1012 Corridor

When state economic development officials talk about the kinds of companies they want to attract to Louisiana, they point to TurboSquid.

The nine-year-old, New Orleans–based digital media firm is an online consignment store of sorts, boasting the largest library of 3D models and products for sale in the world. It is revolutionizing the way digital media products are bought, sold and delivered, and its list of international clients includes CNN, Pixar and the U.S. Department of Defense.

But it’s not just because the company is high-tech, innovative and successful that economic development officials hold it up as a model. It’s because in TurboSquid’s nearly decade-long existence the company has helped cultivate an entire industry for Louisiana in the digital arts, attracting other, like-minded companies here and creating among them a synergy and a network that has seemingly limitless possibility for growth.

“The soil here is pretty fertile at the moment,” says Matt Wisdom, TurboSquid’s CEO and co-founder. “There are a lot of reasons for people to get into digital media and do it here. We’ve done an excellent job of putting the pieces together.”

Now, the state is looking to replicate the kind of success it has had growing and cultivating a digital media industry by trying to identify other emerging markets and industries, a strategy state officials are calling “Blue Ocean.” The new strategy is an initiative of the Louisiana Innovation Council, which was created by Gov. Bobby Jindal to establish a comprehensive economic strategy and “innovation agenda” aimed at growing the state’s economy and enhancing its competitiveness.

That may sound like something officials at Louisiana Economic Development are doing already—and, of course, they are. But the Louisiana Innovation Council is different in one important respect: It’s focused on looking forward and trying to identify key areas where Louisiana can be competitive in the future. That’s critical, officials say, because statistics show the state is going to have big problems in the next decade if it doesn’t make some changes.

Here’s why: Over the next 10 years, Louisiana is projected to add 235,000 new jobs to its workforce. That may sound fairly impressive, until you compare it to Louisiana’s 15 peer states in the South, which are projected to add 385,000 new jobs on average. Worse still, Texas, Georgia and North Carolina—the states Louisiana aspires to compete with—are projected to add some 450,000 new jobs in that same period.

“Our growth projections are significantly slower than the rest of the South,” says Stephen Moret, the state’s secretary of economic development. “We want to create a growth strategy for the state that would allow us to double our baseline projections.”

Which is where Blue Ocean comes in. The strategy borrows its name from the 2005 business best-seller Blue Ocean Strategy, authored by W. Chan Kim and Renée Mauborgne. Blue Ocean Strategy uses the metaphor of blue oceans to describe the deep potential of economic markets that have yet to be explored. Blue oceans are industries that don’t yet exist and haven’t been tainted by competition, or markets that are reached by crossing the perceived boundaries of an industry. In blue oceans, demand is created rather than fought over, and there’s ample opportunity for growth that is both profitable and rapid.

The state’s new strategy doesn’t refer to the book specifically, but takes the Blue Ocean metaphor as an inspiration, Moret says. The state’s plan is more like a detailed map that identifies several of these deep, untapped pools in which the state should trawl. These areas all have high-growth potential and are arenas in which Louisiana can plausibly compete. Perhaps most important, they haven’t been taken already by other states.

“We are targeting sectors in which no other state has a commanding lead,” Moret says. “We don’t want to go after something where we’re 20 years behind the curve.”

It sounds simple. But making it happen is complicated and will take years. That’s why the Louisiana Innovation Council brought in the consulting firm McKinsey and Co. to devise the nuts and bolts of the Blue Ocean implementation strategy. The firm worked on the plan for several months before Moret officially rolled it out in early January.

At the heart of the plan is the list of six target sectors on which the state will focus its efforts (see chart, next page). The state is still working on parts of the plan that will detail how to appeal to these industries and specific companies to recruit. But Moret emphasizes the plan will be organic, meaning it will include a variety of approaches and be subject to change as time passes and new information becomes available.

Still under development is a cultivation plan for each of the six sectors, with specific action items for each. Those will include things like workforce development, targeted infrastructure investment, tax incentives, higher education programs, marketing plans and how partnerships between state agencies can help. LED is already shifting a lot of its focus in these directions, and Moret says Blue Ocean will dovetail with existing efforts.

“We’re trying to put less and less of our incentives into cash and more into things like talent development,” he says. “I’ve got a variety of business recruitment projects that have specific R&D tied to universities in our state. Each time we can do that it creates a more compelling opportunity for everyone involved.”

The plan is more about building the right “ecosystem” for these high-growth industries, Moret adds, than about recruiting individual businesses. At the same time, the state will be not only maintaining but actually enhancing its business retention efforts.

In the six target sectors and other “emerging markets” like them, Louisiana has already learned a lot about how the Blue Ocean model might look. Among the examples LED cites:

• In nuclear energy manufacturing, Shaw Modular Solutions is manufacturing modules for nuclear power plants in Lake Charles that will be shipped globally.

• In digital interactive media—besides TurboSquid—Electronic Arts has opened a global quality assurance center in Baton Rouge and has partnered with LED and LSU.

• In next-generation auto, V-Vehicle is building a high-quality, fuel-efficient car in Monroe.

In each of those arenas, companies have come to Louisiana and helped grow not just a new business but a new type of business.

Another example is Zagis USA, which recently opened a cotton processing plant in Jefferson Davis parish. The facility processes raw, locally grown cotton into yarn, which it then sells to manufacturers. What sets the company apart, however, is that it’s exporting a value-added product at extremely competitive prices—and making a killing at it.

“Rather than having the traditional textile view that we’re trying to protect the U.S. industry, we really view it in terms of the global supply chain management,” explains Zagis CEO Dan Feibus, who expects company revenues to top $50 million next year. “We have the raw material and we convert it, then it can be shipped to markets all over the world. What we’re really trying to do is grow the business.”

Another key component of Blue Ocean will be to identify specific companies—as many as 50, perhaps—within each sector that the state should actively target and pursue. That approach has proven successful for LED in the past. One of the main reasons the international game manufacturer EA opened its testing facility in Baton Rouge is because LED honed in on the company and spent several years actively pursuing it.

“That focus really paid off,” Moret says. “I think it really impressed them that we specifically went after them. We would like to replicate that experience.”

Zagis USA also came here because they were impressed with how the state treated them. Economic development officials were prepared, professional and ready to do whatever the company needed to make the deal work.

“We got a huge amount of support from the state,” Feibus says. “We found a very entrepreneurial, market-driven state development arm that was moving forward in trying to make things happen.”

Company CEOs say the education component of incentive packages is extremely important. In the digital arts arena, for instance, LSU is working closely with cutting-edge companies in Baton Rouge, including EA, Nergyzed Entertainment and Ya-Tech, to help train and produce a pool of talent. But in New Orleans that piece of the puzzle is missing.

“The next big step for us, especially in New Orleans, is to get an educational pipeline to help deliver talent in this area and generally improve the curricula across the state,” says Wisdom at TurboSquid. “Larger companies that would consider being here want to have a full pipeline of young students ready to be molded to fit their corporate culture.”

For the corridor, Blue Ocean comes at a particularly important time. The dynamics of the region have been shifting since Katrina, with new regional alliances and growth that has been more rapid in some parishes than previously expected. There are new residents, new demographics and new opportunities, which is why having a new economic development strategy is particularly valuable.

“Looking to industries of the future is particularly relevant and important to the New Orleans region because, moving into this post-Katrina era, we have perhaps a once in a lifetime chance to reinvent our economy,” says Michael Hecht, CEO of regional economic development alliance Greater New Orleans Inc. “This initiative is going to give us direction towards how we can reinvent it.”

That will mean something different for each parish or region of the corridor, depending on that region’s existing strengths and resources, Moret notes. Lafayette, New Orleans and Baton Rouge are all well positioned to take advantage of heightened activity in digital media. The Zachary Taylor Megasite in Tangipahoa Parish would be ideal for advanced auto manufacturing. Southwest Louisiana has the right climate for the sprawling algae production fields that could spawn a whole new green energy industry. And so on.

“We expect target sectors for the Baton Rouge area that are based upon our historic strengths, as well as developing talents, such as intermodal transportation infrastructure, the presence of two universities, a highly qualified talent base, entrepreneurial corporate leadership and some access to early stage capital,” says Adam Knapp, CEO of the Baton Rouge Area Chamber. “We expect that the targeted opportunities for our region will link well to these and our other assets.”

While the state will be focusing on the Blue Ocean strategy, it will continue with its more traditional economic development initiatives. But Moret says the focus has to be long-term and far into the future in order for Louisiana to become competitive and stay there.

“We’re trying to outperform the rest of the South, and if all we do is cultivate our existing industries, we’re not going to achieve our goal,” he says. “We need to cultivate new growth opportunities. That’s what Blue Ocean is about.””

Louisiana’s Blue Ocean Sectors

Digital media/software development

• Next-generation digital media/software development ecosystem (gaming, health care software development, smart phone applications, etc.)

Next-generation auto

• Manufacturing center for cleaner cars

Renewables & energy efficiency

• Energy efficiency: Green living, green building, green manufacturing

• Biomass-based fuels and hydropower

• Nuclear power parts and modular production

Specialty health care

• Specialty research hospital and corridor

• Obesity/diabetes research and treatment

• Manufacturing pharmaceuticals

Water management

• “The Netherlands of the U.S.” (leverage current coastal restoration and water defense efforts)

Next-wave oil & gas

• Ultra-deep water production

• Unconventional gas

• Enhanced oil recovery (from existing oilfields)