Judging Manufacturing Success in Northeast Ohio

I posted this article on CrainTech today and have re-posted here for my ED Futures readers to catch it. The issues are relevant to any community, region or state struggling to hold onto and strengthen their manufacturing base.

One of the issues that we must confront as a "community" in NE Ohio is how we judge our future success in economic development. Five to ten years from now, how will we know whether we have done the right things relative to manufacturing? We need to set realistic expectations about what we can achieve, and everybody (including the public) has to understand what the betting odds on different courses of remedial action.

Up till now, job development has been the most frequently used yardstick to judge success in economic development in NEO and elsewhere. The 13-county NEO region still has 345,000 manufacturing jobs--much less than we had but still a lot! The job measure is not enough, especially in gaging our progress in assisting the manufacturing sector. We need other measures, including output growth, productivity, innovation, capital investment, exports, diversification of industry mix, new product development, market share growth, increasing synergy between the manufacturing and service sectors in the region, and others.

The starting point in setting future expectations about what we need to achieve is "who and what are we now," or what is our baseline?" Then what is our vision of what we can/will become in the future. There is almost always a gap between the two. The question is how do we close it through intervening action by the private and public sectors.

Every US region is on an economic trendline of one sort or another. The trendline for manufacturing in NE Ohio is not a favorable one because of the past quarter century of disinvestment by our major manufacturing corporations. We have experienced far greater "outward" momentum than "inward" momentum from an investment and development standpoint. We have to change the direction of this momentum, which will not be easy.

Most industrial companies pulling up stakes here would probably explain their decision to shutter or relocate operations as a function of global competition, changing technology, corporate restructuring, etc. Some would point the finger of blame at City Hall, state government, or other entities. They would say "we did what we had to do to survive."

I find that larger external forces (things beyond the community's control) usually have more to do with a realistic explanation of why companies leave an area. This is what I call the 80% factor in economic development; that is 80% of what happens in any highly developed regional economy (like NEO) is driven by national and global trends. Only 20% of what happens can we influence. An econometric technique called "shift-share analysis" provides some insight into the influence of various local and external factors.

I tend to think in terms of possible future scenarios--best case, worst case, and most probable case. Forecasting is exceedingly difficult because of the growing level of risk and uncertainty in shaping future outcomes. Also, our "beliefs" shape we are capable of envisioning. We need to engage in more scenario-type thinking as we fashion future regional economic development strategies. We also need to do a better job of defining the yardsticks we will use to assess results. Finally, we need an improved understanding of which factors drive the economic competitivenes of NE Ohio. This list should include the role of external events (globalization, offshore outsourcing, etc.) as they ripple their way across economic levels and finally touch down in NE Ohio.

I would offer these ideas as a new place to re-start the discussion about manufacturing in the NEO economy.