Special Editorial By the Publisher

Let's Change Our Minds

Hopefully the first two months of 2005 have treated your geographic area well in terms of new business investment and quality job development. If my small consulting business is any reflection of your business, and I believe it is, I am optimistic this will be a good year for many communities, regions, and states across the various regions of the United States and the world.

I want to talk with you about a vitally important subject: Our mindset about change. We spend too much time in economic development resisting what must and will change in our world. Let me say at the onset, that change does not mean the same thing for all places. There are differential impacts to be considered.

I have been thinking about this issue for some time and want to share with you what I see. As you read this, please remember that I am one of you. I am talking to myself as much as I am talking to you. All of us are products, and at times victims, of our own thinking. I’m hoping this editorial will spark a much needed “honest” dialogue about where economic development is headed in the next ten years and beyond.

Change is inevitable in the economic development business, as it is in all industries. The key is our “mindset” about change. If we are not careful, what we believe (or think) can get in the way of what we know. Some of the things we believe in economic development impair our ability to see reality in a knowledge-based way. Please see an example of this below. Any sensible human being should be willing to change what they believe based upon new knowledge. Notice I said new knowledge, and not just new data or information. Economic development strikes me as more data and information-driven than knowledge-driven. That is something all of us need to change.

Here is an example of how our beliefs fail us at times. Many economic developers believe they can work miracles within the tiny “self-drawn” political and geographic boxes they call local or regional economies. And no, regionalism will not save us. It can help solve some “efficiency” problems we face in the business, but regionalism in and of itself will make little difference in the business and economic outcomes we experience in the future, unless we are willing to use economic regions as linchpins in navigating the global economy. Some regions, like Atlanta, North Carolina’s Research Triangle, Chicago, San Diego, and others get it. They see regions as the future bearing points for business, economic, and, job development.

Please don’t misunderstand what I’m saying here. I’m not suggesting that you forget about regional cooperation and collaboration, but I would urge you to define your region’s best opportunities in terms of your business, market, technological, and workforce connections to the rest of the world, and not just to the rest of your region. Further, contrary to what many regional economic development advocates say, you should not work on getting your “regional act” together before exploring better ways to link with the global economic networks that will eventually make or break you.

I see too many regional leaders getting bogged down with their own efforts to get everyone united under one organization, strategy, or slogan. By the time “everyone” is on board, the world has shifted again and valuable new opportunities have whizzed past them. Build new national and global strategic alliances now! Let go of the “belief” that you have to get your regional act together first. The truth is that you will need to work on regional cooperation and collaboration forever—because it is an ongoing responsibility of local and regional economic developers everywhere.

Many of you have read my earlier article on why ED organizations should partner nationally and globally. In general, most readers agree with what I have to say, especially in light of the reality that more and more economic development groups are beginning to move in this direction. If you don’t agree, please don’t kill the messenger. You can download my global partnering article here.

Going back to my point about what we believe in economic development, I believe our minds must be more open than ever before to new ideas and new ways of doing business. We should encourage and welcome innovative economic development policies, strategies, and practices. We’re good at telling businesses and entrepreneurs that they need to innovate and move to new business models, but how well do we “walk our own talk?” Are you, your organization, and your leadership ready to embrace bolder approaches to economic development, like my idea that economic development organizations should build effective partnerships to “co-develop” new opportunities or form new solutions to the really tough problems we face? For example, the twelve major automotive industry clusters worldwide should work together to serve the competitiveness of the global automotive industry, and not just restrict themselves to what is good for their own auto cluster. That is a big step, but one we must be ready to take if we are to avoid using our scarce public incentive dollars to pay for the over-capacity mistakes made by the world’s leading auto producers.

There is another part to this mindset or attitude that was captured so well by James Belasco and Ralph Stayer in their 1994 book, Flight of the Buffalo: "Change is hard because people overestimate the value of what they have—and underestimate the value of what they may gain by giving that up." And yes, it is also true that at times we underestimate the value of what we have in economic development, especially the growth potential of people. I think our current economic development paradigm greatly underestimates the potential of the human mind and spirit. The future economies we build should reflect this larger sense of potential that exists in all people everywhere. My point here is that ED groups stand a better chance of growing the “value” of their local economies and their organizations by building a new global framework and mindset that supports our intertwined economic evolution, rather than continuing on the less productive path of individual attainment.

I’m hoping that this article resonates with you as readers and fellow thinkers and doers. There is nothing I would like more than hear what you think. Thanks for listening.

More on Economic Development Futures

ED Futures is an online journal dedicated to understanding where economic development is headed in the future. Visit us 24/7/365 at: www.don-iannone.com/edfutures. Don Iannone, a 30-year veteran of the economic development field, is the Publisher of ED Futures. Don’s consulting firm, Donald T. Iannone & Associates has worked on over 250 economic development projects in 41 states and 13 countries.

You can contact Don by telephone at: 440.449.0753 and by email at: dtia@don-iannone.com.

California Drives Global Economic Growth

Here is one to read whether you are an economic developer in California or another state.

This paper presents current patterns and recent trends in California’s exports, foreign direct investment, and port activity, three key measures of the state’s international business activity.

These are some of the major findings:

• In 2003, California’s exports grew for the first time since 2000, increasing by more than $1.7 billion from the previous year to $93.9 billion.

• California’s exports have since hit $81.5 billion for the first three quarters of 2004, suggesting a significant annual increase over 2003.

• Asia continues to be the major destination for California’s exports. Recent growth, however, has been concentrated in the NAFTA partners, particularly Mexico.

• California’s exports include proportionately more technology products and fewer transportation and chemicals products than exports from the rest of the United States.

• California’s growth in agricultural exports in 2003 was exceptionally strong, following a five-year period in which exports grew in only one year.

• The European Union and Canada helped drive California’s agricultural exports sharply upward.

• Almonds and cotton were important contributors to strong growth in California’s agricultural exports.

• California was the leading state for foreign direct investment in 2002, with 697,000 employees in foreign-owned firms.

• In 2002, foreign-owned firms in California owned property, plant, and equipment valued at $118.7 billion.

• Among majority-owned foreign affiliates, those from the United Kingdom employed the most workers, 110,300.

• Majority-owned foreign affiliates from Japan employed the most manufacturing workers, 33,200, and owned the most property, plant, and equipment, $22.8 billion.

• Of all Californians who worked in majority-owned foreign affiliates in 2002, 68.4 percent worked in nonmanufacturing sectors.

• California’s seaports processed 23 percent of all U.S. waterborne trade by value and 42 percent of all U.S. container trade in 2003.

Cities' Global Connectivity

Here is what a new Brookings survey says about city connectivity on a global basis:

-While New York, Chicago, and Los Angeles are the U.S. leaders in global connectivity, San Francisco, Miami, Atlanta, and Washington are also important nodes in the world city network. A mixture of regional capitals—such as Boston and Seattle—and specialist cities—such as Houston, the world's energy capital—are found in the next tier. Somewhat surprisingly, dynamic and growing Phoenix and San Jose have relatively low connectivities.

-U.S. cities overall—and particularly non-coastal cities—are generally less globally connected than their European Union and Pacific Asian counterparts. Sixteen EU cities and 11 Pacific Asian cities rank among the top 50 most globally-connected cities, while only seven U.S. cities make the cut. Chicago is the only high ranking U.S. city not located in a coastal state.

-While important service connections exist among certain U.S. cities and particular global regions, U.S. cities are more strongly linked to other U.S. cities than to cities around the globe. New York is the only U.S. city with more non-U.S. cities than U.S. cities in its top ten list of strongest global connections. Only three non-U.S. cities make Miami's top 10 list, for example, while Pittsburgh's list contains none.

-Even the most globally-connected U.S. cities are more locally oriented than cities in the EU. New York and Miami are the least locally oriented of U.S. cities, but even they are far more U.S.-centric in their connections than most European cities are EU-centric. A much larger number of EU cities boast strong connections to Latin America and Pacific Asia than cities in the U.S.

-Beyond localism, functional linkages among firms are more important determinants of connectedness than geography alone. While Europe has no American Pacific Coast city linkages, for example, it has many international financial centers with strong connections to the rising banking and finance hubs of Pacific Asia. Many of these cities, as well as New York, are much more oriented to the Pacific Rim than San Francisco, Seattle, or even Los Angeles.

Download the survey report here.

Louisiana Economic Development: What’s the Real Story?

It seems there are some differences of opinion about the intent of some recent consulting studies commissioned by the Louisiana Department of Economic Development. Click here. I know the economic developers involved. They are good people and solid professionals.

By writing about this situation, I do not aim to add to the apparent confusion in Louisiana. Rather, this is a good example of what every good economic development executive and his or her leadership should pay attention to—that is the need to understand the “readiness for change” in your strategic environment.

From what I can tell, quite different expectations exist in Louisiana about what type of economic development should be encouraged and what are the best policies and strategies to develop these opportunities. This argues for consensus-building, to the extent that is possible. It’s not easy—in any state for that matter—to make these decisions and bring your stakeholders along with you.

This is a “fickle time” for economic development—everywhere—and not just in Louisiana, which has its share of challenges in bolstering educational attainment levels and improving its scores on a host of other performance measures related to the knowledge-based global economy.

Much of what we do in economic development remains an “art form,” and many of the policies and strategies we advocate are, at best, experiments in planned economic change. And yes, at times, they are nothing more than “political stunts.” We’ve all been there. Right?

I wish the folks in Louisiana luck in resolving their current situation. It sounds like a good time to stop looking for someone to blame and get on with a well-understood program to strengthen the Louisiana economy.

Release of NAICS-based GSP

In late 2004, the Bureau of Economic Analysis (BEA) released its comprehensive benchmark revision of gross state product (GSP) estimates for 1977-2002 and new accelerated estimates for 2003. GSPs are considered one of the best measures of economic growth at the state level. The BEA has also released revised GSP estimates on a SIC basis for the years 1977–1997. Please note that the next release date for GSP estimates is June 2005. More here: www.bea.gov

State ED Legislative Developments

Utah pushes a reorganization of its ED efforts. Things look positive there. Click here for the story. Mississippi legislative efforts related to ED fall short. Click here to ctach the details.

More on Complexity Science

Economic developers need to understand complexity science. It offers them much in terms of new ideas and solutions to the problems they seek to solve.

Complexity science is not a tool, but a way of thinking--a mental model for considering problems in new and revealing ways. People in business can benefit greatly by looking at their organizations and actions through the lens of complexity.

Click here to download a good primer on complexity science. (Note: Save the document to your computer and do not open directly from the site. I encountered problems in doing so.)

Struggles to Retain & Recruit Good People

Every economic developer across America has heard the horror stories about how hard it is for businesses to find good workers. Click here to read an interesting article on this topic. My suggestion: If they're not there, give more attention to creating them. This is an ongoing issue and not one any company is going to resolve for once and all.

Business Risk

In a commentary in Investor’s Business Daily, Glenn Yago, Director of Capital Studies at the Milken Institute, and Joel Kurtzman of the Kurtzman Group say that companies are focused on the wrong risks today. An excerpt:

“Since 9/11, an industry of political risk consultants has grown up to help companies decide in which countries to invest. With $53 billion a year going into China, and billions more going to India and other developing countries, the consultants have their work cut out for them.

“For the most part, these firms are staffed with retired Foreign Service officers, academics and ex-intelligence analysts. When they talk risks, they are really talking political risks – revolutions, nationalizations and major acts of terrorism. These are not the risks companies face.
“Contrast political risks with the ones businesses really face – poor market and banking regulation, corruption and inadequate accounting practices. Add to that bad economic policy, fuzzy rules regarding property rights and laws that are on a country’s books but inequitably enforced. These risks may not be dramatic or big, but they are costly, everyday occurrences.”

More here.

Advancing the Arts: Stress Appreciation

The broad range of benefits that the arts provide to individuals can be sustained and enhanced by strengthening public appreciation of the arts, according to a RAND Corporation study issued recently.

The study — commissioned by The Wallace Foundation — concludes that giving individuals repeated rewarding experiences with the arts over time is a necessary first step before other, more public benefits of the arts can be realized. These other benefits include exposure to new perspectives, sharpened learning skills among young people, expanded capacity for empathy, and stronger social bonds in communities.

Based on these findings, the report recommends that federal, state and local policy be refocused to build demand for the arts by introducing more Americans to engaging arts experiences, especially when they are young. This would be an expansion of the current focus on maintaining the supply of the arts.

More here.

Research Triangle Institute (RTI)

There are some amazingly smart people doing important research everywhere. For one, take a look at what RTI in NC is doing.

RTI International won a prestigious "R&D 100" award for a technology that removes large amounts of pollution from synthetic coal gas, or syngas, expanding the prospects for coal to replace imported petroleum and natural gas.

The annual R&D 100 award, sponsored by the leading trade journal R&D Magazine, honors the most significant new technologies of the year.

More here.

Kansas Steps Up Marketing Efforts

The Kansas Department of Commerce has initiated a new business recruitment cooperative marketing program as a part of the state's brand image campaign: "Kansas - as big as you think". Here for more.

A Look at After-School Programs

The Kauffman Foundation does a terrific job in advancing what we know about entrepreneurship. I ran across the foundations's After-School booklet recently. This is a good one for anyone venturing into this arena. Click here to download it.

Entrepreneurial Business Ideas

So, you received a call from a guy who just got his MBA and he wants to start his own business, but has no idea what type of business he might create. Click here for some ideas. The whole Young Entrepreneur site is worth a browse.

Inc. Magazine's Best of the Best

Inc. calls it the Hall of Fame. Click here to see who stands out among the magazine's selections over the years. Interesting reading.

Smartups!

Great name! Also, an interesting book about high-tech business startups. Learn more here.

Complex Systems in Economic Development

Are you thinking about the role of complexity science in economic development? Hopefully you are because our field needs to move from its reductionistic "deal-driven" mindset to one that fully embodies the complex systems that define the "space" we call "economic development." To get you started, go here and then here.

Saginaw: Partnering Works

That is the message in this recent article about how Saginaw, the Cool City, is using strategic partnerships to get its job done.

Techno-Advantage for Communities

Looking for ideas? Click here http://pti.nw.dc.us/ to see what the National League of Cities Technology Website has to offer. Some good stuff here.