Economic development

American cities not very intelligent

Submitted by acohill on Thu, 01/25/2007 - 09:23

For the second year in a row, no American city made the list of the world's "Intelligent Cities," which is compiled by the Intelligent Community Forum. This highlights the longstanding regulatory and leadership problems we have in the U.S. when it comes to telecom. Some state and Federal regulators and legislators still think re-monopolizing the telecom industry (well under way with the re-forming of AT&T) is the answer to the country's long term economic development challenges. Other elected officials just keep hoping that the problem will go away, even though each passing year makes the businesses in their regions less and less competitive globally.

Outsourcing: The good and the bad

Submitted by acohill on Tue, 12/12/2006 - 09:34

BusinessWeek has an article on outsourcing that has some useful insights in it. The good: Outsourcing does not always save time or money. As many of knew when the outsourcing craze began to heat up, it is a lot of work to manage workers on the other side of the world who are 10 or 12 hours out of sync with your own office hours. In India, where IT outsourcing has helped fuel the economy, rapidly rising salaries and very high turnover (often above 50% a year) is driving U.S. businesses away. Some of that work is coming back to the United States, and there are opportunities in low cost of living rural areas to capitalize--if you have a tech-savvy workforce and affordable broadband.

The bad news is that even though some outsourcing is moving out of India, some jobs are being moved to other low wage countries. What that means for the U.S. is that IT salaries are flat, and are likely to stay flat for some time. But I have maintained that many IT jobs have been priced too high for years--an artifact of the rapid growth in IT in the nineties. Some adjustments are not necessarily bad. But overall, we are in a world economy, like it or not, and your community is competing with other countries, not just the next county or the next state. And no matter how much local leaders may not see that or deny it, it is a fact. Every community in America has to be looking over its shoulder at the world economy now. We aren't in Kansas anymore.

U.S. may be sliding downhill economically

Submitted by acohill on Tue, 12/05/2006 - 09:57

Although I meet more economic developers these days who are beginning to understand the world is changing (a good thing), I usually find after a brief conversation with them that many of them are determined to keep doing the same old thing--they just expect different results now (one definition of insanity). Part of the problem is a belief that nothing much has really changed, but articles like this one in the Wall Street Journal suggest otherwise. The Journal reports that of the twenty-five largest IPOs (Initial Public Offerings of stock) in the world last year, only one took place in the United States. Lethargic U.S. companies and over-zealous regulation in the wake of things like the Enron scandal are leaving the U.S. behind in the global Knowledge Economy.

Local communities are competing with Hong Kong, South Korea, Singapore, and even London for business, but too many economic developers and community leaders are stubbornly determined to ignore the data. I see unlimited opportunities for communities that are willing to make some changes, but some communities, especially in rural areas, are going to slowly wither away.

Charleston's Digital Corridor worth studying

Submitted by acohill on Fri, 11/17/2006 - 11:02

Charleston, South Carolina's very successful Digital Corridor program is worth careful study. Ernest Andrade, the manager of the program, understands that economic development today is about making and nurturing relationships, not water and sewer. Here is a short excerpt from Andrade's article that summarizes where economic development should be focused today:

"Three key pieces of statistical data reinforce an argument that communities should spend more of their economic development resources on business formation. First, approximately 80% of all job creation occurs from within the community; second, a majority of the businesses being formed today have five or fewer employees; and third, there is an inverse relationship between high wage, knowledge-based companies and their physical space requirements."

It is the last item that is particularly worthy of careful analysis: high wage knowledge companies don't need a lot of real estate. They don't need vast tracts of empty land. They often don't even want to be in business parks. They often want to be in rehabbed downtown lofts, close to other small businesses, and close to good restaurants, where the deals are so often made. They want to be close to good coffee shops so they can meet casually with co-workers and clients. They want to be near vibrant and active downtown areas.

Charleston is a shining example of what is possible in community revitalization, and if you have never visited the city, it would be worth it to pack up all your economic developers and spend a couple of days there. Give Andrade a call and talk to him while you are there.

Attracting talent, not businesses

Submitted by acohill on Fri, 11/17/2006 - 08:19

I was fortunate enough to have dinner the other night with a very gifted and smart county administrator, who told me this:

"Our job is to attract talent to our region, not businesses. If we have talented people, we can do anything. And to attract talented people, we have to have the amenities that they want and expect, like broadband."

I think he has it exactly right. In the Knowledge Economy, businesses are becoming more and more portable and less and less reliant on traditional infrastructure like water and sewer. It does not mean that infrastructure is now irrelevant or unimportant, but it does mean that we have to think about it in different ways.

I was at a major top tier college recently, and they told me they had a hiring crisis. New faculty were turning down well paying jobs at this prestigious school. Why do you think? It was because broadband was unavailable outside the "downtown" area of this otherwise rural community. Many faculty wanted to live outside town where they could own a few acres of land and really enjoy country living, but broadband was no longer a nice luxury, it was now a life necessity. These prospective faculty were telling the college they simply would not live in a community without broadband.

In other words, these talented people were not attracted to this community because of the lack of broadband in residential areas, not business parks. So you have to have affordable broadband options in your business and industrial parks, but you also have to have it everywhere else if you want to attract talented people to your region.

Power, quality of life, and broadband

Submitted by acohill on Fri, 11/10/2006 - 07:49

For some time, I have been telling communities that quality of life and affordable broadband are the drivers of economic development in rural areas of the country. But over the past few months, I have come to believe that there is a third factor: reliable electric power. As we store more and more data and dish more of that data out to a global audience via our Web sites and businesses, reliable electric power is a critical resource that is needed to keep electricity-hungry servers humming.

How important is it? Wired reports that Google is building a new office campus and data center next to a hydroelectric dam. It turns out that not only do communities need redundant fiber connections to the Internet. They also need redundant power connections into business parks and business districts, to minimize power outages. A company like Amazon is doing millions of dollars of business PER HOUR, and just a few minutes of losing connectivity to the Internet or to electric power is disastrous.

Regions served by public electric utilities or by electric coops are well-positioned to take advantage of the new interest in rural areas by high tech companies, because those utilities are more flexible and can more easily make investments that benefit the community.

Finally, safety and security are also driving the shift to placing these in rural areas. In the aftermath of 9/11 and Katrina, companies are realizing decentralized operations are a business necessity. And the low cost of land, lower wages, less traffic, and the beautiful countryside helps too. Rural communities, start your power generators for the coming boom of the Energy Economy.

Fiber transforms local economies

Submitted by acohill on Thu, 10/26/2006 - 10:01

The magazine Killer App has a must read article on how fiber infrastructure has turned the rust belt economy of Wales (abandoned coal mines and steel mills) into a global powerhouse. The key: a steady investment in fiber over a period of years turned into a magnet for Knowledge Economy businesses looking for a reliable workforce, reasonable cost of living, and affordable broadband.

Oh, and there was one more thing. Wales had excellent electrical power because of the former demands of the steel mills. The region was able to attract large data centers because Wales had an unbeatable one-two punch: world class fiber infrastructure AND reliable electric power.

Finally, Wales has adopted an open access model, meaning they did not try to create a new government monopoly on telecom services. Instead, they are encouraging competition among service providers to ensure a rich variety of services that can meet any business need as well as keeping prices low (because of competition).

This is an article you may want to print out and send to every local elected official and economic developer--especially those that think telecom is somebody else's problem. It is an excellent case study of a region that pulled its economy out of a nose dive and successfully created economic prosperity.

Broadband and electric power, not water and sewer

Submitted by acohill on Mon, 10/16/2006 - 07:05

I have written extensively on the need for communities to be able to market affordable broadband and great quality of life to businesses, but there may be a third leg that can be added: reliable electric power. We take this for granted, but as businesses are increasingly powered by computers and network equipment, their need for reliable and resilient electric power becomes far more important than water and sewer.

Blackouts and brownouts play havoc with electronics, and even if businesses invest in UPSs (uninterruptible power supplies) you don't ever want to have to use them. Reliable electric power is particularly important to companies that provide hosted services to their customers, and more and more businesses are getting into this fast growing business sector.

If your region has a well-managed public utility or a good private utility, it is something you ought to be talking about. And if you have funds to spend on infrastructure, you may want to look at improving the local electric power grid--redundant electric feeds, multiple electric feeds into business parks, and so on.

The "whoops" report: entrepreneurs are creating jobs

Submitted by acohill on Mon, 10/09/2006 - 18:15

The Wall Street Journal reported today (page A18) that the U.S. Department of Labor has revised job figures for the period between March, 2005 and March, 2006. New jobs were undercounted, and Labor has added 810,000 more new jobs to the count to bring the three year total to 6.6 million new jobs. The Journal is calling this a "...whoops, we found a whole lot of jobs we missed."

The Journal believes that the Labor Department continues to undercount small business and self-employed entrepreneur jobs creation, an issue I have been writing about for years. The Census Bureau conducts two regular surveys. The Establishment Survey measure payroll jobs, and the Household Survey counts how many people are employed in a household. The problem is that Labor, along with doom and gloom analysts, tend to focus on the Establishment Survey, where jobs growth has been anemic--because the nature of business is changing.

The Establishment Survey has no way of counting self-employed businesspeople and entrepreneurs because these kinds of businesses have little or no payroll. And small businesses are moving more and more towards outsourcing many kinds of work that used to be done in house.

Bottom line: Communities need affordable broadband because the small businesses and entrepreneurs most likely to create new jobs have to have it to survive and grow.

Population: 351 (and fiber)

Submitted by acohill on Thu, 08/17/2006 - 08:27

Here is a story about a woman who the the Director of R&D for a high tech multimedia firm. She lives in Winthrop, Washington, and sleeps in a teepee. Now I know many of you will probably stop reading right there, but this article highlights a growing trend and the power of fiber to change rural communities. From the article, here is a description of Winthrop:

It's more than three hours by car to the nearest freeway exit, two hours to movie theaters and shopping malls. It's a place where, as late as 2001, folks in certain canyons were struggling to get phone service. Four hours from Seattle, a century-wide gap in telecommunications.

No more. These days, fiber-optic cables run like a river down the valley. Microwave towers beam data from peak to peak.

Jokingly, I ask Evans if she can get streaming video in her teepee.

Seriously, she replies, "Of course! . . . Six megabits per second."

Another interesting nugget in the article is the fact that call centers that moved overseas are already coming back. Where are they going? To rural communities WITH FIBER. Rural communities offer workers with excellent work ethics, stable wages, and low cost of doing business. But these days, call centers need the lowest possible telecommunications costs, and they also need to be able to hook a call center into their worldwide VoIP phone systems. Fiber delivers. And it should be a cautionary warning to communities that are hitching their wagon to wireless while thinking that all their broadband problems are solved. Wireless does not provide the bandwidth, security, or reliability that businesses want and need for mission critical services like VoIP.

Farther down in the story, a company in Winthrop had to pay $400,000 out of pocket to get access to fiber for their business because there was no community infrastructure. It's a wonder the firm stayed at all. What kept the firm in tiny Winthrop? Quality of life.

It's a twofer: Rural communities that have the right quality of life and fiber have a bright future. It is important to note the emphasis on the RIGHT quality of life. Every community thinks it has great quality of life, but the amenities, services, schools, and recreational opportunities have to appeal to the kind of people you want to attract to the community, not just folks that have lived in your town all their lives. And there is often a disconnect between the two groups and just what constitutes quality of life. Take a look at the Open for Business handout Design Nine has in its Resources section.

Read the whole article; it is worth the time.

Better living in small towns

Submitted by acohill on Fri, 07/07/2006 - 08:05

This article was sent to me by a county administrator who has long recognized the potential of small towns, good quality of life, and broadband. Forbes has selected 150 small towns and small cities and divided them into six categories, based on amenities and quality of life. It will be no surprise to many of you that the one thing Forbes has identified as a key enabler of economic growth is not water, sewer, or industrial parks.

It is affordable broadband.

If your economic developers have not yet completely overhauled their economic development strategy, print out a copy of this article and send it to them. The author talks about geographic arbitrage, meaning that a lot of white collar professionals are selling their high-priced homes located in major metropolitan areas and using the cash to buy an equivalent home for a lot less money somewhere else. How do they find work? They bring their work with them, using broadband to stay connected to clients and contacts.

A lot of these folks are working out of their homes, making neighborhoods the business districts of the 21st century. As I do periodically, I will list the four elements of my 21st century economic development plan.

If your economic developers do not have a plan like this in place, you may want to ask them why. And of course, underlaying all this is the understanding that a community-based digital transport system (shared fiber and wireless digital roads) is the new water and sewer--it's basic and essential infrastructure needed to support economic growth. If your locality does not have a line item in its budget for regular annual expenditures to develop and expand a common digital roadway, it should. How else will you attract businesses and business professionals? Great quality of life without affordable, high performance broadband gets you nothing.

Economic development news

Submitted by acohill on Fri, 06/16/2006 - 07:45

If you have not already made EDPro part of your regular blog news network, you should. Ed Morrison, an economic development professional in Ohio, has the best roundup of Knowledge Economy news and information, bar none. He is also promoting the notion of Open Source Economic Development, which stresses the importance of regional collaboration and a strong focus on innovation. It's great reading.

Roanoke tries to attract youth

Submitted by acohill on Mon, 06/12/2006 - 12:35

Roanoke is a city near Blacksburg, and the city's demographics are skewed, like many rural towns and cities, toward older people. The City recently decided to stop wringing its hands about the paucity of young people and actually do something. First they hired someone whose primary job responsibility is to solve the problem, and then gave him free rein. Stuart Meese, who landed the job, has both a blog and a city-sponsored online database of young people looking for work in the area.

With over 450 young people in the database after just a few months, the database is fast becoming a valuable resource for area businesses looking for talent. A hat tip to Roanoke and Stuart Meese for putting resources behind the problem and doing something other than just complaining. And while you might ask, "What about Monster.com?" I'd say, "What about it?" They are two different tools, and employers searching the Roanoke database can do so with a reasonable certainty they are looking at motivated potential employees who really want to work in the area. You can't say that with any certainty when you pull up a bunch of Monster.com listings.

The work from home movement

Submitted by acohill on Fri, 06/02/2006 - 12:23

When I talk to communities about the need to view residential neighborhoods as business districts because of the growth in home-based workers and businesses, economic developers often get upset. They get upset because having lots of small businesses driving a local economy does not fit the old Manufacturing Economy model of just trying to attract businesses from other regions.

This article from Fortune (hat tip to Slashdot) illustrates an increasingly common business--one with a majority of its employees working from home. MySQL AB is a major tech firm with 320 employees in 25 countries, and 70 percent of those employees work from home.

What that means is marketing industrial and business parks with great water and sewer offers nothing to a company like this one. Instead of the company relocating, it is employees and business owners that are relocating, and they want two things: great quality of life and affordable broadband. And the affordable broadband has to be in residential neighborhoods, not the local industrial park.

It's not that you give up on your business and industrial parks--far from it. But it does mean that you have to expand your economic development strategy to include new kinds of businesses, new kinds of workers, and new kinds of infrastructure, like fiber to the home. One interesting tidbit from the article is that MySQL relies heavily on Voice over IP (VoIP) telephone services to keep things working smoothing--and that means, once again, that broadband service in worker homes is critical.

How does your community rate in this new global economy? Do you have programs and strategies in place to attract work from businesses and employees? If not, why not? Why ignore the double digit job growth increases from work at home businesses?

Do high energy prices help rural areas?

Submitted by acohill on Mon, 05/01/2006 - 08:43

Jerry Fuhrman, who writes from rural southwest Virginia, has an interesting observation today that I think is applicable to many rural areas of the country.

He notes that one of Virginia's main exports is wood (mostly to China), and one of Virginia's main imports is furniture (mainly from China). Fuhrman's question is how will high energy prices affect the cost of goods, since it takes a lot of energy to haul wood to China, turn it into furniture, and then haul it back to the U.S?

Higher energy prices are going to change things in ways we are not thinking about right now. The current focus on automobile efficiency is, I think, extremely short-sighted. Fuhrman is more on track, looking at indirect effects and trying to ferret out business opportunities. There is a business boom at the end of every downturn. Thinking in a futures context means less handwringing about the present and more consideration of where things might end up.

Virginia used to be a furniture manufacturing powerhouse. And Fuhrman may be right that it could be again.

Small businesses hurt by lack of broadband

Submitted by acohill on Mon, 04/17/2006 - 08:07

Chicago area small businesses are hurt by the lack of broadband. But that is a story that applies to small businesses everywhere in the U.S., but rural businesses suffer the most.

In rural areas, the longer distances make it more difficult for incumbent phone companies to justify the investment, but the need is still there. I was at a county council meeting last week in a community working to develop a broadband master plan for the county, and the incumbent phone company used the same tired arguments against the community effort.

The phone company representative said that it was too expensive to do. This is patent nonsense. It may be more expensive, but it is not "too expensive." We need only look at the existing telephone and electric lines to virtually every rural home and business in the country--mostly provided by well-run and profitable coop ventures. Common sense alone suggests that if we have already run two cables to rural homes and businesses, we can certainly do so again.

What we need are honest phone and cable companies that are willing to say, "Okay, we understand the market has changed. We'll work with any local community that builds an open access infrastructure. This will lower our costs and expand our potential market. And we understand we will have to compete."

That would be honest and forthright, and companies that would embrace an open access communitywide network would, I am convinced, make more money than they are now. Why? Because they would have access to more customers at lower cost, and could offer a wider variety of advanced services.

But it requires corporate honesty first to prosper in that kind of environment. In the meantime, communities and community leaders can't just sit by and watch their local businesses wither away because basic infrastructure is missing. If it were 1960, we have the equivalent, in many communities, of leaders who are saying good water and sewer is not important because the outhouse still works just fine.

Local businesses need affordable high speed broadband to compete in the global Knowledge Economy. And they can't wait forever. What are your leaders and economic developers doing to remedy the situation?

Web search: get on page one

Submitted by acohill on Fri, 04/14/2006 - 09:42

A new study confirms what most people already know intuitively, but it is always nice to have data to back it up: Most people stop looking at search results at page three, and many expect to find what they want on page one.

It is an issue for businesses, but also for communities and economic developers. With most relocation research starting on the Web, if your community is not getting relevant community site links on the first page of most search engines, it is telling relocation consultants you are not "connected." And your community is probably not even getting on the short list for consideration. Worse, you won't even know, because no one is calling the economic development office at this stage of relocation search.

It also underscores the importance of a broad, communitywide cooperative effort among local Web sites. Without a comprehensive and collaborative effort, few of your community sites--government, economic development, tourism, civic--will show up on page one of search results.

Unfortunately, I still see many communities managing (or not managing) community Web sites as private fiefdoms that get little time, attention, or resources. And at the same time, the community is wondering why so few businesses are taking a serious look at their town or region.

Design Nine has been helping communities design Web strategies longer than any other company on the planet (we started designing community portals in 1993). Call us if you want to get your community on page one.

Kentucky "gets" economic development

Submitted by acohill on Mon, 04/10/2006 - 12:50

The state of Kentucky is beginning to get the hang of a 21st century Knowledge Economy economic development strategy. From this article[link no longer available] (hat tip to EDPro), here is Kris Kimel, president of the Kentucky Science & Technology Corp:

"We are not going to recruit ourselves to prosperity in this state," Kimel said. "That's a piece of it ... but by and large, because of the shift in this knowledge economy, our economy's going to be driven in the future ... by how good a job we do at creating the kinds of knowledge and entrepreneurs that can grow those companies."

Notice Kimel's emphasis on knowledge creation and entrepreneurs as part of an overall economic development effort. That is where many of the new jobs are coming from, not from traditional industrial recruitment. The article goes on to note that the state can no longer recruit primarily based on lower cost (e.g. lower wages, lower cost of utilities, lower cost of land). Why not? Well, if you want low cost for your factory, you will take it to Asia, not to Kentucky, or any other state in the U.S., for that matter.

It is a whole new ballgame in economic development, and an effective regional ED strategy should be developed using a clean sheet of paper and expert advice. One of the biggest problems I see? It's the boards that guide ED groups; too often, the board is comfortable with a Manufacturing Economy approach that produces lackluster results. Who is on your local ED board? Are entrepreneurs and Knowledge Economy businesspeople well represented, or does the board make up look pretty much like it did in 1983--the last year that industrial recruitment was effective as a primary strategy?

Blogging and economic development

Submitted by acohill on Tue, 03/28/2006 - 11:53

I generally get a cool reception when I tell communities that they need to promote community portals and local blogging. It just does not sound like something that is going to bring jobs and businesses into a region.

This short article is just one data point, but illustrates perfectly how the Web and what is available on the Web from a community or region drives relocation decisions. Here is the key quote:

"...One of the things that encouraged me to make that move with my family was the realization that the vitality, innovative spirit, and collegial atmosphere of the region around B-burg was a good bit higher than I realized. Your weblog was a key part of that, along with the discovery of a growing community of writers, musicians, and creative businesses."

Community portals and a rich, interconnected web of local community sites and blogs tell the world that your community is online, understands technology, is not afraid of it, and is using it to connect people. It's the cheapest and easiest way to promote what your community has to offer people looking for a great place to live and to work.

Lack of broadband hurts business recruitment

Submitted by acohill on Mon, 03/20/2006 - 12:27

A recent story in the Washington Post (registration required, unfortunately) discusses how the lack of broadband is hurting business and employee recruitment in rural areas. Here is a key statement from the Telework Consortium, a group that helps businesses set up work from home programs.

"I think Loudoun County needs to look at broadband as being another utility as important as electricity and the telephone."

Businesses today are making relocation decisions based on the availability of affordable broadband, and that is not just broadband availability in business parks. Companies want employees to have access to business systems from home, and that means broadband.

Think of it another way. If the CEO of business prospect can't find affordable broadband in the town or area where he or she will live if the business moves, the business probably is going to go somewhere else.

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