Economic Development and Wealth Creation in Rural America

Economic Development and Economic Development and Wealth Creation in Rural AmericaWealth Creation in Rural America

An An Outcome FocusedOutcome Focused Approach Approach

A presentation to 2007 Indiana Rural Summit

November 15, 2007

by John A. Molinaro

Aspen Institute Community Strategies Group

Aspen Institute Community Strategies Group NovembAspen Institute Community Strategies Group November, 2007er, 2007

22

Who are we?Who are we?

Aspen Institute Community Strategies Group (CSG)Aspen Institute Community Strategies Group (CSG)• A Washington DC based national organization that A Washington DC based national organization that spurs spurs

innovation and action to build lasting prosperity in innovation and action to build lasting prosperity in communitiescommunities through focused learning through focused learning

Our primary fields of interest include:Our primary fields of interest include:• Supporting the economic success of familiesSupporting the economic success of families

• Economic, community and workforce developmentEconomic, community and workforce development

• Community philanthropy as a tool for rural developmentCommunity philanthropy as a tool for rural development


33

What is What is “Outcome Focused“Outcome Focused”” Economic Development?Economic Development?

Economic development Economic development defined by the desired defined by the desired outcome,outcome, not activities or inputs: not activities or inputs:

Abundant, quality jobs and entrepreneurial Abundant, quality jobs and entrepreneurial opportunities that sustain and opportunities that sustain and

enhance the well-being and build the wealth enhance the well-being and build the wealth of families and communities of families and communities

If it doesn’t lead to this outcome… If it doesn’t lead to this outcome…

… …it’s it’s notnot economic development. economic development.


44

A bit of history…A bit of history…

1960’s to 1980’s1960’s to 1980’s

Rapid industrialization swept across rural AmericaRapid industrialization swept across rural America

Companies sought cheaper land, cheaper labor Companies sought cheaper land, cheaper labor and less regulationand less regulation

Rural areas could meet these demandsRural areas could meet these demands

Industrial recruiting made good sense because it Industrial recruiting made good sense because it worked – and set the paradigmworked – and set the paradigm


55

Times have changedTimes have changed

TodayToday ““The World Is FlatThe World Is Flat””

Labor-intensive work can and does go Labor-intensive work can and does go anywhereanywhere

America’s education advantage has erodedAmerica’s education advantage has eroded

Technology is fungible – it flows wherever Technology is fungible – it flows wherever there is money to buy itthere is money to buy it

Industrial recruiting is a no-win strategyIndustrial recruiting is a no-win strategy


66

The Rise and Fall of The Rise and Fall of Industrial RecruitingIndustrial Recruiting

1950’s1950’s – Most of the world’s manufacturing capacity is in the – Most of the world’s manufacturing capacity is in the USA, demand is high, cost is no object, so most USA, demand is high, cost is no object, so most manufacturing happens close to marketsmanufacturing happens close to markets - in large cities with - in large cities with unionized labor unionized labor

• Markets drive location – industrial recruiting is irrelevantMarkets drive location – industrial recruiting is irrelevant 1970’s1970’s – The “ – The “Japan threatJapan threat” forces US manufacturing and ” forces US manufacturing and

telemarketing firms to move to rural areas telemarketing firms to move to rural areas for cheap land for cheap land and non-union laborand non-union labor

• Industrial recruiting successfully attracts these companiesIndustrial recruiting successfully attracts these companies TodayToday – The “ – The “China threatChina threat” forces almost all commodity ” forces almost all commodity

manufacturing offshore and the “manufacturing offshore and the “India threatIndia threat” erodes ” erodes technology, service and telecommunications jobstechnology, service and telecommunications jobs

• To be stable, jobs must be tied to a place – industrial To be stable, jobs must be tied to a place – industrial recruiting is counterproductive – a waste of resources!recruiting is counterproductive – a waste of resources!


77

How can rural places successfully How can rural places successfully compete today?compete today?

Four Keys:Four Keys:

Regional collaborationRegional collaboration

Comprehensive approaches, Comprehensive approaches, individualized to placeindividualized to place

Growth from withinGrowth from within

Finding their unique “Sweet Spot”Finding their unique “Sweet Spot”


88

Why Regional Collaboration?Why Regional Collaboration? New business models require scale New business models require scale

• e.g., big-box retailers and Internet vendorse.g., big-box retailers and Internet vendors

Competing requires bulk buying power Competing requires bulk buying power

Fierce competition makes margins thinnerFierce competition makes margins thinner

• More sales needed to break evenMore sales needed to break even

Niche markets “fill the gaps” Niche markets “fill the gaps” • Niche markets also require scaleNiche markets also require scale

Activities once competitive at the local level now Activities once competitive at the local level now require a regional market to surviverequire a regional market to survive


99

Example – Hardware SalesExample – Hardware Sales 1950’s1950’s – Small town independent hardware stores – Small town independent hardware stores

sell 30,000 items one at a time from open binssell 30,000 items one at a time from open bins

1970’s1970’s – Larger community hardware chains (e.g., – Larger community hardware chains (e.g., True Value) sell 20,000 items in multi-unit blister True Value) sell 20,000 items in multi-unit blister packspacks

Today – Today – Most hardware is sold in regional centersMost hardware is sold in regional centers

• Regional center big-box retailers (e.g., Home Depot) sell Regional center big-box retailers (e.g., Home Depot) sell 10,000 high-volume hardware items – and a whole lot of 10,000 high-volume hardware items – and a whole lot of other stuffother stuff

• Niche chains (e.g., Restoration Hardware) fill the gaps for Niche chains (e.g., Restoration Hardware) fill the gaps for high-end specialty items – but only in the largest regional high-end specialty items – but only in the largest regional center communitiescenter communities


1010

Why Comprehensive and Why Comprehensive and Individualized?Individualized?

Issues faced are both complex and interdependentIssues faced are both complex and interdependent

Multiple rural Americas require individualized Multiple rural Americas require individualized approachesapproaches

DeltaDelta – Poor schools, plentiful workforce – Poor schools, plentiful workforce vs.vs.

PlainsPlains – Good schools, sparse workforce – Good schools, sparse workforce

One size does not fit all!One size does not fit all!

Each area must build on its strengths and minimize Each area must build on its strengths and minimize its weaknessesits weaknesses


1111

Why Growth from Within?Why Growth from Within?

95% of all new jobs are created by local 95% of all new jobs are created by local “small” businesses (<200 workers)“small” businesses (<200 workers)

No one truly wins the No one truly wins the “Toyota Lottery!”“Toyota Lottery!”

It’s cheaper and easier to keep and grow It’s cheaper and easier to keep and grow what you already havewhat you already have

Local businesses have “roots” and are less Local businesses have “roots” and are less likely to leavelikely to leave


1212

What is the “Sweet Spot?”What is the “Sweet Spot?”

The place where The place where passionpassion, , competencecompetence and and economicseconomics

coincide!coincide!


1313

““Good to Great” Good to Great” by Jim Collinsby Jim Collins Adapted from “The Hedgehog Concept”Adapted from “The Hedgehog Concept”

What you are deeply deeply passionatepassionate about

What drives your economiceconomic

engineengine

Where you have world classworld classcompetencecompetence

The Sweet Spot


1414

Focusing on your “Sweet Spot”Focusing on your “Sweet Spot” Focus where you have Focus where you have world-class competence:world-class competence:

• What you What you can do as well or better than anyonecan do as well or better than anyone and your and your unique regional assets – your competitive nicheunique regional assets – your competitive niche

If someone can do it better, they will and you will loseIf someone can do it better, they will and you will lose

Focus on what Focus on what drives your economic engine:drives your economic engine:• The one or two factors you want to maximize The one or two factors you want to maximize to get the to get the

most economic returnmost economic return from your activities from your activities Focus on maximizing the activities that add valueFocus on maximizing the activities that add value If it doesn’t add value, it’s not worth doingIf it doesn’t add value, it’s not worth doing

Focus on what you are Focus on what you are passionate aboutpassionate about::• your region’s your region’s shared values and visionshared values and vision

““Where there is no vision the people perish” Where there is no vision the people perish” (Proverbs 29:18)(Proverbs 29:18)


1515

““Good to Great” Good to Great” by Jim Collinsby Jim Collins Adapted from “The Hedgehog Concept” Adapted from “The Hedgehog Concept”

What you are deeply deeply passionatepassionate about

What drives your economiceconomic

engineengineWhere you have

world classworld classcompetencecompetence

Uneconomic

Unsustainable

Uncompetitive


1616

So how can So how can youyou help? help?

There’s a role for everyone in this roomThere’s a role for everyone in this room Abandon the old paradigm – teach the Abandon the old paradigm – teach the

newnew Encourage Encourage regionalregional efforts efforts Support comprehensive approaches – Support comprehensive approaches –

individualized to placeindividualized to place Promote growth from withinPromote growth from within Work to find your “Sweet Spot”Work to find your “Sweet Spot”


1717

1. Abandon the old paradigm and 1. Abandon the old paradigm and teach the newteach the new

Foundation and nonprofit rolesFoundation and nonprofit roles• Initiate and support efforts to Initiate and support efforts to build new leadersbuild new leaders and raise and raise

awareness of existing onesawareness of existing ones• Research and convey good practicesResearch and convey good practices and provide technical and provide technical

assistanceassistance

State government rolesState government roles• Restructure programs, rules, and regulations to eliminate Restructure programs, rules, and regulations to eliminate

incentives and incentives and provide disincentives for smokestack chasingprovide disincentives for smokestack chasing• No one will unilaterally disarm, the impetus must come No one will unilaterally disarm, the impetus must come

from abovefrom above

Community rolesCommunity roles• Abandon industrial recruitmentAbandon industrial recruitment – it doesn’t work and wastes – it doesn’t work and wastes

precious resources!precious resources!• Build on your local assetsBuild on your local assets, , industries, and entrepreneursindustries, and entrepreneurs


1818

A new maxim for this new age:A new maxim for this new age: Yesterday we defined insanity as: Yesterday we defined insanity as:

“…“…trying the same thing over and over again trying the same thing over and over again and expecting different results”and expecting different results”

Today we might more appropriately define Today we might more appropriately define insanity as insanity as “…“…trying something that worked in the past and trying something that worked in the past and

expecting the expecting the samesame results” results”

We We mustmust change the paradigm with change the paradigm with changing timeschanging times


1919

2. Encourage the development of 2. Encourage the development of regional effortsregional efforts

Foundation and nonprofit rolesFoundation and nonprofit roles• Use your influenceUse your influence to get people to the table to work beyond to get people to the table to work beyond

their parochial intereststheir parochial interests• Support and participate in efforts to Support and participate in efforts to forge regional visionforge regional vision and and

commitment to actioncommitment to action

State government rolesState government roles• Continue and expand Continue and expand support for regional initiativessupport for regional initiatives

Role for both the State and foundations:Role for both the State and foundations:• Work to Work to devolve control of resourcesdevolve control of resources to the regional level to the regional level

Community RolesCommunity Roles• Bury the hatchet and Bury the hatchet and work with your neighbors!work with your neighbors!• Succeed together or fail alone!Succeed together or fail alone!


2020

The MIF ExampleThe MIF Example 1986 – McKnight Foundation / State of Minnesota partnership 1986 – McKnight Foundation / State of Minnesota partnership

devolved control of McKnight’s rural grantmaking and State’s devolved control of McKnight’s rural grantmaking and State’s rural economic development lending to the Minnesota rural economic development lending to the Minnesota Initiative Foundations – regional rural community foundationsInitiative Foundations – regional rural community foundations

20+ year partnership – one of the most effective rural 20+ year partnership – one of the most effective rural philanthropy and development initiatives ever undertakenphilanthropy and development initiatives ever undertaken

Resources attracted and raised in and for local communities Resources attracted and raised in and for local communities more than doubled McKnight and State’s commitmentmore than doubled McKnight and State’s commitment

Combining philanthropy and regional development created Combining philanthropy and regional development created unique opportunities – to holistically rebuild rural viability unique opportunities – to holistically rebuild rural viability

Results include tens of thousands of new jobs, transformed Results include tens of thousands of new jobs, transformed regional economies, and hundreds of millions in permanent regional economies, and hundreds of millions in permanent assets to support rural communitiesassets to support rural communities


2121

3. Support comprehensive approaches 3. Support comprehensive approaches – individualized to place– individualized to place

Foundation and nonprofit rolesFoundation and nonprofit roles• Adopt promising practicesAdopt promising practices and learn from groups like: and learn from groups like:

The Chapin Hall Embedded Philanthropy Network The Chapin Hall Embedded Philanthropy Network CFEDCFED

• Research and Research and disseminate modelsdisseminate models that work that work Government rolesGovernment roles

• Build flexibilityBuild flexibility into funding streams into funding streams

• Coordinate programsCoordinate programs across agencies to address comprehensive across agencies to address comprehensive regional initiativesregional initiatives

Community rolesCommunity roles• Broaden your visionBroaden your vision – work across systems and community boundaries – work across systems and community boundaries

to bring all your assets into playto bring all your assets into play Roles for allRoles for all

• Support efforts that fall “outside the box” – if they Support efforts that fall “outside the box” – if they promote the promote the outcomeoutcome of increased economic wellbeing for families and communities of increased economic wellbeing for families and communities


2222

Getting “outside the box”Getting “outside the box”

The TraditionalThe Traditional Entrepreneur Entrepreneur

DevelopmentDevelopment Business TABusiness TA Loan PackagingLoan Packaging ““Gap” LendingGap” Lending Public InfrastructurePublic Infrastructure Regional MarketingRegional Marketing Workforce TrainingWorkforce Training

The Not So TraditionalThe Not So Traditional HealthcareHealthcare Workforce HousingWorkforce Housing Childcare Childcare Worker TransportationWorker Transportation Early Childhood EducationEarly Childhood Education K-12 EducationK-12 Education Career PathwaysCareer Pathways Postsecondary EducationPostsecondary Education……and much, much moreand much, much more

Depending on place, Depending on place, outcome-focused economic development outcome-focused economic development may require investment in and may require investment in and

focus on:focus on:


2323

4. Promote growth from within4. Promote growth from within Foundation and nonprofit rolesFoundation and nonprofit roles

• Support and provide Support and provide entrepreneurial developmententrepreneurial development Disseminate or adopt good practice (e.g., RUPRI-CRE)Disseminate or adopt good practice (e.g., RUPRI-CRE) Adopt proven curriculum (e.g. Kauffman/FastTrak)Adopt proven curriculum (e.g. Kauffman/FastTrak)

• Consider Consider Mission Related InvestmentMission Related Investment in regional loan funds – in regional loan funds – or or create and run one yourself!create and run one yourself!

Government rolesGovernment roles• Capitalize regional loan programsCapitalize regional loan programs focused on small business focused on small business

• Support Support SBA programsSBA programs and the SBDC network and the SBDC network

• Align resourcesAlign resources – e.g., workforce development, higher ed, – e.g., workforce development, higher ed, economic development – to support local/regional growth economic development – to support local/regional growth

Community rolesCommunity roles• Adopt/support Adopt/support Business Expansion and RetentionBusiness Expansion and Retention programs programs


2424

Remember:Remember:

If you entice a company If you entice a company to come to a community…to come to a community…

……someone else undoubtedly will someone else undoubtedly will offer it more to go elsewhere!offer it more to go elsewhere!


2525

5. Work to find community and 5. Work to find community and regional regional “Sweet Spots”“Sweet Spots”

Government and foundation rolesGovernment and foundation roles

• Support Support research, TA, and planningresearch, TA, and planning

• Use your influence toUse your influence to encourage local/regional encourage local/regional planning effortsplanning efforts

• Ensure that Ensure that needed dataneeded data is available for rural is available for rural places on a timely basis places on a timely basis

Nonprofit and community rolesNonprofit and community roles

• Join together to Join together to create a regional consensus/ create a regional consensus/ vision/planvision/plan to reach your to reach your “Sweet Spot”“Sweet Spot”


2626

Finding your Finding your “Sweet-Spot”“Sweet-Spot”

A three step process:A three step process:

1.1. Inventory your assetsInventory your assets YourYour world-classworld-class competenciescompetencies and and

unique strengthsunique strengths

2.2. Understand your economyUnderstand your economy The fuel for your The fuel for your economic engineeconomic engine

3.3. Forge your visionForge your vision Create shared Create shared passionpassion for your plan for your plan


2727

Inventory your assetsInventory your assets Scour your area looking for: Scour your area looking for:

• Entrepreneurial assets Entrepreneurial assets Existing and emerging entrepreneurs, business clusters, etc.Existing and emerging entrepreneurs, business clusters, etc.

• Physical assets Physical assets Geography, scenery, infrastructure, transportation, etc.Geography, scenery, infrastructure, transportation, etc.

• Human assets Human assets Leadership, talent, expertise, workforce, etc.Leadership, talent, expertise, workforce, etc.

• Institutional assets Institutional assets Schools, libraries, nonprofit organizations, etc.Schools, libraries, nonprofit organizations, etc.

• Cultural assets Cultural assets History, heritage, culture, etc.History, heritage, culture, etc.

• Other ???Other ??? Identify your Identify your world class competenciesworld class competencies and and

unique strengthsunique strengths


2828

Understand your economyUnderstand your economy

Determine Determine statusstatus of your key economic sectors of your key economic sectors• Focus on sectors providing unique community assetsFocus on sectors providing unique community assets

• Who is doing what and how much of it?Who is doing what and how much of it?

Research Research trendstrends on promising sectors on promising sectors• What’s emerging, growing, stagnant, in-decline… …What’s emerging, growing, stagnant, in-decline… …

and why?and why?

• What opportunities and threats do they face?What opportunities and threats do they face?

Identify what can fuel yourIdentify what can fuel your economic engine economic engine – – now and into the futurenow and into the future


2929

Find your passion …Find your passion …and your and your “Sweet Spot”“Sweet Spot”

Convene stakeholders to develop shared Convene stakeholders to develop shared values, values, vision and action planvision and action plan • The process must be inclusiveThe process must be inclusive

Not just the usual suspectsNot just the usual suspects• Focus on the future requires heavy involvement of Focus on the future requires heavy involvement of

“younger” leaders“younger” leaders Their passion will be your futureTheir passion will be your future

IntegrateIntegrate your assets inventory and economic your assets inventory and economic analysisanalysis

Look for the Look for the “Sweet Spot”“Sweet Spot”• Intersection of your Intersection of your passionpassion, your , your world-classworld-class

competenciescompetencies and unique strengths and your and unique strengths and your economic engineeconomic engine


3030

Outcome Focused Outcome Focused Economic Development:Economic Development:

What you are deeply passionate about

What drives your economic

engine

Where you have world classworld classcompetencecompetence

It’s all about Finding YOUR Sweet Spot

……and finallyand finally

A little something for the A little something for the skepticsskeptics among us among us

So you think you have So you think you have nothing to work with?nothing to work with?

These places started in a These places started in a deeper hole:deeper hole:


3333

Tupelo Region Tupelo Region Northeast MississippiNortheast Mississippi

1950 – poorest region in poorest state in union1950 – poorest region in poorest state in union Developed a regional vision for improving the economyDeveloped a regional vision for improving the economy Created a new entity to serve as the hubCreated a new entity to serve as the hub Started by helping poor farmers move from growing Started by helping poor farmers move from growing

cotton to raising pigs and chickenscotton to raising pigs and chickens Improved farm income boosted mainstreet salesImproved farm income boosted mainstreet sales Worked one step at a time to make things better – Worked one step at a time to make things better –

especially the quality of their workforceespecially the quality of their workforce By 1980’s became one of the fastest growing areas in By 1980’s became one of the fastest growing areas in

the south – because of their quality workforcethe south – because of their quality workforce 2007- just picked for a new Toyota plant2007- just picked for a new Toyota plant


3434

Emilia RomagnaEmilia RomagnaRural Northern ItalyRural Northern Italy

1970 – one of the poorest regions in poorest country in 1970 – one of the poorest regions in poorest country in western Europe, with 20% unemploymentwestern Europe, with 20% unemployment

Chief asset and chief liability – 325,000 small Chief asset and chief liability – 325,000 small manufacturers, many one and two person shopsmanufacturers, many one and two person shops

Formed a regional entity to coordinate planning & Formed a regional entity to coordinate planning & actionaction

Developed a regional plan to capitalize on this asset Developed a regional plan to capitalize on this asset by creating flexible manufacturing networksby creating flexible manufacturing networks

Committed resources to organizing what was already Committed resources to organizing what was already there there

Now the second most prosperous region in western Now the second most prosperous region in western Europe with virtually no unemploymentEurope with virtually no unemployment


3535

Alice Springs Area Alice Springs Area Central AustraliaCentral Australia

1929 book “A Town Called Alice” describes area as 1929 book “A Town Called Alice” describes area as literally the end of the earthliterally the end of the earth

In early 1970’s, formed a regional entity to look at In early 1970’s, formed a regional entity to look at their futuretheir future

1974 – regional plan identified tourism as possible 1974 – regional plan identified tourism as possible economic driver and Ayer Rock, the world’s largest economic driver and Ayer Rock, the world’s largest monolith as the chief assetmonolith as the chief asset

Plan focused resources on airport access, water Plan focused resources on airport access, water systems and a resort hotelsystems and a resort hotel

23,000 tourists in 1969 grew to over 500,000 today23,000 tourists in 1969 grew to over 500,000 today The region’s economy is now boomingThe region’s economy is now booming


3636

Some common themesSome common themes

Regional collaboration Regional collaboration

Incremental, long term focusIncremental, long term focus

Built on existing assets and competenciesBuilt on existing assets and competencies

Sound economic analysisSound economic analysis

Passionate buy-in/support for regional Passionate buy-in/support for regional vision and planvision and plan

Thank you!Thank you!

Contact Info:Contact Info:

John A. Molinaro, Associate DirectorJohn A. Molinaro, Associate DirectorAspen Institute CommunityAspen Institute Community Strategies GroupStrategies Group

One Dupont Circle NW, Suite 700One Dupont Circle NW, Suite 700Washington, DC 20036Washington, DC 20036

[email protected]@aspeninst.org202-736-5856202-736-5856

www.aspencsg.orgwww.aspencsg.org

Documents

Economic Development and Wealth Creation in Rural America