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8/6/2019 Module 7-Presentation Team Copy
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Exploring Opportunities fora Stronger Region
Module
Seven
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Reflecting on the Previous Session
• What did you find most useful or valuableabout the previous session on thedemographic features of your region?
• What progress have you made since theprevious session in terms of your homeworkassignments?
• Any questions or clarification about ModuleSix?
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Overview of Module Seven
• Explore basic concepts of competitiveadvantage
• Provide an overview of tools and dataavailable to detect regional competitiveadvantage
• Examine strategies for building stronger
regional economies
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Basic Concepts ofCompetitive Advantage
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Competitive Advantage: Four Factors
What determines competitive advantage?
• Firm Strategy, Structure and Rivalry
• Factor Conditions
• Related and Supporting Industries
• Demand Conditions
Business shapes the economic value of a region, but places can help shape, nourish,and sustain local enterprises and industry.
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Firm Strategy, Structure and Rivalry
Porter’s Diamond Theory
Firm Strategy,Structure and
Rivalry
DemandConditions
FactorConditions
Related andSupportingIndustries
How does placeinfluence the
quantity, qualityand cost of input
factors?
Local customerbase? What dopeople want?
How manycompetitors?What is the threat
of new entry?
What valuechains or
clusters existin our region?
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HealthCareIndustry
Firm strategy:
3 hospitals
7 full-time doctors
Industry determined by
University-Owned Hospital,located 100 miles away
Demand Conditions:
Unemployed and
underemployed seekinglow-cost health care
Higher income leaving theregion for large urban
hospital
Factor Conditions:
Low rent
Inexpensive unskilled labor
Difficult to retain medicalprofessionals
Related and SupportingIndustry:
25% of durable suppliescan be purchased locally
0% of non-durable suppliescan be purchased locally
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Regional Competitive Advantage
• Businesses are competitive to the degreethey can generate profits.
• Places are competitive to the degree their
residents can build wealth.• Regional competitive advantage: the
interaction between businesses, industry andplaces that generate local wealth.
• Wealth building opportunities also existoutside of the private sector (government,non-profit organizations, and investments)
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Tools and Data for DetectingRegional Competitive Advantage
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What Are the Keys toEconomic Growth?
• People
• Place
• Businesses
• Innovation
• Clusters or branding
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First Key to EconomicGrowth: People
• Who are our workers?
Skill level, education, occupation
Work ethic
• Who are our residents?
History and culture
Long time residents, newcomers
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People: The Residents
• Who are the people that live in this region?
How long have they lived here?
How many generations have lived here?
Where did they move from?
Why?
• Why do they like living here?
Social conditions
Cultural factors
Economic prospects
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People: The Workforce
• Who are our workers?
Basic demographics
Experience
Work ethic
• Is our workforce adapting to change?
Technology
Recognizing needs
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The Second Key to EconomicGrowth: Place
• What amenities doesour region offer?
• Why would people wantto live here?
• Why would businesses
relocate here?
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Place: Industrial Indicators
• Current leading employers
• New and expanding companies and industries
• Research bases, R & D
• Available land and buildings
• Existing infrastructure
• Access to transportation networks
• Tax structure
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Place: People & Qualityof Life Indicators
• Population and labor force
• Education
• Health care• Recreational opportunities
• Shopping
• Crime, weather, etc.
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The Third Key to EconomicGrowth: Business
• What is the portfolio of businesses in ourregion (small, medium, large)?
• What‟s the mix of industrial sectors in our
region?
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Industries & Occupations: Looking atData on Your Region
• What types of industries/ businesses currently exist inyour region?
• What are the keyoccupations?
• How have these businessesfared particularly during theeconomic downturn of the
last few years?
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Business Assistance in the Region
What type of programs, assistance,or incentives are offered to:
• Support expanding businesses?• Recruit new businesses?
• Foster the growth of
entrepreneurs or small locallyowned businesses?
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Identifying Entrepreneurs
Smallbusinesses
Self- Employed
People with
underutilized talentSocial
Entrepreneurs
Theunemployed
Innovators
High growthbusinesses
Entrepreneurship
Youth
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Who is an Innovator/Entrepreneur?
Identifying Innovators &Entrepreneurs
Problem/Opportunity
New Old
Solution
New YES YES
Old YES NO
Entrepreneur: one whose goal is tocreate or capitalize on new economic
opportunities through innovation.
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Assessing Entrepreneurship Capacity
• Community surveys
Existing programs
Community readiness for new programs
Leadership
Networks
• One-on-one interviews with local entrepreneur
Assess ambitions and needs Identify regional constraints
Community surveys and one-on-one interviews
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Assessment for Entrepreneurship Capacity
Inventory of Entrepreneurship:• BEA-REIS data
• Census (non-employer statistics)
• County Business Patterns
• Panel Study on EntrepreneurialDynamics
• Survey of Business Owners
Capacity for New Entrepreneurs:• Educational attainment
• Immigration and diversity
• Financial resources
• Business resources
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The Fourth Key to EconomicGrowth: Innovation
"Innovation . . . the successful
introduction of a new thing or
method . . . Innovation is the
embodiment, combination, or
synthesis of knowledge in original, relevant,
valued new products, processes, or services”
Luecke and Katz, 2003
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Your Region’s Capacity for Innovation
• What are your region‟s most competitive
Research & Development (R&D)assets?
• How effective are regional universitiesor community colleges atcommercializing new ideas and
innovations?
• What resources does your region offerto foster innovation?
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How Nurturing is Your Region?
Conception Implementation Marketing
• Idea Generation• Project Planning
• Development• Prototype Dev• Testing
• Production• Launch
BusinessProcess
RegionalCapacity
• R&D centers• Universities• Industrial Parks
• Capital availability• Community Support
• Education• Technical
Assistance
Three Phases of Innovation
Source : Tawari, Buse and Herstatt, 2007
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The Creative Class
• Identified class of “creative”
occupations that should be attractedand retained
• Defined as “developing, designing or creating new applications, ideas,relationships, systems, or products,including artistic contributions”
• This class is thought of as “footloose”and attracted to high amenity places
Term popularized by Richard Florida in his 2002 book
“Rise of the Creative Class.”
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Why the Creative Class?
• The density of creative class hasa positive effect on job growthboth in the „creative‟ and „non-
creative‟ sectors.
• Creative capital andentrepreneurship work in
synergy with one another toincrease employmentopportunities in both sectors.
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Where is the Creative Class in the US?How "creatively-driven" is your economy compared to the national average?
Dark-blue is the least creative and dark-red the most creative areas.
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Fifth Key to Economic Growth:Clusters or Branding
• Cluster – making the whole greater thanthe sum of the parts
• Branding – consolidating the essential
characteristics of the individual identity intoa brand core
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Industry Cluster Analysis
• A type of analysis that views firms,
and therefore, industries, as
interdependent, not isolated• Value chains
• A collection of businesses producing
similar output
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What Can RegionalCluster Analysis Tell Us?
Where we have . . .
• Gaps• Growing industries/clusters
• Declining industries/ clusters
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Data Needs
• Industry sector data : number of
establishments (over time), number of
employees, payroll, earnings
• Potential linkages to determine value
chains
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You Think There is a RegionalCluster, So Now What?
• Map the cluster by identifying the industries thatmake up the cluster.
• Determine if the cluster is growing or declining.
• Decide if you have the regional capacity to supplythe necessary industries/products.
• Identify potential leakages and/or opportunities fornew enterprises.
• Determine which economic strategy(ies) might bemost successful at strengthening the cluster.
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Mapping the Cluster
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Value Chain Cluster Example
Grapestock
Fertilizers,Pesticides,Herbicides
GrapeHarvestingEquipment
Irrigation
Technology
Educational, Research
& Trade Organizations
Growers/ Vineyards
Wineries/ ProcessingFacilities
State GovernmentAgencies
SpecializedPublications
PublicRelations &Advertising
Labels
Caps & Corks
Bottles
Barrels
WinemakingEquipment
CaliforniaAgricultural Cluster
TourismCluster
FoodCluster
Wine
Source : California Department of Food and Agriculture
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Manufacturing Clusters
Manufacturing
Below Average
Above AverageSig Above Average
500 0 500 1000 Miles
N
EW
S
WesternUnitedStates
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Cluster Illustration: Bubble Chart
Source : EMSI.com
Kentucky Industrial Bubble Chart
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Identify Potential Leakages andBusiness Opportunities
• Determine the industries that make up the cluster.
• Assess the current regional capacity for industryproduction.
• Characterize the potential of each industry assaturated, potential expansion, zero potential.
• Characterize the future growth of industry as stable,high-growth, or declining.
• Determine the types of skills needed to create thesebusinesses.
Identify Potential Leakages and
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Identify Potential Leakages andOpportunities for New Businesses
Wine
Zero inputs available regionally
Small % of inputs available regionally
Large % of inputs available regionally
100% of inputs available regionally
Grapes
Research
Fertilizer
Advertising
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Examining Clusters in Your Region
Possible Economic Development
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Possible Economic DevelopmentStrategies to Strengthen a
Cluster or Brand
• Targeted attraction of industry
• Business retention and expansion
• New firm creation/entrepreneurship
• Attracting the creative class
• Network development and
meta-business creation
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Targeted Attraction of Industry
• Past Approach: Blindly attracting industry
• Now: Targeting businesses within identify
industries identified as likely to be successful inthe region
• Strategies for identifying potential successes: Cluster Mapping
Location Models
Community Business Matching Model
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Location Models
• Have you ever heard someone say:
“We are working on attracting ______
(some large manufacturer) to our rural
region” ?
• There are models that employ place
specific data that identify the probability ofcertain types of industries locating in aparticular area.
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Location Models
Source : Targeting Regional Economic Development, 2009
By examining demographic and economic trends:
• We may identify certain industries that we willhave limited success in attracting to the region
…AND THAT’S OKAY!
• We can also find industries and businesses thatwill work well in your region.
C it B i M t hi M d l
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Community Business Matching Model
Compatibility Desirability
Community
Business
Assets
Needs Profile
Goals
TheIdeal
Source: Cox et al., 2009
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Business Retention and Expansion
• Focuses on keeping existingbusinesses
• Helps existing businessesgrow and add jobs
• Includes all efforts to help
insure the survival and growthof a community‟s existing
businesses
How to Approach Business
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How to Approach BusinessRetention & Expansion
Community-Based Business Visitation• Planning Phase • Action Phase
Recruit volunteer visitors Visit and survey local businesses
• Follow-up Respond to “Red Flags” Prepare and present report Plan for future Follow-up is most important!
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Advantages of BR&E
• Lets businesses know they are valued
• Helps solve local business issues
• Improves community awareness andinvolvement
• Can connect businesses to othercommunity resources
• Can create a coalition of communityorganizations
• Can keep or add jobs
R i l St t i t I
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Regional Strategies to IncreaseEntrepreneurism
• Community-based training options
Weekend boot camps
FASTRAC or other 13 week programs Short-term targeted business training
• Access to business coaching
• Youth entrepreneurship: 4H,Scouts, in-school programs
E t i l C iti R i
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Entrepreneurial Communities or Regions
CommunitySupport
Conception
Birth
Openness tonew ideas and
intellectualstimulation
Capital: Equity and Debt
Education: K-22
Information
Connections +Networking
Infrastructure
Services and Amenities
Source: Based on Reynolds, et. al., Small Business Economics 23: 263 –
284, 2004.
Att ti th C ti Cl
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Attracting the Creative Class
The creative class is „footloose‟ and tend tocongregate in places with a high quality of life
• Networking
• Retain / Attract Youth
• Recreational Activities
• Cultural Diversity, Tolerance and Inclusiveness
• Infrastructure
• Population Density• Proximity to Metropolitan Areas
• Natural Amenities (esp. mountains, forest) P o t e n t i a l t o A f f e c t
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Network Development
Business Network Development: A formalor informal collaboration or cooperation
among either competing firms or firms thatare part of a value chain for the purpose ofcreating a net benefit for all involved
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Network Examples
Workforce Development Example • Milwaukee Seven Water Council:
Goal is to transform the workforce system and
create high performance talent pipelines within the region
Entrepreneurship Network Example
• The Entrepreneurs Network:Promote and enhance job growth and business
creation
M t B i F ti
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Meta-Business Formation
Strategies for generating revenue thatsupport all local business
Examples:
• Local coupons
• Local credit/debit cards
• Local currency
• Business directories
• Local stock exchange
• Businesses that support other businesses
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What’s Next?
• Identify a strategy or two that the teamthinks could be successful
• Consider data collection needs
• Identify assets and
barriers
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Final Reflections
• What are the takeaways from thismodule?
What topics did you find most helpful? What did you find confusing?
What do you hope to implement as
part of your regional team’s activities? Other items you want to mention?
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Looking Ahead: Module Eight
• Refining Your Goals
• Identifying the ABCs of Success
• Selecting Strategies
• Planning for Action