Changing the Organizational Culture

Thinking your ED operations needs to undergo a cultural shift to be successful? You may be right, but consider what is really involved. To make it successful, here are five pointers to remember:

1. Culture change comes last, not first.
2. Lasting change depends on results. You must show new approaches work and that it's worthwhile to change.
3. Requires a lot of communication and interaction.
4. May involve turnover of key people who block change.
5. Promotion practices need to be changed to be compatible with the new practices. New leaders should be compatible with the new culture and champions of it.

Does Sustainable Business Pay Off?

Perhaps the single most influential factor that is beginning to emerge among business and industry is the realization that waste reduction, energy efficiency, and pollution prevention make economic sense.

Companies are starting to understand that sustainability involves substantially more than an ethical consideration -- it can improve the bottom line and is an integral part of good business.

See "Does it Really Pay to Be Green? An Empirical Study of Firm Environmental and Financial Performance." (PDF)

Eastern and Central European Outsourcing

A new report by The Boston Consulting Group (BCG) confirms that Central and Eastern Europe (CEE) can be highly competitive with Asia as a location from which to source products and services for Western European markets.

According to the report, The Central and Eastern European Opportunity—Creating Global Advantage in Serving Western Europe, misperceptions about the CEE region, combined with the tremendous attention recently afforded to China, have led some companies to overlook CEE and take much of their sourcing and manufacturing to Asia.

BCG’s research suggests that companies aiming to sell products and services in Western Europe should take a close look at opportunities for sourcing and manufacturing in CEE countries, and should carefully weigh those opportunities against the possible benefits and certain risks of going farther afield.

Four areas in which CEE countries compare favorably with China and other rapidly developing economies (RDEs), says BCG, are:

-Cost competitiveness
-Growing markets
-Talent pools
-The business environment, notably in intellectual property.

Innovation: Not All That Glitters is Gold

Though companies continue to pour more money into innovation, a majority of their senior executives are unhappy with the returns the investments are yielding and are unclear on how to do a better job turning ideas and innovations into profits, according to the results of a new survey of senior executives by The Boston Consulting Group (BCG).

Best Public School Districts

As many of you know, Expansion Management Magazine publishes an annual report card on public education. It is quite useful as a starting point in assessing educational quality in a community.

So, who made the top list in 2005?

Best Overall Metro School Districts (regardless of size of enrollment):

1. State College, Pa. MSA
2. Sheboygan, Wis. MSA
3. Madison, Wis. MSA
4. Lawrence, Kan. MSA
5. Iowa City, Iowa MSA
6. Oshkosh-Neenah, Wis. MSA
7. Appleton, Wis. MSA
8. Ithaca, N.Y. MSA
9. Ames, Iowa MSA
10. Eau Claire, Wis. MSA
11. Harrisonburg, Va. MSA
12. Dubuque, Iowa MSA
13. Glens Falls, N.Y. MSA
14. Fairbanks, Alaska MSA
15. Fond du Lac, Wis. MSA
16. College Station-Bryan, Texas MSA
17. Corvallis, Ore. MSA
18. Wausau, Wis. MSA
19. Sherman-Denison, Texas MSA
20. La Crosse, Wis.-Minn.

SOURCE: Expansion Management Magazine, April 2005.

Sustainability in the Eyes of the Corporate Site Locator

Everyone knows that economic developers have a "love-hate" relationship with sustainability. Everyone also knows that companies are suspicious of the term as a guise to get them to do things they don't need or want to do.

A recent article in Business Facilities Online offers some useful insights into this complex issue. Here is a clip from the article:

"Over the past few years, facility managers have shown an increasing awareness of the connection between commercial buildings and their impact on the environment, particularly as it relates to reducing costs and making their facilities healthy for the people who work there. These are the central goals for facility managers, because they make good business sense. It's also apparent that pursuing sustainable activities is not being driven by the desire to make their organization look better in the public eye, though that may be a result.

The examination of any controversial topic should begin with a definition. What is sustainability and what does it mean to key professionals involved in the pursuit of this goal?"

Sale/Leasebacks

Many areas are using sale/leaseback agreements to meet the real estate needs of companies. An excellent article on the subject appeared in a recent issue of Area Development Magazine. If this is a subject of interest, you may wish to read the article from April 25, 2005.

From Area Development:

"A sale/leaseback is a financial strategy that gives you an opportunity to raise cash and improve your balance sheet. A sale/leaseback takes place when a business sells real estate it already owns to a third party for fair market value (the "sale"), and then immediately enters into a long-term net lease and continues to occupy the property (the "leaseback"). If the transaction is structured as a triple net lease, the tenant continues to be responsible for maintenance, utilities, and insurance, therefore retaining control of the property. In entering into a sale/leaseback agreement, you are paid fair market value for your property, which provides cash to expand operations, pay down existing debt, create liquidity, and/or substantially improve your balance sheet and financial ratios.

A sale/leaseback essentially provides 100 percent financing to the business owner. A company looking to build a new facility does not have to tie up cash in the form of the 25 percent or more "down payment" typically required by commercial banks. Further, the entire lease payment is tax deductible, as compared to a traditional mortgage where only the interest portion of the loan payment is deductible. If a company already owns its real estate, it can "unlock" the equity in the property and turn that equity into cash. The original purchase price of a building, its cost, net of accumulated depreciation, is shown on the balance sheet. A property that was purchased for $3 million 10 years ago is shown at a net book value of $2.25 million on the balance sheet, but may have a current market value of $7 million. A sale/leaseback on that property would replace the $2.25 million asset on the balance sheet with an asset of $7 million in cash."

Rating Entrepreneurial Regions

Here is an excellent study report to read on entrepreneurial regions. It was funded by the SBA and conducted by an Ohio consulting company.

What was the study purpose? The connection between innovation and entrepreneurship as drivers of local economic development is often discussed but not often studied. This research addresses the needs of local policymakers to understand the role of entrepreneurship and innovation in creating an environment where local economic growth can thrive.

In a nutshell, what was learned? Both entrepreneurship (new firms and growing firms) and innovation (patents, R&D, and hi-tech industries) are drivers in the growth of regional economies. This study infers that innovative regions need entrepreneurship to more fully develop local economies. Entrepreneurial regions are likely to be associated with higher levels of technology.

Download the study report here, which includes a rating of various US regions.

Ontario Growth Firm Study

Ontario officials conducted an interesting study of growth firms in the province. While the study is a few years old, it is nevertheless quite interesting.

Four types of firms wereexamined in the study — hyper-growth and controlled-growth firms (both components of leading growth firms), non-expansionary SMEs and large firms — all show distinct dynamics of growth and decline, though the findings show significant similarities between controlled-growth firms and non-expansionary SMEs.

Over the entire 12-year period from 1986 to 1998, it would have been difficult for any firm to grow as rapidly as it did during the boom years of 1986 to 1989. And, indeed, the study found that none of the four groups of firms came even close. The strongest growth in the final two periods came from hyper-growth firms, which added 11% to their employment in the fourth period. This was a long way from the 132% of the first period, but well ahead of the performance of other firms.

The study's findings are compared in the context of seven situations below, providing the major highlights of the research:

• Performance in boom periods
• What happened in the 1990 recession
• How firms bounced back from the recession
• Failure rates
• The extraordinary performance of the firms that never declined
• The scorecard at the end of the 12-year period
• Contribution to job creation

In addition, the characteristics of leading growth firms are discussed at the end of this section.

The growth of the hyper-growth firms was spectacular, and provided the first indication that they were quite distinct from all other firms.

Employment in controlled-growth firms grew by 29% during 1986 to 1989. (This growth is less than the criterion of 40%, but the criterion refers to payroll
growth, not employment growth, and payroll usually grows faster than employment.)

More here.

Ontario's Youth Entrepreneurship Initiative

Ontario's economic growth and job creation is driven by our entrepreneurs. They will be responsible for our continued economic prosperity in the rapidly-changing world of the 21st century.

Surveys and studies conducted in the past few years reveal that while one in three young people age 18-34 cite entrepreneurship as the most desirable profession, they face a number of barriers to becoming successful entrepreneurs. These barriers include a lack of:

-Recognition of entrepreneurship as a viable career option on the part of parents, educators and the corporate world;
-Awareness and access to programs/services available to young entrepreneurs;
-Start-up financing.

Ontario's young entrepreneurs programs aim to remove these barriers by:

-Promoting entrepreneurship as an excellent and desirable career option to young people beginning in Grades 7 and 8;
-Providing a continuum of support through secondary, post-secondary and early career years;
-Improving access to programs and services;
-Improving access to business financing.

More here.

How Strategists Really Think: Tapping the Power of Analogy

Abstract from Harvard Business Review
April 1, 2005

"Leaders tend to be so immersed in the specifics of strategy that they rarely stop to think how much of their reasoning is done by analogy. As a result, they miss useful insights that psychologists and other scientists have generated about analogies' pitfalls. Managers who pay attention to their own analogical thinking will make better strategic decisions and fewer mistakes.

Charles Lazarus was inspired by the supermarket when he founded Toys R Us; Intel promoted its low-end chips to avoid becoming like U.S. Steel; and Circuit City created CarMax because it saw the used-car market as analogous to the consumer electronics market. Each example displays the core elements of analogical reasoning: a novel problem or a new opportunity, a specific prior context that managers deem to be similar in its essentials, and a solution that managers can transfer from its original setting to the new one. Analogical reasoning is a powerful tool for sparking breakthrough ideas. But dangers arise when analogies are built on surface similarities.

Psychologists have discovered that it's all too easy to overlook the superficiality of analogies. The situation is further complicated by people's tendency to hang on to beliefs even after contrary evidence comes along and to seek only the data that confirm their beliefs. Four straightforward steps can improve a management team's odds of using an analogy well: Recognize the analogy and identify its purpose; thoroughly understand its source; determine whether the resemblance is more than superficial; and decide whether the original strategy, properly translated, will work in the target industry."

Has Environmentalism Fallen Upon Its Own Sword?

This one is from the Economist. A very worthwhile read.

“The environmental movement's foundational concepts, its method for framing legislative proposals, and its very institutions are outmoded. Today environmentalism is just another special interest.” Those damning words come not from any industry lobby or right-wing think-tank. They are drawn from “The Death of Environmentalism”, an influential essay published recently by two greens with impeccable credentials. They claim that environmental groups are politically adrift and dreadfully out of touch."

More here.

Growing Influence of Blogs

Look past the yakkers, hobbyists, and political mobs. Your customers and rivals are figuring blogs out. Our advice: Catch up...or catch you later By the way, ED Futures is a blog. Go here.

Winners and Losers at $100 a Barrel

Who would stand to win and lose if crude oil hit $100 a barrel? Click here to see who Business Week sees as the possible candidates. Interesting. Let's hope it is only speculation.

Convention Center Plans in Youngstown and Toledo

While Toledo frets over where and with what money to build an arena, Youngstown, another economically stressed Ohio city is putting the roof on a new facility. Youngstown hopes to open the Youngstown Convocation Center in November.

How Youngstown came up with the money for an arena makes for a good political yarn - but it won't help Toledo, Toledo officials said. Most of the money for the $41 million structure is a federal grant of $26.8 million channeled through the Department of Housing and Urban Development and arranged five years ago by then-U.S. Rep. James Traficant (D., Youngstown). It's not likely to happen here, U.S. Rep. Marcy Kaptur (D., Toledo) said.

More here.

Northwest Indiana Readies for New ED Push

Indiana Governor Mitch Daniels is proposing the establishment of the Northwest Indiana Regional Development Authority aimed at bringing economic development opportunities and jobs to Lake and Porter counties. The state says it will contribute $20 million toward the initiative over the next two years.

NIRDA would be governed by a seven-member board that would comprised of one representative each from Lake and Porter counties appointed by the council and commission of both counties; one representative each from the cities of Gary, East Chicago and Hammond, and two representatives appointed by the governor. One of those appointees would serve as chair for at least the first seven years of the authority, and the other would be an individual jointly recommended by the cities of Portage and Valparaiso.

More here.

Asia-Africa Economic Links Sought

That is a theme from the recent Asia-Africa Economic Summit held in Jakarta. Read more about what is envisioned here.

Utah Appoints New ED Board

Economic development begins, and even ends, with leadership. Utah is shoring up its leadership base for economic development. Read the story here.

Maine's Creative Economy

An increasing number of places are focused on growing their creative sector. Maine is one of them.

The "creative economy" makes a very significant contribution to the overall economic health of Maine. A recent study by the University of Southern Maine concluded that, in 2002, it accounted for more than 63,000 jobs or about 10 percent of Maine's total wage and salary employment.

More here.

Iowa Low on Entrepreneurship

Iowa is concerned about its low ranking on entrepreneurship.

A recent report by the Corporation for Enterprise Development (CfED) ranks Iowa second-to-last for the rate of new companies started within its borders. Only South Dakota had fewer new companies per 1,000 workers in 2003, the year data was collected.

More here.

Young Leaders in NE Indiana

A recently formed group is working to bridge the gap between economic development efforts and quality of life enhancement in Fort Wayne.

The Young Leaders of Northeast Indiana is a group for professionals in their 20s and 30s who are “committed to making our community a vibrant and viable place to live, work and play.” The mission of Young Leaders is to “engage and empower our young leaders through community and professional and social opportunities.”

More here.

What Does Greater Cincinnati Want?

When it comes to working together to bring new businesses to the region, Greater Cincinnati's economic development leaders prefer mass transit to a mouthpiece. Here for more.