Best & Worst States for Business 2021: The New Digital Factory Towns

Coders and social-media mavens are a dime a dozen in long-established high-tech outposts like Silicon Valley. But to leverage AI in manufacturing, tap into “design thinking” in product digitization and harness big data in actuarial software, companies are looking to places like Chicago, Grand Rapids and Columbus.

The capital of Ohio is employing a “legacy digitization strategy” built around the critical mass of insurance companies headquartered in Columbus, Cleveland and other Ohio cities. The long-time presence of marquee insurers like Nationwide, SafeAuto and Progressive has built a huge stockpile of industry expertise.

“You can find actuaries and people who understand the category here, and it’s a favorable state regulatory environment,” says Mark Kvamme, co-founder of Drive Capital, a Columbus-based VC firm that funded local startups like car insurer Root; moved a travel-insurance startup called Battleface to Columbus from Washington, D.C.; and launched Medicaid-insurance startup Circulo locally.

States and cities are making headway with a new strategy: assisting industries and vertical niches where they’ve already dominated—or think they can grab an edge. The playbook is gathering steam thanks to the dispersion of work—and talent—during Covid.

Alex Frommeyer, CEO of Beam Dental, calls Columbus “a goldilocks city for our business. It’s got a huge concentration of digital talent across product engineering, data science, marketing and a bunch of other fields, a university concentration in insurance and the business infrastructure. But it’s not such a ‘discovered’ city where we need to compete with Facebook, Google or Tesla for talent.”

In Michigan, digitization of legacy industries “plays to our strengths,” says Tom Kelly, CEO of Automation Alley, a public-private partnership north of Detroit. The group recently granted 300 3D printers to small manufacturers in two counties, which will then be connected to form a huge additive-manufacturing network.

Based in Grand Rapids, the Seamless Consortium combines about two dozen big local employers that depend heavily on industrial design to finance “proof of concept” engagement with startups around the world related to manufacturing technologies. “It’s easier for physical companies to integrate this stuff than for digital people to integrate all the capital in the physical world,” says Mike Morin, co-director of the group. “That’s why you’re seeing this happen here.”

The city’s history as a “design capital” helps, says Nevan Hanumara, a professor at MIT. “It’s in the DNA and in a network of professionals who hop from company to company there and stay tightly interconnected.”