It was at this point that PSG was asked to help. We were asked to do two things - synthesize the two reports into one and tease out the strategic questions that arose from the research.
What leapt off the page at us was a questioning of the fundamental assumptions that underlie economic development - assumptions that often aren't articulated or tested. This work did test the assumptions in focus groups attended by over 400 individuals. To us, there were two big disconnects between what people said the current assumption was and what they wanted it to be.
The first concerned the best return on investment of public dollars. People didn't use the following words, but this sums up what was said.
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Current assumption
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Proposed assumption
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Where to invest.
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Chase what you wish you had.
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Grow what you've got.
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Focus group participants and business leaders interviewed said the same thing. They described common economic development strategies as chasing what didn't exist, through promotion, tax free zones or other efforts aimed at getting firms to relocate - often from across an artificial governmental border. They believed a greater ROI would result from helping existing business grow and expand. This was considered much less expensive than starting something with no toehold in the local economy.
A second assumption fundamentally challenged the very purpose of economic development. Those interviewed said that success was being defined too narrowly and that economic development was measuring the wrong things.
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Current assumption
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Proposed assumption
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What's success?
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Development of "deals, jobs, and specific properties."
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Creation of sustainable, new wealth.
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There was general agreement that economic development efforts should be measured and evaluated. However, participants questioned the measures used, especially the standard yardsticks of job creation, development of specific properties, or chasing relocations. They suggested alternate measures, such as growth in real household income, community tax base, or overall wages.
To the coalition, this fundamental questioning of purpose - that economic development needed to shift its focus from job creation to the creation of new wealth - represented the most provocative of the findings. It was clear that participants wanted the end result of economic development to be the infusion of new dollars into the economy. But, where does new wealth come from? To PSG, this was a design challenge. The restated assumptions served as a 'jumping off' point - from which we proposed a framework that explored what wealth is, where it comes from, and how it is sustained.
What is wealth?
We started by defining wealth as having assets that provide the prospect of sustained future earnings. The new goal is to increase wealth - for individuals, businesses, and communities - by enhancing those assets that improve prospects for sustained future earnings.
Where does wealth come from?
Old wealth comes from inheritance or redistribution of wealth. In this state, traditional wealth creation depended on access to cheap, abundant natural resources and labor. These old rules were rapidly outdating in a global market.
Our framework states that creating new wealth comes from creating sustainable advantage in the marketplace. Individuals, businesses, and communities all compete in a global marketplace. Wealth for each comes from having sustainable advantages that hold marketplace value. In practical terms, talent and knowledge is valued more than physical labor. Similarly, delivering 'added value processing' is valued more than delivering raw material. They cannot control the marketplace they are each in, but they must understand it and position to thrive within it. Each needs to be externally focused - attending to customers, markets, and global trends in the search for sources of advantage.
Our framework did not assume that wealth creation is a right, but rather a responsibility. Each party - community, businesses, and individuals - must first be responsible for developing its own advantage - knowing that advantages are most sustainable when they reinforce one another. Individuals are primarily responsible for enhancing their own knowledge and skill needed by the workplace. Businesses are primarily responsible for enhancing their competitiveness, and then reinvesting back into their communities and workforce. Communities are primarily responsible for enhancing their own advantages and then reinforcing the advantages of local individuals and businesses.
Where does sustainable advantage come from?
Our framework advances five main factors that lead to sustainable advantage. It posits the theory that greatest advantage goes to those individuals, businesses and communities that:
- Attend to basics first
- Intensify their knowledge
- Make marketplace based choices
- Differentiate themselves - by continuously adding value
- Strengthen attachments - by building relationships that last and matter
These five could also be summarized in the vernacular as Get the Basics (B), Get Smarter (S), Get Focused (F), Get Unique (U), and Get Attached (A). Further, there is an internal hierarchy. The first three are core success factors. If an individual, business, or community does not have each of these three, it has nothing. Once these three are attended to, the next two can cause exponential growth advantage.
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Individuals |
Businesses |
Communities |
| B |
Basic education, skills, attitudes Basic wage |
Basic product & service Fundamental operating systems Price |
Basic services -safety, education, utilities, roads Price of Government |
| S |
Knowledge That Works
- Advanced education
- Experience & skill
- Productivity
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Knowledge Intensity
- 'Technology'
- Productivity
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Knowledge Infrastructure
- World class education
- Libraries
- Connectivity
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| F |
Career Choices
- Core Assets
- Markets
- Strategy
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Business Positioning
- Core Assets
- Markets
- Strategy
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Leadership Choices
- Core Assets
- Markets
- Strategy
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| U |
Value/Price
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Value/ Price
- Invention
- Continuous improvement
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Value/ Price
- Reinvention
- Reform/ transparency
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| A |
"Sticky" relationships - attract, connect, sustain
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"Sticky" relationships - attract, connect, sustain
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"Sticky" relationships - attract, connect, sustain
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Let's get more concrete about what applying this framework might mean in practice. For example, it would mean that it is more important to invest in strengthening business planning capacity than to provide one-time capital. It would be more important for a region to have one world-class P-12 school than to invest in promotion. Exploring 'sticky' relationships might lead a community to examine how it welcomes new arrivals - and whether it knows how to keep them. You can see how it is applied.
What I thought especially cool about this client work was the re-examination of the basic assumptions that under gird a whole system - BIG assumptions that guide its very core. It is so important in reform work to do this. In this instance,
- Regarding core purpose, it asks leaders to move from an emphasis on creating jobs to creating sustainable, new wealth
- Regarding the means, it asks leaders to move from chasing opportunities to keeping what's successful and building assets known to improve future prospects
- Regarding the measures, it asks leaders to move from counting deals and jobs to measuring whether individuals and businesses are indeed more prosperous.
Challenging the assumptions has led to a new framework that challenges every leader working in economic development!
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