Part 1 of 2. This month: Regional leaders joining forces to stimulate entrepreneurship and turn natural attributes into competitive advantages
Bloodroot (Sanguinara canadensis), a dainty white flower with sun-colored stamens, might look like just another Eastern Kentucky woodland beauty. It is one of the faces also of an innovative way of thinking that could bring economic diversity and prosperity to a region seeking to answer the pressing question “what now?” after being buffeted for decades by economic forces beyond its control.
Business students at the University of Pikeville have developed a product called Rhizofeed from the bloodroot. Properties of its root, the students found, provide a natural antibiotic for chickens that is less expensive and more stable than probiotics. Its rhizome extract also has anti-inflammatory properties and has been linked to improving the immune system, regulating digestion and promoting weight gain.
After winning first place in four competitions with their business plan for Rhizofeed, the UPike students are now working with Alltech to bring the product to market. Nicholasville-based Alltech, a $1 billion company operating in 128 countries, makes and sells natural feed supplements that improve animal performance.
The Rhizofeed initiative is an example of new thinking and attitudes that state and regional leaders hope is the beginning of an economic revolution.
The coal mining jobs that have been a financial cornerstone in Eastern Kentucky for multiple generations are crumbling away in recent years. Coal has been cyclical, but this time growing worry is that a rebound is not going to come and the 7,000 miners laid off from well-paying jobs the past three years have little prospect of being called back.
The U.S. energy sector and industry in general is pivoting toward cheaper, more ecologically friendly and now very plentiful natural gas. Hydraulic fracturing has even made the United States the world’s leading oil producer again and is creating what looks like permanent change in the nation’s energy infrastructure – and the economies attached to it.
That was a major motivation behind the Shaping Our Appalachian Region (SOAR) initiative Gov. Steve Beshear and U.S. Rep. Harold Rogers launched in 2013 to stimulate discussion, thinking, collaboration and action to create new economic opportunity in Eastern Kentucky. Three multiday SOAR conferences have provided a framework for idea sharing and problem solving.
“We know we have natural attributes we can build into competitive advantages,” said Tim Gibbs, executive director of the Ashland Alliance. “For years it was coal, but that is not going to be the same driver as in the past. Other attributes are our cultural heritage, tourism and our central location (within an eight-hour drive of 50 percent of the country).”
One key strategy is to build a new culture of entrepreneurship in the region so that residents can create the bootstraps with which to pull themselves up via new businesses such as the one envisioned by the UPike student team.
Unconventional thinking and new business
Rhizofeed aims to target a multibillion-dollar poultry production industry – Kentucky’s top agribusiness sector by revenue – that is looking for alternatives to probiotics or antibiotics, a market expected to grow as an increasing number of major food companies such as McDonald’s demand antibiotic-free production. Grown, extracted and sold from Kentucky, Rhizofeed could diversify Eastern Kentucky’s regional economy while improving poultry production globally.
“This is unconventional when you think of agriculture,” said Howard Roberts, dean of the UPike Coleman College of Business, “but the agriculture market has to be much different in Eastern Kentucky. Traditional row crops won’t work here.”
This kind of thinking is at the heart of the UPike College of Business. Diversifying the Eastern Kentucky economy was one of the original goals when the business school was established in 2013 and remains the thrust today.
“We look at regional needs and try to be in tune to the needs of the region so we can respond with programs that meet that need,” Roberts said.
In 2011, the small local chambers of commerce of Floyd, Johnson, Knott, Lawrence, Letcher, Magoffin, Martin and Pike counties joined forces and became the Southeast Kentucky Chamber of Commerce to create an entity with enough resources to support business development regionally.
Like the economic diversification they are seeking, UPike programs have taken diverse directions. Healthcare is one example.
“We want to train young people for careers in healthcare, specifically healthcare management,” Roberts said. “We have done that by creating a new masters in healthcare management.”
Business recruitment is another focus.
“We have a strong need in this area to attract businesses and to focus on economic development,” Roberts said. “Most recently, through the Southeast Chamber of Commerce, we have hired Chuck Sexton who serves as economic development coordinator for the entire region. This will give us a focus we haven’t had before.
The list goes on.
The Kentucky Science and Technology Corp.’s IdeaFestival, an annual multi-day exploration of creative thinking aimed at stimulating business innovation in Kentucky, in June put on a one-day event in Pikeville focused on “The Future Of Healthcare.” It attracted folks not just from the region but from Louisville and Cincinnati as well.
A new office of the Kentucky Innovation Network opened in Pikeville to advise existing small businesses and help aspiring entrepreneurs write business and marketing plans. In the fall of 2016, a new UPike Kentucky College of Optometry will open, becoming the state’s first such school.
Success will revolve around talent
A new telecommunications program is already in place, designed to train and retrain displaced workers. Many of these workers could be employed with the expansion of dark fiber, a super high-speed Internet service that could make working from Eastern Kentucky as easy as working from New York City.
“When you look at Appalachia, the needs are great,” Roberts said. “Appalachian has a future that is going to be very different – becoming less dependent on extracting minerals and more on providing services. It will happen slowly, but I have no doubt we can have a dynamic transition to a diverse economy.”
Gibbs agrees, and the Ashland Alliance chamber of commerce and economic development organization he leads is another key player seeking economic success in Eastern Kentucky.
Gibbs believes future success will revolve around talent, which means shaping the region’s workforce.
“A lot of economic development is based on matching talents to opportunities, being able to find a skilled, innovative workforce,” Gibbs said. “Our workforce must be able to adjust to the new economic. We are trying to create a nimble structure that will give us a competitive advantage.”
Ashland Alliance started with the Kentucky Work Ready program, which employs a nationally recognized standard for workforce skills.
“To make positive change you have to have business and industry, political leaders, educators all at the same table speaking the same language. This program forces you to bring people together,” Gibbs said.
One of those meetings happened recently when area industry and educational leaders met to develop what they call a work field. High school seniors will be able to sign a contract and if they meet the conditions – certain coursework, no drug or alcohol incidents, solid attendance records, few tardies, soft skills development – they will be certified Job Ready and eligible to be hired by participating employers when they graduate.
“Educators listened to business and industry tell them what they needed,” Gibbs said. “Some of their needs are straightforward. They need people to show up. For example, one executive from AK Steel talked about what happens if someone is late. In the production process, they still have to cover that position. For them, if that person shows up late, it isn’t much different than them not showing up.
“Their operation is lean enough that every single person is important. They wanted one component of the (work field) plan to be whether students show up and are timely. This is an important indicator of a successful employee to them.
“We had all hands on deck in developing this plan. We knew if it the community didn’t embrace it, it wouldn’t be used. Now we will be able to match workers who need jobs with people who have what industry needs in workers.”
Make a “glorious heritage” an asset
While Gibbs believes there is nothing more important to economic success than investing in people, he said Eastern Kentucky also must take a multifaceted approach to growing business and jobs.
Gibbs believes the region’s cultural heritage – the Country Music Highway, the array of musicians who’ve come out of the region, the Jenny Wiley Theatre in Prestonsburg, the Paramount Theatre (now Arts Center) in Ashland – has barely been tapped.
“We can take better advantage of our glorious heritage,” he said.
The region’s central location in the eastern United States likewise has not been fully tapped, he said.
“At the Huntington (W.Va.) airport, the vast majority of flights are to Florida and South Carolina,” he noted. “We could be marketing to those states about the tourism opportunities here; the planes fly in both directions. For example, the Rush Adventure Drive Park in Boyd County had an event for ATVs and four-wheeling that was attended by 5,000 folks. That kind of thing is a huge opportunity. We have to re-evaluate what we have, how we value it, and how we market it.”
Meanwhile, there must also be a transformation from a place-based economy to a technology economy, according to Gibbs.
“We have to go from megabyte to gigabyte,” he said. “We are just now realizing what that can mean and how we can market it. It is similar to communities being electrified for the first time and getting water for the first time. We are not looking to be (ranked) in the high 40s of the states in terms of technology. We are looking for Eastern Kentucky to be in the top five.
“We did a trade trip to India a couple months ago. We were talking space
science – making micro satellites that do certain things very well. They can be built at one-tenth the cost of a (full-size) satellite. Every skill it takes to build these micro satellites we teach at our community colleges.”
Sites and certification count – a lot
Not everything is about change, however. Good industrial sites, a staple of economic success for decades, is still important today. Flat land is at a premium in Eastern Kentucky, but Ashland Alliance does have a 1,000-acre multiuse business site known as EastPark.
“We are lucky enough to have one of the 10 regional industrial sites,” Gibbs said. “We are not just certified ‘shovel ready’ but also as a quality site by McCallum Sweeney, a premiere site consultant.
“Certifications have become so much more important. It is a company’s way of eliminating risk,” he said. “They know you have training opportunities, know you have educational partners, have the bits and pieces they are looking for. We have done our due diligence. We are not ready in six or nine months. We are ready today. We are pre-certified.”
It is important to act quickly to help develop businesses and industries that make it possible for people to live and make a living in the region, said Peter Hille, president of Mountain Association for Community Economic Development (MACED).
“There has been a lot of focus on the 10,000 lost coal jobs, but even before that happened the region was characterized as economically distressed,” Hille said. “The Appalachian Regional Commission (created in 1963) has identified the area as economically distressed as long as it has been making that classification. That would be the same even if we replaced those jobs.
Hille said the topic is “a big conversation a lot of moving pieces, and quickly adds that it is an area with “enormous opportunities.”
Try it to see if it works
Taking advantage of those opportunities has been the focus of MACED since its inception in 1976. Hille said the organization has three key strategies:
• Community Investment – investing capital and technical assistance to create economic opportunities, protect natural and cultural assets, and provide critical services.
• Demonstration Initiatives – developing new approaches to old problems and testing them out on the ground.
• Research and Communications for Policy Change – conducting research on policy opportunities and barriers that results in better development practice and opportunities.
Within these strategies, MACED offers an array of programs. For example, the organization’s Energy Efficient Enterprises helps businesses become more energy efficient while reducing greenhouse gas emissions. Specifically, How$martKY , another MACED program, works with electric cooperatives to fund energy efficiency retrofits for homes.
“We were able to approve a $400,000 investment in a grocery store in southeastern Kentucky for an LED lighting retrofit,” Hille said. “The investment will pay off in two years, and the company will come out $100,000 a year ahead after making the investment.”
Forestry is another focus. The Appalachian Carbon Partnership promotes sustainable forest management through education, financial assistance, and new income options in the sale of carbon credits while the Center for Forest and Wood Certification helps landowners and wood products companies get involved in forest and wood certification.
The group also gets involved in policy development both on the front end in terms of research and on the back end in terms of helping to shape policy. The Kentucky Sustainable Energy Alliance, for example, advocates for state policies that support investment in energy efficiency and renewable energy. The Appalachian Transition Initiative fosters conversations about a more sustainable and prosperous future.
Eastern Kentucky Concentrated Employment Program, a Hazard-based organization that serves 23 counties, in June received a $7.5 million grant from the U.S. Labor Department to help address coal industry layoffs through its Hiring Our Miners Everyday effort. EKCEP received a $5.2 million Department of Labor grant last year.
These are not the only groups working on the issue. Perhaps the biggest effort by far is the SOAR initiative co-chaired by Gov. Steve Beshear and 5th District Congressman Hal Rogers.