Casual visitors would hardly have reason to guess that by stopping in Mitchell they’re also visiting one of the most successful technology hubs of any small city in America. Agriculture is the area’s leading industry — fitting for the home of the Corn Palace — while manufacturing also remains important, with local companies making fans and trailers. But Mitchell has also fostered a tech cluster in a way that is unusual in rural America.
Mitchell is home to a pair of telecom services companies that, between them, employ about 500 people. That’s not bad for a city of 15,000. Those companies, in turn, have spun off other cybersecurity and IT firms as employees have struck out on their own.
“Being sited in the middle of corn country but having these other strong factors is pretty unique for a small town,” said Ronald Wirtz of the Federal Reserve Bank of Minneapolis, who tracks business conditions in South Dakota and several neighboring states.
Mitchell is not a place blessed with a lot of natural advantages. Civic leaders readily concede it lacks the amenities of a major city or a Rocky Mountain resort area. But Mitchell has made the most of the advantages it does have, including its location on the interstate, its proximity to the growing city of Sioux Falls, its institutions of higher education and a culture of collaborative leadership.
“There aren’t that many small communities in that part of the country that rank that high in terms of overall job growth,” said Ross DeVol, president of Heartland Forward, an Arkansas-based think tank focused on improving economic performance in the center of the country. “Mitchell is definitely one of the better performers among small communities.”
Mitchell invested early in connectivity. In 2005, it was the first small city in South Dakota to install broadband throughout the community. Today, there’s fiber all over town, connected to every business and school and nearly every residence. This stands in stark contrast to much of rural America, where broadband remains a rumor. There seems to be a rural broadband initiative announced every other month, either in the federal government or by some governor’s office. Yet two-thirds of the nation’s counties lack access to broadband, including 77 percent of those with populations under 50,000, according to the National Association of Counties.
People who work in rural economic development can share unending horror stories about the problems caused by lack of connectivity. Calls get dropped or conversations get mangled because there’s only one bar of cell service. Customers are sometimes unable to pay in-person with credit cards when passing storms knock out the Internet.
These kinds of problems are about more than the frustration of not being able to stream shows on Netflix. Digital connectivity has become essential for economic activity. In the era of the coronavirus, that’s truer than ever. Millions of Americans are still working remotely, often alongside their school-age children, over Zoom and other platforms.
Theoretically, this should make it possible for rural areas to attract more individuals and companies that no longer have to be tied to big cities. Some of the nation’s largest cities were already starting to lose population over the past half-decade, well before the pandemic. Housing prices in attractive small cities such as Jackson Hole, Wyo.; Helena, Mont.; and Idaho Falls have shot up over the past year, with people eager for more space and an extra bedroom that can serve as a home office.
Those places are exceptions, however. About 60 million people live in rural areas — not quite a fifth of the total U.S. population — but rural population has stagnated or declined over the past decade.
“If you’re rural and highly isolated, it’s going to be very difficult to succeed,” said John Lettieri, president of the Economic Innovation Group, a Washington-based research and advocacy firm. “The success of a rural economy seems dependent on its proximity and connectivity to other things.”
For all the thousands of “leaving New York” (or San Francisco or Seattle) stories that have been published in recent months, the reality is that most people are going to stay within a reasonable drive of their jobs, even if they’re showing up in person less often. And most jobs are staying tied to the cities. Even during the pandemic, major companies such as Amazon and Facebook leased additional office space in Manhattan by the hundreds of thousands of square feet. Palantir, a data analytics software company, did announce in August that it was leaving Silicon Valley, but its new headquarters is Denver, not some small town in the middle of nowhere.
The pandemic has given rural America a rare chance for a makeover, the opportunity to convince more people they can have a future away from congested metropolitan areas. Yet people and companies won’t settle in a small town if it’s known as a black hole for broadband. “There’s an opportunity for some smaller communities to make a case for themselves as to why they’re a good location,” DeVol said. “But if you don’t have broadband, the remote worker idea is just not going to pan out for you.”
Students at Dakota Wesleyan University mostly pursue majors that are aligned with the workforce needs of the community. / Credit: David Kidd/Government Technology
THERE’S A VICIOUS CIRCLE at play in most rural communities. Young people move away because there are few opportunities, leaving behind an older population, a smaller workforce and a diminished tax base. Rural residents are older, on average, than city dwellers, with higher rates of poverty and lower rates of life expectancy. Starting businesses is difficult. Some 40 percent of rural counties lost bank branches between 2012 and 2017, according to the Brookings Institution, with 33 percent fewer entrepreneurs operating companies in 2018 than was the case 30 years earlier.
That means small towns and rural counties aren’t just losing people, but people of prime working ages. The typical rural county can lose up to 30 percent of its high school class within a couple of years of graduation, as kids set off for college, military service or better job prospects elsewhere, according to Kenneth Johnson, a demographer at the University of New Hampshire. “In almost all rural counties,” he said, “there’s a net migration out of people in their 20s.”
In Mitchell, they’re bringing young people in. A lot of that is thanks to the presence of Dakota Wesleyan University and Mitchell Technical Institute. Local business leaders work hand-in-glove with the colleges to create curricula that suit local employment leads. Dakota Wesleyan, for instance, routinely brings in business leaders representing sectors such as manufacturing, technology, financial services and agriculture to help develop programs that reflect the trends they’re seeing in the labor force. Innovative Systems, one of the local telecom services companies, let Dakota Wesleyan know they needed more help developing mobile platforms. Students were put to work figuring out ways to improve the user experience for such platforms. Five were hired after completing internships at the company. That kind of town-gown symbiosis may sound simple, but it doesn’t happen everywhere. “It is not productive for us to have majors that are not aligned with the needs of Mitchell, or the area generally,” said Amy Novak, Dakota Wesleyan’s president.
The colleges not only help Mitchell bring in talent from other communities but also provide its educated youngsters a reason to stick around after graduation — a promise lacking in many rural places. Only 20 percent of rural adults 25 or older have a bachelor’s degree, according to the U.S. Department of Agriculture, compared to 35 percent in urban areas. “Last summer, we had 32 interns, and I counted 13 parent-child staff and intern combinations,” said Jacki Miskimins, marketing director of Vantage Point Solutions, an engineering and consulting company with 350 employees, including 200 in Mitchell. “These kids have grown up watching their parents have these great, fulfilling careers at Vantage Point.”
Both Vantage Point and Innovative Systems spun off from a prior company, Martin and Associates, which was sold off to an out-of-state buyer about 20 years ago. The two companies do complementary but not competing work. Vantage Point provides services to telecommunications companies and banks — designing systems, deploying them and taking care of regulatory work — while Innovative Systems makes products for voice systems and video providers. With an overlapping customer base of telecom companies nationwide, the two businesses can refer leads to each other. Because they can collaborate, rather than try to take each other apart, they’re also able to share thoughts and ideas about what’s good for Mitchell as a whole.
One of those ideas was the push toward universal broadband. The idea had drawn local opposition, not least from incumbent providers. Mitchell Technical Institute created an Internet operations center that hosted an increasing number of local companies’ networks, which demonstrated demand. Eventually, Santel Communications, the local telecom provider, put in its fiber-to-the-home network, with Vantage Point doing a lot of the installation work. Mitchell turned into the rare small town with broadband speeds that could compete with any city on the coasts.
Schoolchildren in Mitchell have been provided laptops, from kindergarten on, for many years now. They enjoy high-speed Internet at school and, for the most part, at home. “Telecommunications development has created another economy on top of Mitchell’s agricultural one,” noted the Intelligent Community Forum, a think tank that has recognized the city as a digital leader. “It consists of engineering, consulting and software companies that have made Mitchell into a regional hub for expertise and services.”
"While you might be out here in what people consider the boondocks, said Mitchell Mayor Bob Everson, "you have the ability to connect with anybody in the world quite easily." / Credit: David Kidd/Government Technology
A LOT OF SMALL TOWNS try to lure companies through tax incentives. Mitchell doesn’t do that type of giveaway, in part because taxes are pretty minimal to begin with. South Dakota doesn’t collect income taxes and doesn’t allow cities to either. Property taxes are low. “We don’t have the ability to entice people with a lot of good offerings, so to speak,” said Mitchell Mayor Bob Everson.
What Mitchell has that a lot of its neighbors don’t is broadband. “While you might be out here in what people consider the boondocks,” Everson said, “you have the ability to connect with anybody in the world quite easily.”
Local connections matter, too. Plenty of people who have worked for Muth Electric set off as electrical contractors on their own. Students who learned construction trades from Mitchell Technical Institute have gone on to take business degrees at Dakota Wesleyan on their way to starting their own companies. Name the field — nursing, real estate, digital media design — and similar stories can be told about practitioners who benefited from Dakota Wesleyan’s center for entrepreneurship.
“One of the real advantages was that we had entrepreneurs from Mitchell who didn’t want to move the company to Minneapolis or someplace else,” said Roger Musick, who started Innovative Systems by buying out Martin and Associates’ electronics division, which then consisted of one product and 10 employees. Innovative Systems now employs 200 people.
Shuttling people in and out of two colleges and then local companies is something that not many small towns could pull off. There are a lot of small college towns around the country that thought they were recession-proof but found out they were really company towns when their campuses failed to reopen in the fall. Universities spinning off businesses, long a dynamic underpinning economic success in Silicon Valley, Austin and Boston, is now happening in more places, such as Madison, Wis., and Fayetteville, Ark. But there are still a lot of communities that haven’t figured out how to create sustained partnerships between their campuses and businesses.
In Mitchell, there are standing forums that bring together higher education leaders with private companies, the chamber of commerce, the economic development agency and city government officials. Everyone understands their success depends on working together where they can. There was a local panel not too long ago on tech jobs and economic development in the community where the chief of police was able to speak knowledgeably about what Vantage Point does. “I lived in a lot of places where those collaborations were not embraced,” said Novak, the Dakota Wesleyan president.
WHAT HAS HAPPENED in Mitchell may not be easily duplicated elsewhere. Most small communities don’t have a college, let alone a technical college and a four-year university. Small towns and rural counties that are distant from larger cities and interstates have a harder time attracting and retaining companies. “Areas that are within an hour or an hour and a half of a decent-sized city with a hospital will probably do OK,” said Joel Kotkin, a Chapman University urbanism professor and consultant. “Once you get more than two hours out, what would the attraction be to some hot, humid, isolated area?”
But any community can “get its act together internally,” as Kotkin said. Local leaders have to determine their area’s strengths and then figure out how to build on them. Too often, the hope is to land some new company to bring in hundreds of jobs instead of creating an environment where lots of small companies can thrive. It’s not easy, but a small company that keeps growing will, within a few years, provide a good number of jobs. Having multiple companies succeed makes for a more diverse, stable economy than depending on one large employer.
“You don’t turn things around overnight,” Novak said. “If you stay focused on the long term, you’re able to overcome the bumps and hurdles that come along the gravel road.”
There need to be more options for young people today than in prior generations. There aren’t too many people now in their 20s who are following their fathers into jobs at the local plant. There’s still more economic variation throughout rural America as a whole than in cities, which mostly tend to be dominated by the same fixtures such as health care, finance, technology, and tourism and hospitality. “There are bigger differences among rural areas in terms of their economic mix than there are between the cities,” said Jed Kolko, chief economist at Indeed, a job searching site.
The problem is that specific communities within rural America still tend to be heavily reliant on a single industry such as farming or manufacturing. Much of the work traditionally done in rural areas has either been mechanized or shipped overseas. Consider Galesburg, Ill., which lies at the center of a triangle, about three hours away from Chicago, St. Louis and Des Moines. In the 1960s, the city of 36,000 residents was home to 10,275 manufacturing jobs, mainly producing appliances for Maytag. Thousands of those jobs had already been lost by the time Maytag closed its refrigerator plant in 2004. BNSF Railway still employs 1,000 people in Galesburg, but manufacturing is now just a blip in the local economy. More than two-thirds of its schoolchildren are classified as low-income, and Galesburg’s population has shrunk to 30,000.
Few rural places are well connected to the Internet, let alone plugged into the Internet economy that is an increasingly crucial cornerstone of the national economy. Rural America right now has the chance to show off its attractions to those individuals and companies rethinking their need to be in crowded, expensive cities. But to lure people beyond the suburbs and into the country where they can settle on an acre or 10, rural communities will have to come up with digital strategies that allow workers to stay connected with their companies and companies with their distant customers. Broadband access will be an essential driver of growth.
“Communities that have had those digital connections for a longer period of time have more of a mix of industries and occupations,” said DeVol, the Heartland Forward president. “They’re not at the same disadvantage as other areas that aren’t connected.”
In Mitchell, both Musick and Larry Thompson, Vantage Point’s CEO, spent some time early in their careers working in California. Neither of them liked it. They preferred the quiet lives and short commutes available in South Dakota. There are plenty of people in the Upper Midwest, and other rural corners of the country, who would prefer to stick close to home if the opportunities were there. There are, in turn, companies that would be glad to locate in cheaper locales, if only they could find the talent.
Musick and Thompson both say they prefer to hire and train local workers whenever possible. “It seems like they have more sticking potential when they have roots, family and friends,” Thompson said. “If they come from Los Angeles, they don’t stay one winter.”
This story appeared in a special Future Ready sponsored issue of Government Technology. It was prepared by the Government Technology Content Studio, which is editorially independent of both the sponsor and the Government Technology editorial staff, who were not involved in producing the issue.