Changing energy markets are having a big impact on communities around the country. Some regions, like South Dakota, have been booming (at least until recently) thanks to new shale energy resources. But, other regions are being challenged in new ways. Regions long dependent on coal, in Appalachia and elsewhere, are facing serious transition challenges as they seek to diversify their local economies. A new US Economic Development Administration-backed effort, led by the National Association of Counties (NACo) and the National Association of Development Organizations (NADO) will work with coal-impacted communities seeking to identify new economic engines and innovation opportunities. The project is sponsoring an Innovation Challenge competition that will provide technical support and other assistance to communities around the US. The Challenge competition is just underway, and project organizers are encouraging communities to consider participating in this important work. If you are interested in learning more about the Innovation Challenge, you should join a webinar being held tomorrow, January 22, 2015 from 2-3PM Eastern Time. You can sign up here and learn more about the effort here. (NOTE: EntreWorks Consulting will be providing consulting support for this project, and we will be offering regular updates on this work in the coming months).
For the past year, I’ve had the pleasure (with colleagues from Georgetown University and the Center for Rural Entrepreneurship) of supporting the American Farm Bureau’s Rural Entrepreneurship Challenge. This exciting initiative had a lot of cool aspects, but the most fun for me came from the Rural Entrepreneurship Challenge, a national competition for the best rural entrepreneurs. This was a very hotly-contested competition, and we had applications from around the U.S. and from every kind of business you can imagine.
On Monday, the four finalists faced off at the Farm Bureau’s national convention in San Diego, and, just like Ohio State’s football team, a national winner rose to the top. Lone Tree, Iowa’s ScoutPro, a maker of software for crop maintenance, took the top spot. All of the competitors were impressive, but ScoutPro was a deserving winner. They have developed an excellent technology platform already in use in Iowa and elsewhere, and had strong projections for future growth. They are just another example of the many exciting companies being created and prospering in rural America.
There are many things I wish were true. I wish Santa was for real and I would love to see Bigfoot in the wild. When it comes to public policy, my most fervent wish is the long-touted US manufacturing renaissance is for real. There’s lots of great anecdotal evidence for this claim, but it’s not a slam dunk. But, I really want it to be true as this is one of the best means we have to create better jobs at home and help long distressed communities seeking a new economic lifeline.
Sadly, two new reports raise more questions about the present and future of US manufacturing. A.T. Kearney’s Reshoring Index, released last month, finds that offshoring to overseas manufacturers is still outpacing reshoring back to the US. Meanwhile, the pace of reshoring—at least as tracked by AT Kearney– appears to be slowing. Similarly, a new Information Technology and Innovation Foundation report, The Myth of America’s Manufacturing Renaissance, is similarly pessimistic. It contends that many of the often cited trends that foster reshoring, such as lower energy costs at home, higher Chinese wages, and higher overseas transport costs, are not of sufficient scale to change the basic equation related to the location of manufacturing facilities. The authors conclude that the slight recent uptick in US manufacturing is a cyclical adjustment and not the harbinger of positive structural change.
These studies are not the last word, but they do suggest that we have more work to do. While the jury is still out on new directions for US manufacturing, that doesn’t mean we should simply throw up our hands in despair. Continued efforts to spur the revival are needed, and, in fact, are essential if we want this wish to come true.
The January 2015 edition of our e-newsletter, EntreWorks Insights, is now available. This issue examines how the changing world of work is affecting the commercial office market. In short, it’s creating a lot of challenges for the commercial real estate industry. But, at the same time, it might create exciting opportunities for communities that respond effectively to the workforce and workplace revolution. You can access the newsletter here and subscribe to future issues here.
A new study from the UK’s Institute for Public Policy Research examines the state of self-employment in Europe and finds that, as in the US, self-employment or freelance work is the fastest growing segment of the workforce. Across Europe, 14% of all workers are now self-employed, and interest in self-employment is growing. In fact, 45% of survey respondents expressed preference for self-employment over a traditional “real job,” and a large share of the currently self-employed express strong job satisfaction.
The challenges facing Europe’s version of the 1099 economy as similar to those found in the US. A fundamental trade-off exists: swap flexibility and options for steady pay and security. Independent work can be fulfilling and exciting, but it can create lower pay and tougher working conditions. For most Europeans, the trade-off may not be as stark as we find here at home. Thanks to more solid social safety net programs, many of the concerns faced by America’s self-employed—how to pay for health care, retirement, and education—are less pronounced. On the flip side, many European nations are actively encouraging more start-ups and seeking more flexible and dynamic economies. So, Europeans may benefit from an even greater upside of a strong freelance economy. In the end, the growth of Europe’s self-employed workforce offers further evidence that these trends are not unique to the US, but are about an ongoing transformation in the world of work.
What do Washio, HomeJoy, Mechanical Turk, and SpoonRocket have in common? They are all emerging players in the growing on-demand economy. Like their better known compatriots Uber and AirBnB, these firms all provide on-demand freelance services in a host of areas. SpoonRocket delivers meals, Mechanical Turk supports data tasks, Washio provides laundry services, and HomeJoy provides housecleaning services. All of these firms are seeking to establish lead positions in the fast-growing on-demand economy, and their success (or failure) will greatly affect the growing ranks of U.S. freelancers and independent workers (the 1099 Economy).
As an excellent new issue summary in The Economist notes, these developments are sparking a debate on the future of work—a discussion that will likely gets lots of attention in 2015. The battlelines are pretty clear. The on-demand economy can be a great thing. It provides needed services at lower cost, and provides employment opportunities for workers who prefer a flexible schedule and opportunities to pursue other interests as well. The deal is less sweet for those seeking stability, good regular pay, career ladders, or enough income to raise a family. Creating multiple job and career opportunities is a good thing—as long as the freelance economy grows along with an economy that can generate other more stable “real jobs.” That’s the open question as many developed economies continue to struggle in creating good jobs for large shares of the workforce. As The Economist notes, the on-demand economy is a great thing for “outsiders and insurgents.” The debate in 2015—and beyond—will focus on how to make it work for everyone else as well.
On a visit to Manhattan last month, I spent a cold rainy rush hour fruitlessly trying to hail a cab. Like many, that experience led me to thank my lucky stars for my Uber account and to curse the old hidebound taxi industry. It seems like I’m not alone as one of the surprisingly hot policy topics today is the not sexy issue of occupational licensing. Does the practice of occupational licensing (for hairdressers, caterers, cab drivers and the like) represent an unfair barrier to entry for budding or new entrepreneurs?
Over the past few months, I’ve read a ton of studies on this issue of occupational licensing. The Kauffman Foundation has been especially prolific with its study “License to Grow” and related materials. The Progressive Policy Institute similarly refers to these rules as part of a new “guild mentality.” As these studies note, there has been a huge jump in the number of professions requiring licenses—up from 10 percent in the 1970s to 29 percent today. These licenses help ensure safety and quality, but can also block entry into the licensed fields. And, while we all might prefer a licensed heart surgeon, we may not demand a licensed florist, hair braider or travel agent. These barriers to entry help increase costs and block budding entrepreneurs, although more rigorous, long-term studies suggest that the impact of licensing differs greatly by occupation and over time.
While there is a big (and legitimate) push to drop occupational licensing, let’s also recognize that some professional certifications make sense. In fact, much of our push for technical education, career pathways development, and creation of middle skill jobs is about certifications—providing people with the certifications (and yes, the licenses) that serve as a “seal of approval” and help prepare them for better jobs and better careers. Moreover, the evidence that occupational licensing has wider community economic effects is somewhat limited. For example, a recent study from Kentucky looked at the linkages between occupational licensing and local start-up rates. The researchers found that the use of county occupational license taxes had no connection to county-level business start-up activity. Instead, the county’s “culture” of entrepreneurship—in government and more generally—had a much bigger effect.
As a business owner and a user of rush hour taxis, I dislike occupational licenses as much as anybody else. But, as in some many policy debates, it’s important that we look before we leap. In our rush to block the licensing of hair braiders or teeth whiteners, we need to be sure that we attack these rules with a scalpel, not a battle axe.
Whenever there is talk of innovative universities, it’s not too long before you hear mention of MIT, the Massachusetts Institute of Technology. MIT is one of the first universities to embrace innovation and entrepreneurship as a core mission, and, for the most part, they started in this business as a global leader and remain at or near the top today. But, even mighty MIT cannot sit on its laurels, and, for the past year, the university has been involved in a major rethinking of its innovation initiatives and policies.
The preliminary fruits of this work were released late last week in a report entitled, “The MIT Innovation Initiative: Sustaining and Extending a Legacy of Innovation.” The report frankly notes that much current MIT programming dates back to old models of innovation, i.e. the proverbial vision of the scientist toiling alone in the lab. Today, innovation is “hybridized,” emanating from across multiple disciplines, requiring skills and talents in diverse areas, and the capacity to access to key physical, virtual, and computational resources.
The preliminary report offers a detailed review of current MIT programs and initiatives and proposes a host of university-led new directions. These include:
- A major expansion of infrastructure, with a focus on new scale-up facilities and funds and dedicated innovation spaces located around MIT’s campus.
- Creation of vibrant, small-scale innovation communities that are global in scope and move MIT’s innovation activities off campus and around the globe.
- Creation of a new Laboratory for Innovation Science and Policy to help foster new thinking and new directions in innovation policy.
This report is the first of series of efforts to rethink MIT’s innovation footprint. This effort should send a strong message throughout higher education circles: if MIT is rethinking how it does innovation, maybe you should consider the same!
The Five F’s of Innovation
I spend a lot of time on this blog touting the many start-ups and entrepreneurial innovators that are helping to drive our economy. But, more established firms—the middle market—also innovate. In fact, when these firms innovate, they can likely have more profound economic development impacts as their rapid growth creates more jobs, more capital investment, and more spin-offs than their newer start-up brethren. A new report from the National Center on the Middle Market, a research center on these growth companies, offers a useful typology of how these middle market firms innovate—what they call the Five F’s.
The Five F’s stand for First, Focused, Frequent, Finder, and Fat. Most of the categories are pretty straightforward. “First” firms are first to market with a new idea. “Focused” firms own a niche market, and “Frequent” firms live and die on their ability to design new products/services and predict the next thing in advance. Unfortunately, many middle market innovators employ the “fat” strategy, where profits from a lucrative market niche prevent managers from rethinking the business model or developing new markets. Blockbuster Video is classic example of this model. “Finders,” the clear favorites in this report, “create value by anticipating previously unarticulated needs.” Apple is a classic example of a finder, but many smaller and less-well known firms, such as Jen’s Ice Cream and Patagonia, also fit the bill.
While the “fat” strategy is not recommended, each of these business models can be sustained over time. But, they require a different mindset and approach. For example, “Frequents” must become masters of process so that they can do things quicker and better than the competition. This is why many of the world’s most successful food chains, like McDonald’s or Subway, can also boast that they have the leanest processes and procedures. In contract, “Firsts” need to be first to market and continue to out-innovate the competition or convert their technology into the market standard. Again, the secret is not necessarily to have the best business model, but to build practices and procedures that align with your “best” business model.
This month’s elections sent many strong messages, including some tough love for us community economic developers: Don’t expect much new public money focused on local economic development. This is just the continuation of a long-term trend, but it further reinforces the need to identify new ways to pay for our important work. Fortunately, lots of new ideas are emerging in areas like crowdfunding and various Buy-Local initiatives. The rise of community foundations as key economic development partners is another very exciting opportunity.
A new report from the Democracy Collaborative examines this somewhat new role for many community foundations. “A New Anchor Mission for New Century” profiles 30 community foundations that are doing innovative work in terms of supporting community economic development. This list includes foundations from across the nation, and profiles investments occurring in a diverse array of urban, suburban and rural locales. As the report notes, something different is happening in these communities—a new and sustained commitment to building community wealth. I have had the pleasure of working with and for several of the profiled foundations, and have seen firsthand how their investments have helped change their region’s economic trajectories. I would suspect that these foundation models and practices will soon become the norm as more community foundations become actively engaged in local economic development.
The report is a useful how-to guide for foundation leaders and for community leaders in general. If you don’t have a community foundation in your region, start one now!! If you have one but it is not investing in economic development, engage them and encourage them to read this report and see the positive impact that these new investments can spur.