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Cleveland, business leadership and economic development
Sunday, January 28, 2007 The substance of this post appeared frist as a comment on Brewed Freah Daily here. In economic development, there are two broad strategies: 1) publicly-led, privately supported and 2) privately-led, publicly suported. In the first category the public sector takes the financing lead, supported by the private sector. In the second category, private business takes the financing lead, supported by the public sector. The first category builds stadiums, convention centers, infrastructure. (In broadband, you see communities using both categories of strategies, interestingly, depending on the circumstance.) In the second category, you see strategies that accelerate innovation: cluster-based strategies, business development strategies, and entrepreneurship support networks. (The Council for Entrepreneurial Development in North Carolina, probably the most successful entrepreneur support organization in the country, takes no public money.) In Cleveland, we have been very good at the first category of strategies, but not so good at the second. We have been very aggressive at investing public money in economic development. We built Gateway, R&R Hall, Science Center and so on. But we have largely failed with residential development (only about 8,000 units when we need closer to 20,000 or 25,000) and retail development (Tower City, Galleria). Residential and retail are privately-led strategies. Here's an example of how the two strategies should work together. Oklahoma City developed a publicly-led strategy (the MAPS initiative) that rebuilt a lot of the public investments downtown. We coupled that with a privately-led development strategy (Forward Oklahoma City, now in its third five year cycle) to attract businesses (Sonic's relocated HQ, Dell, Southwest Airlines, etc.). The result has been a transformation in about 8 years. (Disclosure: I designed the privately-led strategy.) In Cleveland, the key public sector investments in downtown happened fifteen years ago, but it was only last year that the business community established a business improvement district downtown. That's too late, and much of the momentum downtown has been lost. (In OKC, we established the district along side the MAPS initiatives.) For Cleveland to progress, we need to get better at privately-led strategies. These are the strategies that transformed the South (where aversion to the federal government and higher taxes limited reliance on public money.) The role of the private sector goes beyond competing for public dollars. No matter how much public sector investment we attract to Northeast Ohio, it will not be enough to transform the economy. (Translation: To be transformative, NorTech needs to be more than a funds broker. Government funds are only a partial metric. Refine NorTech's role in building open networks.) JumpStart is showing some very promising signs of understanding this new privately-led dynamic. They are introducing, for example, a new web site that could result in significant new private sector investment. Read more. In Cleveland, we have an interesting variant: foundation funding. Most regions do not have the luxury of the deep foundation funding we have here in Cleveland. Foundation funding is both a blessing and a curse. It's a blessing when it finances early stage ideas (Civic Innovation Lab, although too small and too slow for many entrepreneurs, is a very good idea.) It's a curse when it substitutes for private sector leadership. Foundations are removed from the market. Program officers are generally no more sensitive to market signals than government employees. When government takes the lead in making decisions that are more appropriate for the private sector, we get industrial policy. In Cleveland, we are straying close to the line of an industrial policy led by foundations, not by government. That may make sense for the foundations (it's their money, after all), but it is not an approach that encourages much open innovation. Sadly, this approach also slows things down, when we need to be speeding up. The three year Voices and Choices exercise is an example. Most regions go through a "listening exercise" in months, not years. Part of the problem, I think, is that our business community in Cleveland really does not understand its role in regional economic development. Here's a thought exercise: If you polled the Board of the Greater Cleveland Partnership, what percentage could -- with no help from staff -- outline our region's top three transformational initiatives? Not just the name, but what these initiatives are actually doing and how they are measured. (Here's another set of questions: What is the mission of the Greater Cleveland Partnership? What are the strategic outcomes we are working to achieve as a region? What is our vision of the future for Northeast Ohio? What are the principles that are guiding our regional development initiatives? How do we hold ourselves accountable? The recent PD series asked a lot of these questions and came up with muddy answers.) The GCP does not routinely organize field trips to other cities so its Board members can learn what works and what doesn't. The last big delegation of business leaders to travel anywhere was probably -- my guess -- in the 1980's when a group went to St. Louis. In the past year alone, board-level delegations of business leaders have been traveling all over the U.S. -- Milwaukee and Louisville went to Denver. Charlotte went to Philadeliphia. Cincinnati and Northern KY went to Boston. Lexington, KY went to Oklahoma City. Oklahoma City went to Indianapolis. Baton Rouge went to Research Triangle. Phoenix went to Austin. You get the idea. That's a good place to start. The Boards of NorTech, JumpStart, GCP need to become more active in what works in economic development. Relying too much on staff is not a smart strategy. If you are not careful, staff can end up -- as I have seen in many places -- focusing on protecting their position, not bettering the cause. They filter information to the chamber board, and the board becomes passive. Board meetings become polite lunches, not places where key strategies are openly discussed, debated and aligned. In sum, in organizations that are staff-led, in my experience, the transformation slows and often ends up off course. (Staff cannot read market signals very well either.) That is, my guess, what has happened here in Cleveland. posted by Ed |
Comments:
Right on, Ed. Even the righteous ED groups know better than to step out of line and interfere with or otherwise claim priority over the traditional power elites. That's why a brain dead idea like a new convention center--in spite of all the countervailing data--sucks all of the air out of the room for four years running now. That's worth repeating: for four years the old guard has been figuring out how to ram this unpopular project down our throats, and now with a compliant group of commissioners in tow, are ready for the final push.
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So it seems to me that groups like Jump Start need to fulfill another, more dicey role: to not only speak up for truly transformational projects but to make plausible cases (as you do in this blog) against huge corporate subsidies that lead nowhere. In short, the elevation of the strategy you propose requires the utter discrediting of its primary nemisis. To that end, who will be the first to run with Sam Miller's wacky presidential library idea reported in this morning's PD? When will these guys die? |
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