REI Booklet Print v1.2 2

8/13/2019 REI Booklet Print v1.2 2

1/27

Page 1 of 27 www.rei.case.edu

Building Prosperityin Northeast Ohio

with

Open Source Economic Development

Ed Morrison

Executive DirectorCase Center for Regional Economic Issues

[email protected]

Weatherhead School of Management

May, 2005


2/27

Table of Contents

Overview

4Part 1: What " s Changed 6

Building wealth in the industrial era 7

The rst wave of globalization 8

The second wave of globalization 10

The perfect storm of globalization 11

From command and control to collaboration 12

The changing dynamics of economic development 13

The competitive advantage of networks 14

The increasing importance of brainpower 15

Part 2: Open Source Economic Development 16

Components of Open Source Economic Development 17

Building brainpower 18

Converting brainpower into wealth 19



3/27

Building quality connected places 20

Branding our region: Understanding the experience 21

Building civic habits of Purposeful Dialogue

22

Building clusters with Open Source Economic Development 23

Our Universities Collaborative 24

Colleges and universities as civic spaces 25

Get linked 26



4/27

Overview

We are moving from an economy based on large industrial organizations to an economy built on collaborative networks.This shift -- which the Internet has accelerated -- profoundly changes the character of economic development. Civic lead-ers need to move from thinking that economic development is the primary responsibility of a handful of people -- themayor, the county commission, the chamber of commerce board. In today " s globally connected economy, a region " s eco-nomic development is everyone " s business. Economic prosperity emerges from strong networks of engagement.

In Northeast Ohio, we need to rebuild our civic spaces in order to compete in an economy based on networks. This strat-egy carries important competitive consequences. The regions with strong civic collaborations will be able to learn faster;they will be able to spot business opportunities faster; and they will be able to act faster.

The purpose of this reportThis report outlines the evolving challenges of economic development in Northeast Ohio. .The report is divided into twoparts. Like the rest of the U.S. economy, Ohio is caught in a perfect storm of globalization. Part 1 explore how economicdevelopment has shifted, and how we must shift our thinking if we are going to remain globally competitive. Ohio is notalone in making these adjustments. Every advanced economy is faced with the same set of circumstances -- a at earthin which competition can come at us from any direction. 1

The second part of this report explores how Open Source Economic Development, an ew approach to economic devel-opment, can help Northeast Ohio adjust to these new realities. Open Source Economic Development starts with the prem-ise that our economy exists as a set of networks embedded in other networks. The Open Source model provides practical

guidance to civic leaders on how to build these networks or clusters.Applying Open Source Economic DevelopmentFor the past eighteen months, the Center for Regional Economic Issues at Case has been deploying and rening theOpen Source model. We have uncovered important new clusters emerging in our region. These new opportunities includecreative digital media, preventive health care, biofuels, wind energy, advanced logistics, electric commuter vehicles, sus-tainable building design and green materials.


1 See Thomas Friedman, The World is Flat (2005).


5/27

The Case Center for Regional Economic IssuesThe Center for Regional Economic Issues (REI) is a think and do tank based at the Weatherhead School of Manage-ment at Case Western Reserve University. Founded in 1984, REI has established a national reputation for thought leader-ship in regional economic development.

We focus our activities in four areas:

Conducting advanced and applied research in regional economic development;

Designing analytic frameworks and practical tools for civic leaders and economic development practitioners;

Building collaborative networks to accelerate regional economic development; and

Conducting training and public education initiatives in regional economic development

Ed MorrisonEd Morrison authored this report. He is REI " s Executive Director. For over nineteen years, he has been conducting strat-egy projects with economic developers in the U.S. His work won the rst Arthur D. Little Award for excellence in economicdevelopment presented by the American Economic Development Council in 1985. Ed is the architect of the strategic eco-nomic development action plan that has transformed Oklahoma City " s regional economy. Ed also authored the 1998 re-port for the Commission on the Future of the South, chaired by former Kentucky governor, Martha Layne Collins. From1998 to 2003, Ed managed the community assessment program for the Kentucky Cabinet for Economic Development.This initiative improves development prospects throughout rural Kentucky.

Since 1998, Ed has taught economic development strategy at the Economic Development Institute at the University of

Oklahoma. Ed also travels to China frequently, where he has negotiated and guided a joint venture in Xi"

an. Prior to start-ing his economic development work, Ed worked for Telesis, a corporate strategy consulting rm. In this position, he servedon consulting teams for clients such as Ford Motor Company, Volvo, and General Electric. He conducted manufacturingcost studies in the U.S., Japan, Mexico, Canada, Italy, Sweden, and France.

Ed started his career in Washington, D.C., where he has served as a legislative assistant to Ohio Congressman CharlesA. Vanik, staff attorney with Robert Reich in the Ofce of Policy Planning at the Federal Trade Commission, and staffcounsel for the US Senate Democratic Policy Committee. He holds a BA degree from Yale University and MBA and JDdegrees from the University of Virginia. You can contact him at [email protected]



6/27

Part 1: What " s Changed

We should start with a clear understand-ing of how communities in Ohio buildwealth. A community or region prosperswhen businesses trade outside the re-gion and import income. These tradedbusinesses provide the engine power tomove an economy forward.

Income circulates within the economywith local businesses, such as restau-

rants, retail stores and most servicebusinesses. This framework outlines thethree basic strategies of economic de-velopment:

1. Increase good money: Increasewealth by strengthening businesses thattrade outside the region;

2. Circulate neutral money: Extend the

circulation of income in the region bystrengthening local businesses; and

3. Reduce the ow of bad money: Cutdown the income owing out of the re-gion through purchases and braindrain. 2


2 David Morganthaler provided REI with the terminology of good, neutral and bad money.

1

Rest of theWorld

TradedBusinesses

Local Businesses

Purchases and paychecks

Y o u r e c o n o m y

Anotherregion

Brain Drainand

Purchases

Sales

3

2

1

2

3

Import income into the region withtraded businesses

Circulate the income in the regionwith local businesses and workers

Reduce the leakage by reducingoutside purchases and workers

In any economy, traded businesses generate wealth based on relativelyhigh levels of productivity. In any economy a relatively small portion ofthe workforce -- about 30% -- is engaged in traded activities. This esti- mate comes from Michael Porter at the Harvard Business School.


7/27

Building wealth in the industrial era

In the past, Ohio built its wealth withlarge, vertically integrated enterprises.The steel industry is a good case inpoint. Rubber is another.

Unfortunately, like just about everythingelse, circumstances change. Goodtimes do not last forever.

Technology analysts call these changesthe S Curve. Civic leaders need to pay

attention to these S curves, and preparetoday for what " s next.


Time

Prosperity

S-Curves deliver one message: Nothinglasts forever.

Hulett ore unloaders were unique to the Great Lakes.They unloaded ore for the expanding steel industry inthe region.


8/27

The rst wave of globalization

The rst wave of globalization hit Ohio " sshores in the 1970

"

s. Collapsing costcurves undermined the competitive posi-tion of some of our major industries.

These collapsing costs accelerated theS Curves underlying our key Ohio in-dustries: steel, rubber, autos, metalparts.

We are continuing to see the impacts of

low cost competition. Manufacturing isthe most visible sector facing thesepressures.


1930 1940 1950 1960 1970 1980 1990 20000

20

40

60

80

100

120Cost index

Sea Freight

Air Transport

Telephone

Satellite

Source: World Bank

Collapsing cost curves led to the rstwave of globalization to hit Ohio.

We will see additional plantclosings as relentless cost

pressures continue toundercut older

indus trial enterprises.


9/27

Impacts on Northeast OhioWe can see the impact of S-Curves, inCleveland and Cuyahoga County. Thecontraction of the steel industry led to a

loss of population and wealth.The civic leadership in Northeast Ohiodid not see the impact of S Curves com-ing. They did not anticipate the changesin underlying technology of economicgrowth.

So, for example, Northeast Ohio missedout on the major developments in elec-tronics that fueled economic growth incomputers and telecommunications.


1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 20000

20

40

60

80

100

120

140

160

Millions of tons

Steel production

The decline of U.S. steel production in the 1970;s led directlyto the loss of population in Cuyahoga County and Cleveland.

Source: American Iron and Steel Institute

1810182018301840 185018601870 1880189019001910 1920193019401950 1960197019801990 20000

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Population

Cleveland

Cuyahoga County

Source: U.S Census


10/27

The second wave of globalization

No one anticipated the second wave ofglobalization triggered by the Internet.

Developed beginning in the 1960 " s as adefense project, the Internet moved intopopular commercial application with theNetscape " s invention of the web browserin 1994.

The explosion of Internet use hasopened new ways of collaborating and

building competitive advantage.The Internet is our rst interactive massmedium. We are just starting to under-stand the implications of this new tech-nology on our businesses, our organiza-tions, our communities, and ourselves.


1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20030

20

40

60

80

100

120

140

160

180

0

20

40

60

80

100

120

140

160

180

Internet host count, in millions

Source: Internet Systems Consortium

Netscape invented the web browser in 1994, and this technology accelerated the popular use of the Internet.


11/27

The perfect storm of globalization

The continuing collapse of costs and theexplosion of the Internet have created aperfect storm of globalization. There isno place to hide from these global reali-ties.

Throughout Ohio we are losing manu-facturing jobs, as companies continue toshift their production overseas.

Global competition is relentless. In the

years ahead, we can expect even morepressure, as low wage countries likeChina and India engage in increasinglysophisticated businesses.



12/27

From command and control to collaboration

The growth of the Internet is havingother impacts. Our organizations arechanging. Information is now more openand available. Older organizationalforms are breaking down.

Companies are coming to understandthat command and control must bebalanced with collaboration and team-work.


Command and control organizationsare giving way to organizations basedon collaboration and teamwork...Thereason: information now ows freely.

New models of innovation are emerging based on collaboration


13/27

The changing dynamics of economic development

The practice of economic developmentis changing as well. More and morecommunity leaders recognize that theyhave to collaborate regionally to com-pete globally.

This approach makes sense. Economicdevelopment takes place in the civicspace outside the four walls of any oneorganization.

No command and control structureswork here. Instead, communities needto build networks of collaboration: clus-ters of economic activity


The Civic Space

A lot of organization are involved in economic development

in our communities. They come together in the civicspace.

The Civic Space

The key to successful economic developmenthas become building networks in the civicspace. Some economists call these clusters.They are networks in which the participants engage in complex learning.


14/27

The competitive advantage of networks

Communities, regions and states with

thick networks of collaboration will havea competitive advantage. They will learnfaster. They will spot opportunitiesfaster. And they will be able to mobilizeresources faster.

In today " s world, where wealth is gener-ated through knowledge and networks,communities need to build connectionsand networks in order to compete.

This relationship is often expressed asMetcalfe " s Law, named after Robert M.Metcalfe, inventor of Ethernet (an origi-nal computer networking technology).

According to Metcalfe: "The power ofthe network increases exponentially bythe number of computers connected toit. Therefore, every computer added to

the network both uses it as a resourcewhile adding resources in a spiral of in-creasing value and choice." 3


3 See http://www.infonortics.com/vc/1999/tidwell/tsld007.htm

0

15

30

45

60

75

1 2 3 4 5 6 7 8 9 10

Number of connections

Number of fax machines

We can illustrate the value of networks with this simple example. What is

the value of one fax machine? Answer: Zero. But as the number of faxmachines increases the number of connections increases dramatically.Why? Because a lot more connections are possible.


15/27

The increasing importance of brainpower

Globalization is having another impact:

It is increasing the importance of brain-power. We see this shift in the growingconnection between education andearnings.

In today " s global world, a high schooldiploma is no longer a ticket to a stablefuture. Much worse, dropping out ofschool amounts to a lifetime economicdisability.

Brainpower has become our most im-portant competitive asset.


$0

$150

$300

$450

$600

1979 2002

Average weekly earnings, 2002$

In an era of global competition, the earnings prospects for

high school dropouts is deteriorating dramatically.

Source: U.S Bureau of Labor Statistics

$0

$375

$750

$1,125

$1,500

1979 2002

Meanwhile, the earnings prospects forcollege graduates have improvedsteadily.

M e n

W o m e n

M e n

W o m e n


16/27

Part 2: Open Source Economic Development

We need a new way to think about re-gional economic development. OpenSource Economic Development pro-vides that framework.

Rather than seeing our economy as acollection of vertically integrated com-panies, Open Source Economic Devel-opment sees our economy as networksembedded in other networks.

The key comes in building these net-works -- clusters of relationships thatlead to productive, innovative invest-ments.


Case REI is working with Valdis Krebs and InFlowsoftware to apply social network analysis to clusters.See http://www.orgnet.com


17/27

Components of Open Source Economic Development


posits that any competitive regionaleconomy needs exible, productivenetworks to:

1. Build brainpower;

2. Convert brainpower to wealththrough innovation and entrepre-neurship;

3. Create quality, connected placesto attract, nurture and retain people;

4. Promote the region with effectivebranding and marketing; and

5. Developing civic habits of pur-poseful dialogue.


Brainpower

Quality,Connected Places

InnovationNetworks

PurposefulDialogue

Branding


18/27

Building brainpower

Ina global economy, brainpower matters.

Any region"

s competitive advantagestarts with developing brainpower.

Advances in brain science teach us that braindevelopment continues throughout our life-time, but the years 0 to 5 are particularly im-portant. In other words, workforce develop-ment begins with a pregnant mother.

Case REI has been promoting the con-

nection between early child care and ourregion " s long term prosperity.

Brainpower raises other important is-sues. As we developstrong clusters of innova-tive businesses, we mustcontinuously align oureducation and trainingprograms to these new

opportunities.Now, our regional educa-tion and training pro-grams are only weaklyconnected to the market.


Prominent business groups, led by the Committee for Eco- nomic Development, are now calling for more investment inearly childhood education.

Brainpower

Brainpower

Quality,Connected

Places

InnovationNetworks

PurposefulDialogue

Branding


19/27

Converting brainpower intowealth

Innovation and entrepreneurship networksconvert brainpower into wealth. Michael Porterof the Harvard Business School has calledthese networks, clusters.

Clusters represent thick networks of relation-ships -- open innovation systems -- that leadto wealth through innovation.


Businesses that trade outside a region create wealth. NortheastOhio has a strong base of traded clusters on which to build. Inaddition to established clusters, we have emerging opportunities in areas such as creative digital media, preventive healthcare, advanced logistics, and new energy sources.

Innovation

Networks

Brainpower

Quality,Connected

Places

InnovationNetworks

PurposefulDialogue

Branding


20/27

Building quality connectedplaces

Smart people and knowledge-based busi-nesses can locate anywhere. They will tend tocluster in regions that build quality, connectedplaces..

Richard Florida " s theories of a Creative Classare largely focused on creating spaces that at-tract young knowledge workers.

Our concept of quality, connected places goesdeeper. We are embracing sustainable devel-opment as a guide to our future.

Sustainable development focuses on ensuringa better quality of life for everyone, now and forgenerations to come. A widely used interna-tional denition is development which meetsthe needs of the present without compromisingthe ability of future generations to meet theirown needs. 4

Our denition extends to the concept of con-nectivity. In an economy in which wealth comesfrom knowledge, connectivity becomes criticalto our prosperity.


4 This denition comes from the Bruntland Report, Our Common Future. The World Commission on Environment and Developmentissued this report in 1987. It is often called the Bruntland report after the chairperson of the commission, the then Prime Minister ofNorway, Mrs Gro Harlem Bruntland.

Quality, Connected

Places

Brainpower

Quality,Connected

Places

InnovationNetworks

Purposeful

Dialogue

Branding


21/27

Branding our region: Understanding the experience

Branding is perhaps the most misunderstood

dimension of regional economic develop-ment.

Branding focuses on the deep stories thatdene our region, the common threads thathold us together. Our shared story embracesour past as a way to see our future. We un-cover and develop our brand by focusing onthe experiences we share in our region.

More important, focusing on experiencesopens new doors to wealth creation. .


In their book The Experience Economy, Joseph Pine II and James Gilmoreoffer an insightful framework for thinking about the changing structure of hu- man aspirations, economic demands and business opportunities. Gilmore isbased in Cleveland and consults with Case REI.

Brainpower

Quality,Connected

Places

InnovationNetworks

PurposefulDialogue

Branding

Branding


22/27

Building civic habits of Purposeful Dialogue

In many ways, the last component of Open

Source Economic Development is the mostcritical. Because economic developmenthappens in the civic space, we cannotcommand and control our way to prosperity.

We must seek alignment through conversa-tion. Fortunately, we have some guidelines tofollow. Appreciative Inquiry (AI), developed byDavid Cooperrider here in Northeast Ohio,provides a framework for building alignment

through pragmatic dialogue.Other approaches can contribute. Delibera-tive Discussion provides an approach for ex-ploring particular issues in detail. OpenSpace guides a group through a process touncover the opportunities within it.

All of these approaches share common ele-ment: they balance open participation with

leadership direction.


PragmaticDialogue

Brainpower

Quality,Connected

Places

InnovationNetworks

PurposefulDialogue

Branding


23/27

Building clusters with Open Source Economic Development


provides the roadmap to build our inno-vation economy in Northeast Ohio.

Building knowledge-based clusters re-quires managing a continuous series ofconversations and action plans: strate-gic doing.

One important insight from AppreciativeInquiry is that people move in the direc-

tion of their conversations. Open SourceEconomic Development guides the typeof conversations we need to have in theregion in order to build wealth.


Stage 4Stage 3Stage 2Stage 1

Anchor

Supporting networksbegin to form withpublic and private

support

Clusters typicallystart from a

seed investmentin a technology

platform

Networks continueto form

by attractingrms and brainpower

Cluster continues toevolve with split-offs

and outsideinvestment

20 to 30 years

Clusters take time to evolve. They emerge from a continuous process of complex learning and the fast alignment ofresources to pursue these opportunities. This processtakes place through conversation around the right ques- tions.

Brainpower

InnovativeBusinesses

QualityPlaces

Cluster Growth Engine

Quality, Connected Places:Infrastructure and Amenities

What infrastructure is requiredto grow the cluster?

How can we make thisdevelopment sustainable?

What initiatives do we need toimprove the along criticaldimensions of sustainabilityand connectivity?

Brainpower: Work skillsWhat numbers of people with what skills are needed in thecluster and when?

Are there immediate needs that need to be m et with recruitment?

What training is needed for existing people in the cluster?

What new courses or changes to existing courses are needed tomeet business needs?

Who are emerging business leaders we need to attract?

Innovative Businesses:Cluster Development

What management andnancial support is needed togrow businesses in thecluster?

What university-businesschannels need to beestablished or developed?

What outside businesses canserve to anchor the cluster?

PurposefulDialogue

Dialogue:Collaborative Partnerships

What partnerships are needed tobridge gaps?

How can these partnerships bemanaged and nanced?

Branding

What's our story?

Branding


24/27

Our Universities Collaborative

The global economy is hitting Ohio hard.

In the years ahead, the pressure will notrelent. We have a choice. We can sitback and continue to watch as bigchunks of our old industrial structurefalls to the relentless pressures of globalcompetition. Or, we can reinvent our-selves. We can call on our deep tradi-tions of innovation and creativity andbuild competitive, new business oppor-tunities.

Redening our future economy beginswith new thinking about collaboration.Economic change is sweeping theworld. New technologies develop con-stantly, and new markets are opening.New competitors emerge alongside re-markable new opportunities.

One common theme ties these changes

together. Our future depends on howwell we develop and deploy our brain-power. Our colleges and universities arethe foundation of the infrastructure thatwe need to compete globally.


Start-up rms

Ventureinvestor andentrepreneur

networks

Colleges andUniversities

Skilled talent pool

Technology clusters

Provides ideas,incubatorsand smart people

Provides capitaland expertise

Recruitssmart people

Recruits andtrains smart people

Adds new rmsto technology clusters

ProvidesR&D partners

Recruits andsuppliessmart people

Creates wealthto expandinvestment

Provides trainingsupport to clusters

Source: This drawing is based on a systems diagram developed at Carnegie MellonUniversity.


25/27

Colleges and universities as civic spaces

In a network economy, colleges and universities provide the civic spaces that enable people to

come together and dene new collaborations.For example, a range of opportunities in Northeast Ohio. have emerged from discussions atREI.Tuesday. Each Tuesday from 4PM to 6PM, REI hosts a discussion on some aspect of theeconomic transformation now underway in our region. REI.Tuesday is an example of how toapply Open Source Economic Development to identify the opportunities for innovation in ourregion.

Here are some of the initiatives that are now underway:

! Real NEO, an open source community of economic development initiatives(http://www.realneo.us );

! The New Energy Roundtable to explore our energy future in Northeast Ohio;

! Ramtech, an initiative to establish an collaboration among small component manufac-turers to accelerate automation and provide Just in Time training;

! TransTech, an advanced logistics and transportation cluster. TransTech is working onthe Genesis project a pilot project in electric commuter vehicles and a bio-diesel distri-bution company, the rst in Northeast Ohio;

! Green City, Blue Lake, a cluster of sustainability organizations throughout the region;

! Center for Health and Disease Management, an initiative to support an emerging clusterin preventive health care;

! An emerging Creative Industries cluster that is focusing on creative digital media and anew technology transfer center at the Cleveland Institute of Art;



26/27

! A new collaboration on Teleworking. The European Union and cities like Tampa haveembraced teleworking as a means to reduce trafc congestion and improve the produc-tivity and exibility of organizations.

! East Cleveland 2010, a series of initiatives to build a new foundation for the economy ofEast Cleveland;

Get linked

If you are interested in learning more about Open Source Economic Devel-opment, contact Ed Morrison at [email protected]

If you are interested in learning more about the Universities Collaborative,contact Steve Minter at [email protected]

If you want to learn more about REI.Tuesday, contact Betsey Merkel [email protected]

If you want to learn more about REI, visit our web site athttp://www.rei.case.edu or contact [email protected]

If you are interested in learning more about Appreciative Inquiry visit the website of the Case Center for Business as an Agent of World Benethttp://worldbenet.case.edu /

If you are interested in RealNEO visit RealNEO at http://www.realneo.us orcontact Norm Roulet at [email protected]

If you want to learn more about social network analysis, visithttp://www.orgnet.com or contact Valdis Krebs at [email protected]



27/27

If you want to learn more about Entrepreneurs for Sustainability, visit theirweb site at http://www.e4sustainability.org or contact Holly Harlan [email protected]

If you want to know more about the Green City Blue Lake network, contactDavid Beach at [email protected]

If you are interested in learning more about Ramtech, the collaboration ofsmall component manufacturers, contact Maybeth Mathews [email protected]

If you are interested in learning more about TransTech, the cluster of ad-vanced logistics and transportation initiatives, contact Herb Crowther [email protected]

If you are interested in creative digital media and the initiatives of the Cleve-land Institute of Art, contact Jurgen Faust at [email protected]

If you are interested in East Cleveland 2010, contact Alfred Miller [email protected]

If you are interested in the teleworking initiative, contact Vic Voinovich [email protected]

If you are interested in Open Space technology or the emerging network of

facilitators in Northeast Ohio, contact Jack Ricchuitto at [email protected]

If you are interested in Deliberative Discussion contact Kim Sebaly at KentState at [email protected]

If you are interested in the emerging network of regional leadership groups,contact Suzanne Fleming at Youngstown State at [email protected]


Date post:	03-Jun-2018
Category:	Documents
Upload:	institute-for-open-economic-networks-i-open
View:	223 times
Download:	0 times

REI Booklet Print v1.2 2

Documents