunity Inc. Activities and VEDP Economic Development Strategy Priority Action Issue Action plan A. Talent Short term Medium effectiveness Cross segment Build on existing support programs for military personnel

Skills supply and alignment with sector needs Attract and Retain Establish an Attract & Retain policy to ensure Hampton Roads locals as well as domestic/foreign immigrants remain, return or settle in Hampton Roads. Possible actions include targeted career guidance for graduates, Hampton Roads quality of living branding in the US, targeting Hampton Roads ‘diaspora’ through local business community, … 33 Action Issue Skills supply and alignment with sector needs Talent Analytics Explore the role that Talent Analytics can play in supporting education outcomes and alignment between skills supply and demand by addressing problems pre-emptively and accommodate needs of individual students in a better way. Priority Medium term High effectiveness Cross segment but with focus on IT, multifunctional SSC and Transport Technologies Aligned with a range of existing initiatives Priority Action Issue Skills supply and alignment with sector needs P-TECH Engage companies in key target sectors in a program similar to P-TECH to advance technical skills for young people who do not necessarily follow the traditional university route (see next page for more details). Priority Action Issue Action plan A. Talent Medium term High effectiveness Cross segment Aligned with VEDP Economic Development Strategy Medium to Long term Medium effectiveness Cross segment

Case example P-TECH is a collaboration among the New York City Department of Education, The City University of New York (CUNY), New York City College of Technology (City Tech), and the IBM Corporation. When the collaborators began planning P-TECH in September 2010, the goal was never to create a single school. Rather, the express intent was to create an innovative, replicable model for education — one that united the expertise of the public and private sectors to provide new opportunities for young people, and addressed the need to strengthen the continuum from school to college and careers. Now serving four classes of students, P-TECH continues to chart new territory in the reform of secondary and postsecondary education in the United States. As the first school in the nation that connects high school, college, and the world of work through college and industry partnerships, P-TECH pioneers a new vision for college and career readiness and success. With a unique 9 -14 model, the goal for the diverse, unscreened student population is 100% completion of an associate degree within six years. “Today, I’m excited to announce a new partnership we’ve entered into with IBM and the City University of New York, and it’s the first of the kind in the country. Together, we’ll create a school that runs from grades nine to grade 14 – yes, grade 14. All students will learn the traditional core subjects, but they’ll also receive an education in computer science and complete two years of college work. “When they graduate from grade 14 with an Associate’s Degree and a qualified record, they will be 'first in line' for a job with IBM and a ticket to the middle class, or even beyond. " Mayor Bloomberg, 2011 34 34 WWW. IBM. COM/GBS/PLI

Action plan B. Infrastructure and logistics The action plan for infrastructure addresses immediate pain points that are affecting the operations of companies in Hampton Roads, as well as more strategic issues that will need to be addressed in the medium to longer term. The aim is to create the right infrastructure and services provision for companies to enable them to operate successfully out of Hampton Roads. Key actions relate to: • Freight logistics infrastructure, services and cost with the objective to create a more coordinated and efficient logistics services provision, and develop the scale required for attracting more logistics service providers. This should lead to better services and lower logistics costs. • Port development and improving the role of the port as economic catalyst • Improving accessibility, both by road, rail and air • Energy supply to ensure a reliable and sustainable energy supply with sufficient redundancy (assets and commercial) to meet the needs of large data centres. • Improve digital infrastructure and services, notably to ensure opportunity linked to international cables is fully realized The action points that are being recommended range from the development of strategies and insight, to the introduction of new coordination mechanisms and tools and investment in new or improved infrastructure. 35

Insufficient leverage of port 36 Digital Port and Logistics Platform Set up a port and logistics collaboration and management platform where information and data is shared between actors. This can be used for collaboration and coordination as well as the co-creation of innovative new services and solutions. Priority Insufficient leverage of port High transport costs Short term High effectiveness Manufacturing and Logistics segments Aligned with Port Opportunity Study This strategy requires actions to identify manufacturers’ logistics needs, collaborative opportunities, transport business cases for manufacturers, pro-active outreach to logistics companies and awareness creation in the full logistics chain (manufacturers, services providers, infrastructure operators). Action Issue High transport costs Logistics services strategy Develop a logistics services strategy to help local manufacturers collaborate, manage and bundle transport flows and enhance the cost efficient use of alternative or optimized transport modi (e. g. rail, full truck loads, sector specific logistics platforms, optimization of empty container usage). Priority Action Issue Action plan B. Infrastructure and logistics Medium term High effectiveness Manufacturing and Logistics segments Aligned with Port Opportunity Study

Case Example Extended Gateway – Flanders and Antwerp Port Extended Gateway: Port infrastructure and value added logistics activities as enabler for manufacturing based economic growth § Flanders has a prominent place in the European logistics space. This top position is linked to the region’s central location, its strategic gateways and infrastructure (most notably the Port of Antwerp), its dense and multimodal transport network, its knowhow in high-quality logistics and industrial processes and its welltrained, multilingual and productive employees. § The Flemish logistics ambition is twofold. Firstly, Flanders should position itself as the main gateway to Europe for distribution and value added logistics. In addition, Flanders must focus on highquality logistics in support of and anchoring specialized, innovative industry and global logistics value chains (i. e. chemicals, machinery, automotive, food), with the regional gateways being crucial. § The Extended Gateway concept, which is largely a translation of business reality, serves as the driving and structuring element for expanding the logistics strategy for Flanders. § The Extended Gateway Flanders is operationalized across the region trough a targeted, integrated and multifaceted strategy at the regional and subregional levels, encompassing infrastructure, skills, sites and space (including the identification of logistics hot spots), market organization and subregional coordination, marketing & acquisition and knowledge & innovation, § Key estimated benefits: § 30 -80 k additional direct jobs over ten year period § 10 -20% reduced air pollution per ton transported through improved modal split 37 37 WWW. IBM. COM/GBS/PLI

Case Example Io. T platform for Port of Rotterdam The Port of Rotterdam Authority and IBM today announced their collaboration on a multi-year digitisation initiative to transform the port’s operational environment using Internet of Things (Io. T) technologies in the cloud to benefit the port and those who use it. The initiative will also prepare the Port of Rotterdam’s entire 42 -kilometre site to host connected ships in the future. Speed and efficiency is essential to the port’s business, and requires them to use all of the data available. Thanks to real-time information about infrastructure, water, air, etc. , the port can improve the service they provide to everyone who uses the port, and prepare to embrace the connected, autonomous shipping of the future. Previously the port relied on traditional radio and radar communication between captains, pilots, terminal operators, tugboats and more to make key decision on port operations. Now, as the Port of Rotterdam begins its digital transformation, sensors are being installed across 42 -kilometers of land sea - spanning from the City of Rotterdam into the North Sea - along the Port’s quay walls, mooring posts and roads. These sensors will gather multiple data streams including water (hydro) and weather (meteo) data about tides and currents, temperature, wind speed and direction, water levels, berth availability and visibility. This data will be analysed by cloud-based Io. T technologies and turned into information that the Port of Rotterdam can use to make decisions that reduce wait times, determine optimal times for ships to dock, load and unload, and enable more ships into the available space. With the new initiative, Port of Rotterdam operators will also be able to view the operations of all the different parties at the same time, making that process more efficient. 38 38 WWW. IBM. COM/GBS/PLI

Insufficient leverage of port High transport costs 39 Living lab for Port and Logistics Tech Support the development of local innovation initiatives in the area of port and logistics technologies by establishing the Port as a “living laboratory” (see example) in which logistics companies, research organizations, technology companies and start-ups, community organizations and the government interact to develop innovative solutions enhancing the competitiveness of the port and surrounding area. As part of the living laboratory concept, the Port should codevelop and promote local innovations through the lead adoption of these solutions to solve regional challenges (e. g. Io. T solutions for transportation, unmanned systems or 3 D printing of components etc. ). Strong linkages between the Port, companies and the Navy should be established to help drive the development of concrete applications and solutions. Moreover the living laboratory approach will contribute to the Port’s and Hampton Roads’ potential to brand itself (inter)nationally under one ambitious development goal (e. g. Port of opportunity) Priority Issue Action plan B. Infrastructure and logistics Medium to long term High effectiveness Manufacturing, Logistics and IT segments Aligned with Port Opportunity Study and VEDP Economic Development Strategy

Case Example Singapore Port and Logistics Living Lab PSA Corporation Limited (PSA) with the support of the Economic Development Board (EDB) and the Maritime and Port Authority of Singapore (MPA) has inaugurated the PSA Living Lab, a living laboratory in Singapore for the port and logistics industry, with close to S$100 million committed to the initiative over the next three years. Comprising two operational berths at Pasir Panjang Terminal, the PSA Living Lab will enable start-ups and technology solution providers to collaborate with PSA to develop ideas and test-bed integrated systems in an unparalleled live port environment at PSA Singapore Terminals – one of the world’s busiest hubs for container movement. The PSA Living Lab is an integral part of PSA’s on-going program to develop innovative and cutting-edge technology solutions for its existing terminal operations in Singapore, as well as the future Tuas Terminal. One key project is the Automated Guided Vehicle (AGV) system, which will ramp up operations to a total fleet of 30 vehicles in 2017. Operationally-ready solutions have the potential to be deployed at terminals of the PSA Group worldwide. The PSA Living Lab will also complement the recently-launched PSA unbo. Xed Incubator program, which seeks innovative solutions from start-ups to revolutionise container terminal operations, streamline global supply chain logistics, and enhance the efficiency of international trade with better visibility and security. 40 40 WWW. IBM. COM/GBS/PLI

Action Issue High transport costs Utility services and costs 41 Freight Equalization Program Consider introducing a Freight Equalisation Program to subsidise road transportation costs from Hampton Roads for companies. This is important for Hampton Roads’ logistics and manufacturing competitiveness, given the relevance of the East Coast market and in the absence of improved road transportation infrastructure and logistics services. Encourage greater commercial redundancy in utility services Look for opportunities to introduce greater choice of utility providers (currently one) to allow for greater competition and commercial redundancy for large utility users, e. g. data centers. Indeed, the lack of commercial redundancy can be a knock-out factor for some data center projects. Priority Medium term High effectiveness Manufacturing and logistics segments Aligned with Port Opportunity Study and VEDP Economic Development Strategy Priority Action Issue High transport costs Attract logistics services providers Attract additional logistics services provider companies (e. g. DHL, UPS, Fed. Ex, DSV etc. ) to create sufficient critical mass through consolidated and orchestrated flows and to concentrate higher cargo volumes at the port Short term High effectiveness Manufacturing and logistics segments Aligned with Port Opportunity Study and VEDP Economic Development Strategy Priority Action Issue Action plan B. Infrastructure and logistics Short term High effectiveness Data centres

Action Issue Digital infrastructure 42 Norfolk Airport Expansion Continue to pursue growth and expansion policies for Norfolk airport to improve passenger and freight services. Invest in digital infrastructure Ensure continued improvements in digital infrastructure (e. g. broadband) to support data center and IT proposition. Digital infrastructure also becoming increasingly critical for manufacturing and logistics operations. Priority Medium to long term High effectiveness Manufacturing and logistics Existing improvement plans for road infrastructure Priority Limited air access Invest in road infrastructure Ensure that planned improvements to road infrastructure are implemented. Priority should be to enable better and faster connections to I-95. Priority Action Limited road accessibility and high transportation costs Issue Action plan B. Infrastructure and logistics Medium to long term Medium effectiveness Cross segment Aligned with airport development plan Medium to long term Medium effectiveness Cross segment Existing improvements in digital infrastructure.

Limited renewable energy use 43 Priority Medium to long term High effectiveness Logistics and manufacturing Explore synergies with Greater Richmond Assess where there are benefits in closer collaboration with Greater Richmond, e. g. In terms of shared research capabilities, supply chain linkages and infrastructure assets (such as Port of Richmond), that could be advantageous for potential and existing investors in Hampton Roads. Where relevant, these joint capabilities can be incorporated in promotion efforts and material. Priority Action Issue Limited cluster presence Improve intermodal connectivity Create better linkages and collaboration between different modes of transport (port, road, rail, airport) in order to provide an improved transport offer to companies, notably in distribution and manufacturing. Invest in renewable energy Encourage investment in more renewable energy, e. g. off-shore wind or tidal/wave, to provide more green energy options for large energy users, e. g. data centres. This can be linked to efforts to encourage greater commercial redundancy in utility provision. A strong commitment to renewable energy can also support investment attraction efforts in this segment. Priority Action Issue High transportation costs and limited road accessibility Action Issue Action plan B. Infrastructure and logistics Medium to long term High effectiveness Cross-sector Medium to long term High effectiveness Data Centres

Action plan C. Sites and Real Estate The action plan for sites and real estate is designed to ensure the availability of sufficient high quality and competitively priced shovel ready sites and office facilities. The emphasis is on creating the right real estate product to ensure companies have sufficient options available to meet their investment and expansion plans in the region. Key actions relate to: • Greater awareness of current real estate availability • Greater visibility into immediate short-term readiness of sites and/or building facilities to mitigate unknowns and location risks for investors • Ensuring potential sites are connected to relevant infrastructure and utilities 44

45 Limited availability of shovel ready sites Leverage VEDP Site Development Fund Connect with and leverage the VEDP Site Development Fund for Hampton Roads, and explore opportunities for using this as a vehicle for creating shovel ready sites in the region. Improve zoning and development process Seek opportunities to speed up zoning and development process and remove unnecessary barriers. Priority Action Limited availability of shovel ready sites Action Issue Limited available real estate Work with developers and planners Work with real estate developers and city planners to improve real estate offer for SMEs in region, notably in or near urban centers. This could include a portfolio of office, lab and flex space for high-tech sectors as well as the development of dedicated manufacturing and distribution parks. Medium to long term Medium effectiveness Cross segment Aligned with Port Opportunity Study and VEDP Economic Development Strategy Medium to long term Medium effectiveness Manufacturing and logistics Aligned with VEDP Economic Development Strategy Priority Action Issue Action plan C. Sites and real estate Medium to long term Medium effectiveness Manufacturing and logistics Aligned with Port Opportunity Study

Connect current sites Ensure current sites are sufficiently connected to relevant utility and road infrastructure in order for investors to be able to ramp up new facilities within 12 months (‘shovel ready’). Priority Improve real estate market transparency Increase transparency of the office and site markets in Hampton Roads, highlighting investment opportunities for real estate developers and local investors. Priority Action Limited availability of suitable office space 46 Action Limited availability of suitable office space Issue Action plan C. Sites and real estate Medium to long term Medium effectiveness Cross segment Aligned with Port Opportuinity Study Medium to long term Medium effectiveness Manufacturing and logistics Aligned with Port Opportunity Study and Planning District Commission study

Action plan D. Cluster and Innovation The action plan for cluster development is designed to foster the growth of cluster networks and collaboration between relevant actors. The emphasis is on generating coordinated support for companies from different actors and relevant stakeholders, support the innovation and entrepreneurship activities and help companies based in Hampton Roads to grow. These efforts should also help attract entrepreneurs and start-ups to Hampton Roads. Key actions relate to: • More coordinated and aligned support for companies • Facilitate greater collaboration among companies, universities and other innovation actors • Leverage the potential of strategic sites and assets for cluster development • Support entrepreneurs, start-ups and SMEs in Hampton Roads, and create a vibrant environment for starting and building businesses 47

Action Issue Small cluster presence 48 The target sector experts/specialists within HREDA should play a key role in the coordination of sector and cluster development activities within industry sector partnerships. These partnerships should include all relevant regional actors, i. e. local EDOs, Reinvent Hampton Roads, sector associations etc. This will ensure that strategic development goals and projects, external communications and investor support are aligned and transparent. HREDA budgets and resources should be evaluated with this key role in mind. Support cross-industry synergies Support cross-industry developments and collaboration (e. g. IT for ports/logistics, IT for transport technologies etc. ) to allow sectors such as logistics and transport tecnologies to move up the value chain and to grow the industry through higher value added as opposed to higher production volumes and low value added exports. This approach is also expected to increase the resilience of these sectors in the longer term. Priority Cluster coordination Short term High effectiveness Cross segment Priority Action Issue Action plan D. Cluster and Innovation Medium to Long term High effectiveness Cross segment but focus on logistics and transport technologies

Small cluster presence Priority Issue Action plan D. Cluster and Innovation Port cluster development Support the development of strategic logistics and manufacturing clusters through segment focused transformation and growth. These activities require strong support from the regional level and HREDA. The port and surrounding activities is an example where the resources, expertise and supply chain of an anchor company/organization (e. g. Huntingdon Ingalls, the Navy) can be leveraged to support the development of a strategic cluster. Key short term activities include: - Identify specific supply chain investment opportunities. - Develop longer term economic development vision and objectives, to form the basis for further master planning, marketing strategy, etc. - Review (and visit) similar strategic cluster initiatives to inform strategic development. 49 Medium to Long term High effectiveness Cross segment

Limited local knowledge base Innovation coordination The target sector team within HREDA should facilitate regular consultation among businesses, research and educational institutions focused on R&D. This should be done within the industry sector partnerships. The objective is to generate sustainable project based research collaborations by sharing research needs, communicating on current efforts and activities, identifying development opportunities, evaluating and prioritizing current R&D projects and developing a shared knowledge base on research priorities and capabilities. These coordinating and facilitating activities should be done in close collaboration with local EDOs and other relevant regional stakeholders. In addition, HREDA should work closely with VEDP to identify opportunities for Hampton Roads companies and research organizations to participate in collaborative innovation activities across Virginia. Priority Action Issue Action plan D. Cluster and Innovation Short term High effectiveness Focus on transport technologies, IT, logistics and life sciences Ne measure

Limited local knowledge base 51 Improved Knowledge Transfer Establish/enhance and support knowledge transfer function within universities and research organizations in region. It should be reflected in the management structure and in the incentives for recognition, compensation and promotion within these organizations. Key expected benefits include: - Recognition by the public authorities of the economic utility of the research function of universities and research organizations, which could lead to more funding; - Attracting more funding from companies and foundations for collaborative research, which may in turn leverage more public funding; - Attracting good scientists for recognition and career opportunities; - Attract more students Priority Action Issue Action plan D. Cluster and Innovation Short term High effectiveness Cross segment Aligned with a range of existing initiatives

Small cluster presence 52 Support program for local champions and SMEs Support the growth of local champions and new start ups through a dedicated enablement structure helping them to compete (inter)nationally. This effort involves - dedicated entrepreneurship/SME support - efforts to fill gaps in the local supply chain or business services environment - promoting linkages among players in the sector and across their supply chain - facilitate connections with finance community and customers - assist with optimizing processes related to recruitment, logistics, regulatory compliance and business development / regional export. This effort should be done in cooperation with existing Reinvent Hampton Roads initiatives Priority Action Issue Action plan D. Cluster and Innovation Medium term Medium effectiveness Cross segment but with a focus on Transport Technologies, IT and Life Sciences New measure

Action Issue Small cluster presence 53 Hackathons Organize regular hackathons for specific themes/segments, e. g. transport technologies, to encourage the development of new ideas, solutions and services. These hackathons should be supported by key anchor companies/organizations (e. g. the port, Navy and Huntingdon Ingalls) as well as other interested actors, and drive the development of new innovative projects. Successful project ideas should be supported through the incubator/accelerator services as well as by the relevant anchor companies/organizations. Priority Scale Accelerator and Incubator programs Support and scale existing Accelerator and Incubation programs and entrepreneuship competitions, to support young entrepreneurs with mentorship programmes, business plan development etc. Connect with good practice examples to learn lessons, such as Y Combinator, Angel. Pad (see next page) and Techstars. Incubation services should also be extended to encompass full start-up support. This should include shared facilities, mentorship programmes, innovation support, HR support, links to finance etc. Medium term Medium effectiveness IT, Life Sciences, Transport Technologies Builds on existing incubator services Priority Action Issue Action plan D. Cluster and Innovation Short term Medium effectiveness IT, Life Sciences, Transport Technologies New measure

Case example Angel. Pad is a seed-stage accelerator program based in NYC and San Francisco. In the past 5 years they have launched more than 130 companies in 10 cohorts. Every 6 months they select about 12 teams from a huge pool of applicants (usually around 2000) to work with them. Angel. Pad provides mentorship, seed money, and networking at two 10 -week courses per year. During the program, Angelpad work on everything from finding product market fit, defining a target market to getting first validation for the company. They are also instrumental in helping companies prepare for fundraising and for an investor demo day. Several Angel. Pad companies have already attracted subsequent rounds of investment. The companies are: Coverhound, Crittercism, Loc. Box, Mo. Pub, Postmates, Pgoseat, Ribbon, Rolepoint and Vungle. Angel. Pad is ranked the #1 U. S. Accelerator by MIT’s U. S Seed Accelerator Rankings 54 54 WWW. IBM. COM/GBS/PLI

Small cluster presence 55 Priority Action Issue Small cluster presence Crowdfunding list Set up Hampton Roads Crowdfunding list similar to Angel. List to help match investors and start-ups. This should be used as a platform to match potential investors and entrepreneurs in Hampton Roads. The list could also be extended to investors outside of Hampton Roads. Data Exchange Platform Consider developing a Hampton Roads Data Exchange Platform, and position the platform to support e. g. living lab initiative around the Port. The platform should act as a catalyst for the development of transport technologes in Hampton Roads, providing the data and analytics capabilities for developing new solutions and services. It can also be leveraged for the logistics/distribution sector. Priority Action Issue Action plan D. Cluster and Innovation Medium term Medium effectiveness Life Sciences, IT and Transport Technologies New measure Medium term Medium effectiveness Transport Technologies and Logistics, IT, Life sciences New measure

Case example City Data Exchange - Copenhagen The City Data Exchange provides a service for the sale, purchase and sharing of a wide variety of data from multiple sources between all types of users in a city – citizens, city government, businesses. It enables large established companies, small medium enterprises, start-up companies, as well as academia and public sector to come together and integrate multiple sources of information to meet the challenges of sustainability and quality of life, as well solutions to improve their own efficiency and effectiveness. This City Data Exchange solution streamlines the analytic process by eliminating the need to rebuild the big data plumbing for each analysis, and eliminates big data silos, which make it difficult to share information with other entities. 56 56 WWW. IBM. COM/GBS/PLI

Plant Location International (PLI) Global Location Strategies A service of IBM Global Business Services Web-site: www. ibm. com/gbs/pli Koen Gijpers +32 494 33 45 92 Koen. Gijpers@be. ibm. com 57 Jacob Dencik +32 473 23 09 23 Jacob. Dencik@be. ibm. com Gene De. Prez +1 973 900 4724 gene@globalinnovationpartners. com