Economic Development and Wealth Creation in Rural America

1. Economic Development and Wealth Creation in Rural America An Outcome Focused Approach A presentation to 2007 Indiana Rural Summit November 15, 2007 by John A. Molinaro Aspen Institute Community Strategies Group

2. Aspen Institute Community Strategies Group (CSG) A Washington DC based national organization that spurs innovation and action to build lasting prosperity in communities through focused learning Our primary fields of interest include: Supporting the economic success of families Economic, community and workforce development Community philanthropy as a tool for rural development Who are we? Aspen Institute Community Strategies Group November, 2007

3. What is “Outcome Focused” Economic Development? Economic development defined by the desired outcome, not activities or inputs: Abundant, quality jobs and entrepreneurial opportunities that sustain and enhance the well-being and build the wealth of families and communities If it doesn’t lead to this outcome… …it’s not economic development. Aspen Institute Community Strategies Group November, 2007

4. A bit of history… 1960’s to 1980’s • Rapid industrialization swept across rural America • Companies sought cheaper land, cheaper labor and less regulation • Rural areas could meet these demands • Industrial recruiting made good sense because it worked – and set the paradigm Aspen Institute Community Strategies Group November, 2007

5. Times have changed Today • “The World Is Flat” • Labor-intensive work can and does go anywhere • America’s education advantage has eroded • Technology is fungible – it flows wherever there is money to buy it • Industrial recruiting is a no-win strategy Aspen Institute Community Strategies Group November, 2007

6. The Rise and Fall of Industrial Recruiting • 1950’s – Most of the world’s manufacturing capacity is in the USA, demand is high, cost is no object, so most manufacturing happens close to markets - in large cities with unionized labor • Markets drive location – industrial recruiting is irrelevant • 1970’s – The “Japan threat” forces US manufacturing and telemarketing firms to move to rural areas for cheap land and non-union labor • Industrial recruiting successfully attracts these companies • Today – The “China threat” forces almost all commodity manufacturing offshore and the “India threat” erodes technology, service and telecommunications jobs • To be stable, jobs must be tied to a place – industrial recruiting is counterproductive – a waste of resources! Aspen Institute Community Strategies Group November, 2007

7. How can rural places successfully compete today? Four Keys: • Regional collaboration • Comprehensive approaches, individualized to place • Growth from within • Finding their unique “Sweet Spot” Aspen Institute Community Strategies Group November, 2007

8. Why Regional Collaboration? • New business models require scale • e.g., big-box retailers and Internet vendors • Competing requires bulk buying power • Fierce competition makes margins thinner • More sales needed to break even • Niche markets “fill the gaps” • Niche markets also require scale • Activities once competitive at the local level now require a regional market to survive Aspen Institute Community Strategies Group November, 2007

9. Example – Hardware Sales • 1950’s – Small town independent hardware stores sell 30,000 items one at a time from open bins • 1970’s – Larger community hardware chains (e.g., True Value) sell 20,000 items in multi-unit blister packs • Today – Most hardware is sold in regional centers • Regional center big-box retailers (e.g., Home Depot) sell 10,000 high-volume hardware items – and a whole lot of other stuff • Niche chains (e.g., Restoration Hardware) fill the gaps for high-end specialty items – but only in the largest regional center communities Aspen Institute Community Strategies Group November, 2007

10. Why Comprehensive and Individualized? • Issues faced are both complex and interdependent • Multiple rural Americas require individualized approaches Delta – Poor schools, plentiful workforce vs. Plains – Good schools, sparse workforce • One size does not fit all! • Each area must build on its strengths and minimize its weaknesses Aspen Institute Community Strategies Group November, 2007

11. Why Growth from Within? • 95% of all new jobs are created by local “small” businesses (<200 workers) • No one truly wins the “Toyota Lottery!” • It’s cheaper and easier to keep and grow what you already have • Local businesses have “roots” and are less likely to leave Aspen Institute Community Strategies Group November, 2007

12. What is the “Sweet Spot?” The place where passion, competence and economics coincide! Aspen Institute Community Strategies Group November, 2007

13. “Good to Great” by Jim CollinsAdapted from “The Hedgehog Concept” The Sweet Spot  Aspen Institute Community Strategies Group November, 2007

14. Focusing on your “Sweet Spot” • Focus where you have world-class competence: • What you can do as well or better than anyone and your unique regional assets – your competitive niche • If someone can do it better, they will and you will lose • Focus on what drives your economic engine: • The one or two factors you want to maximize to get the most economic return from your activities • Focus on maximizing the activities that add value • If it doesn’t add value, it’s not worth doing • Focus on what you are passionate about: • your region’s shared values and vision • “Where there is no vision the people perish” (Proverbs 29:18) Aspen Institute Community Strategies Group November, 2007

15. “Good to Great” by Jim CollinsAdapted from “The Hedgehog Concept” Uncompetitive  Aspen Institute Community Strategies Group November, 2007

16. So how can you help? There’s a role for everyone in this room • Abandon the old paradigm – teach the new • Encourage regional efforts • Support comprehensive approaches – individualized to place • Promote growth from within • Work to find your “Sweet Spot” Aspen Institute Community Strategies Group November, 2007

17. 1. Abandon the old paradigm and teach the new • Foundation and nonprofit roles • Initiate and support efforts to build new leaders and raise awareness of existing ones • Research and convey good practices and provide technical assistance • State government roles • Restructure programs, rules, and regulations to eliminate incentives and provide disincentives for smokestack chasing • No one will unilaterally disarm, the impetus must come from above • Community roles • Abandon industrial recruitment– it doesn’t work and wastes precious resources! • Build on your local assets, industries, and entrepreneurs Aspen Institute Community Strategies Group November, 2007

18. A new maxim for this new age: • Yesterday we defined insanity as: “…trying the same thing over and over again and expecting different results” • Today we might more appropriately define insanity as “…trying something that worked in the past and expecting the same results” • We must change the paradigm with changing times Aspen Institute Community Strategies Group November, 2007

19. 2. Encourage the development of regional efforts • Foundation and nonprofit roles • Use your influence to get people to the table to work beyond their parochial interests • Support and participate in efforts to forge regional vision and commitment to action • State government roles • Continue and expand support for regional initiatives • Role for both the State and foundations: • Work to devolve control of resources to the regional level • Community Roles • Bury the hatchet and work with your neighbors! • Succeed together or fail alone! Aspen Institute Community Strategies Group November, 2007

20. The MIF Example • 1986 – McKnight Foundation / State of Minnesota partnership devolved control of McKnight’s rural grantmaking and State’s rural economic development lending to the Minnesota Initiative Foundations – regional rural community foundations • 20+ year partnership – one of the most effective rural philanthropy and development initiatives ever undertaken • Resources attracted and raised in and for local communities more than doubled McKnight and State’s commitment • Combining philanthropy and regional development created unique opportunities – to holistically rebuild rural viability • Results include tens of thousands of new jobs, transformed regional economies, and hundreds of millions in permanent assets to support rural communities Aspen Institute Community Strategies Group November, 2007

21. 3. Support comprehensive approaches – individualized to place • Foundation and nonprofit roles • Adopt promising practices and learn from groups like: • The Chapin Hall Embedded Philanthropy Network • CFED • Research and disseminate models that work • Government roles • Build flexibility into funding streams • Coordinate programs across agencies to address comprehensive regional initiatives • Community roles • Broaden your vision – work across systems and community boundaries to bring all your assets into play • Roles for all • Support efforts that fall “outside the box” – if they promote the outcome of increased economic wellbeing for families and communities Aspen Institute Community Strategies Group November, 2007

22. The Traditional Entrepreneur Development Business TA Loan Packaging “Gap” Lending Public Infrastructure Regional Marketing Workforce Training The Not So Traditional Healthcare Workforce Housing Childcare Worker Transportation Early Childhood Education K-12 Education Career Pathways Postsecondary Education …and much, much more Getting “outside the box” Depending on place, outcome-focused economic development may require investment in and focus on: Aspen Institute Community Strategies Group November, 2007

23. 4. Promote growth from within • Foundation and nonprofit roles • Support and provide entrepreneurial development • Disseminate or adopt good practice (e.g., RUPRI-CRE) • Adopt proven curriculum (e.g. Kauffman/FastTrak) • Consider Mission Related Investment in regional loan funds – or create and run one yourself! • Government roles • Capitalize regional loan programs focused on small business • Support SBA programs and the SBDC network • Align resources – e.g., workforce development, higher ed, economic development – to support local/regional growth • Community roles • Adopt/support Business Expansion and Retention programs Aspen Institute Community Strategies Group November, 2007

24. Remember: If you entice a company to come to a community… …someone else undoubtedly will offer it more to go elsewhere! Aspen Institute Community Strategies Group November, 2007

25. 5. Work to find community and regional “Sweet Spots” • Government and foundation roles • Support research, TA, and planning • Use your influence toencourage local/regional planning efforts • Ensure that needed data is available for rural places on a timely basis • Nonprofit and community roles • Join together to create a regional consensus/ vision/plan to reach your “Sweet Spot” Aspen Institute Community Strategies Group November, 2007

26. Finding your “Sweet-Spot” A three step process: • Inventory your assets • Yourworld-classcompetencies and unique strengths • Understand your economy • The fuel for your economic engine • Forge your vision • Create shared passion for your plan Aspen Institute Community Strategies Group November, 2007

27. Inventory your assets • Scour your area looking for: • Entrepreneurial assets • Existing and emerging entrepreneurs, business clusters, etc. • Physical assets • Geography, scenery, infrastructure, transportation, etc. • Human assets • Leadership, talent, expertise, workforce, etc. • Institutional assets • Schools, libraries, nonprofit organizations, etc. • Cultural assets • History, heritage, culture, etc. • Other ??? • Identify your world class competencies and unique strengths Aspen Institute Community Strategies Group November, 2007

28. Understand your economy • Determine status of your key economic sectors • Focus on sectors providing unique community assets • Who is doing what and how much of it? • Research trends on promising sectors • What’s emerging, growing, stagnant, in-decline… …and why? • What opportunities and threats do they face? • Identify what can fuel your economic engine – now and into the future Aspen Institute Community Strategies Group November, 2007

29. Find your passion …and your “Sweet Spot” • Convene stakeholders to develop shared values, vision and action plan • The process must be inclusive • Not just the usual suspects • Focus on the future requires heavy involvement of “younger” leaders • Their passion will be your future • Integrate your assets inventory and economic analysis • Look for the “Sweet Spot” • Intersection of your passion, your world-classcompetencies and unique strengths and your economic engine Aspen Institute Community Strategies Group November, 2007

30. Outcome Focused Economic Development: It’s all about Finding YOUR Sweet Spot  Aspen Institute Community Strategies Group November, 2007

31. …and finally A little something for the skeptics among us

32. So you think you have nothing to work with? These places started in a deeper hole:

33. Tupelo Region Northeast Mississippi • 1950 – poorest region in poorest state in union • Developed a regional vision for improving the economy • Created a new entity to serve as the hub • Started by helping poor farmers move from growing cotton to raising pigs and chickens • Improved farm income boosted mainstreet sales • Worked one step at a time to make things better – especially the quality of their workforce • By 1980’s became one of the fastest growing areas in the south – because of their quality workforce • 2007- just picked for a new Toyota plant Aspen Institute Community Strategies Group November, 2007

34. Emilia RomagnaRural Northern Italy • 1970 – one of the poorest regions in poorest country in western Europe, with 20% unemployment • Chief asset and chief liability – 325,000 small manufacturers, many one and two person shops • Formed a regional entity to coordinate planning & action • Developed a regional plan to capitalize on this asset by creating flexible manufacturing networks • Committed resources to organizing what was already there • Now the second most prosperous region in western Europe with virtually no unemployment Aspen Institute Community Strategies Group November, 2007

35. Alice Springs Area Central Australia • 1929 book “A Town Called Alice” describes area as literally the end of the earth • In early 1970’s, formed a regional entity to look at their future • 1974 – regional plan identified tourism as possible economic driver and Ayer Rock, the world’s largest monolith as the chief asset • Plan focused resources on airport access, water systems and a resort hotel • 23,000 tourists in 1969 grew to over 500,000 today • The region’s economy is now booming Aspen Institute Community Strategies Group November, 2007

36. Some common themes • Regional collaboration • Incremental, long term focus • Built on existing assets and competencies • Sound economic analysis • Passionate buy-in/support for regional vision and plan Aspen Institute Community Strategies Group November, 2007

37. Thank you!Contact Info:John A. Molinaro, Associate DirectorAspen Institute CommunityStrategies GroupOne Dupont Circle NW, Suite 700Washington, DC 20036jmol@aspeninst.org202-736-5856www.aspencsg.org