Ending Economic Development Turf Wars?

"We have met the enemy and he is us." That old line from the Pogo cartoon can certainly apply to us in the economic development profession. I am constantly amazed at the huge number of organizations that claim to "do economic development." In some sense, that’s a testament to our entrepreneurial drive. But, it also creates great challenges as money is frittered away on organizations that can’t reach scale and in battles over turf.

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Many thanks to Eric Pages of EntreWorks Insights for passing this excellent article along.

"Welcome to the latest edition of EntreWorks Insights, a new quarterly newsletter that will report on business trends, policy developments, and other issues impacting the business of economic development. You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks or the National Commission on Entrepreneurship, where I used to serve as Policy Director. If you wish to subscribe or be removed from this list, please send an email to [email protected]. If you’re interested in the newsletter, please read on. Please feel free to share with friends, family, colleagues, and other loved ones. Comments and constructive criticism (and praise) are also welcome. Thanks for your interest.

Erik R. Pages

President

EntreWorks Consulting

http://www.entreworks.net "

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Many regions struggle with this challenge, but fixing it is easier said than done. In Kansas City, more than 100 organizations have collaborated to create KCSourceLink (http://www.kcsourcelink.com), an excellent on-line source for local business development resources and information. In some ways, KCSourceLink is not much different from a typical "one-stop shop" or web-based information clearinghouse. But, KCSourceLink is more than a static web page. It also provides referrals (with follow-ups) to local service providers so that the region’s entrepreneurs can get face-to-face help if they so desire.

The Entrepreneurial League System (ELS) is another model that seeks to reduce fragmentation among service providers. This system was developed by Gregg Lichtenstein, a private consultant, and Tom Lyons of the University of Louisville. It seeks to create a hierarchy of service providers who focus on different needs/levels of business assistance, from the start-up micro-entrepreneur to the high-growth venture capital-ready firm. This approach is being piloted in several locations (Asheville, NC; Huntington, WV). To learn more, visit http://www.ruraleship.org/content/pdf/Entrepreneurial_League_System.pdf

While the Kansas City and ELS examples are interesting, the Cleveland Ohio area may offer the most interesting model for consolidating and streamlining fragmented regional development efforts. The Cleveland approach is interesting because it recognizes one key reality. Some fragmentation is due to bureaucratic competition between economic development organizations, but the lack of collaboration among funders is a more important cause. So many economic development organizations exist because there are so many independent and uncoordinated funding streams. The federal government’s economic development programs are instructive. Overall, more than 400 federal agencies "do" economic development and each agency has its own local networks of economic development districts, community development corporations, or small business centers. Throw in thousands of state, local, and privately-funded programs and the result is a mish mash of well-intentioned organizations doing important work without the funds and infrastructure needed to succeed.

A recent survey from Wisconsin is instructive (available here: http://www.uwex.edu/ces/cced/documents/econdev_survey_03.pdf). Nearly 900 organizations support local economic development in Wisconsin; their average budget is $235,000 with an average staff size of 2.8. Extrapolating from this data, the researchers project that local spending (excluding state and federal resources) on economic development in Wisconsin could exceed $200 million. If used effectively in a collaborative manner, $200 million could support a lot of economic development in the state.

Cleveland’s leaders are seeking to address this problem through a new coalition called the Fund for our Economic Future (http://www.futurefundneo.org). The Fund was initiated by local philanthropists (led by the Cleveland Foundation) and it now includes 56 partners. Its mission is to support a common regional development agenda that will transform Cleveland’s economy. It is pursuing many interesting strategies around entrepreneurship and cluster development, but its real innovation is the organization itself. In this case, the funders have created a single pool of funds (now at $26 million) to invest in a small group of organizations.

Northeast Ohio is a very fragmented place. Cuyahoga County alone has 57 cities (including Cleveland) within it. Thirty-one major economic development organizations serve the region. Instead of providing grants to all relevant players, the new Fund has opted to invest in four: BioEnterprise, JumpStart, NorTech, and Team NEO. Each of these grantees will receive roughly $2 million, a funding level that should allow them to develop sufficient scale to effectively serve the region.

It’s too soon to determine whether this experiment is going to work, but the Fund for our Economic Future team deserves credit for taking a direct approach to dealing with some of the primary flaws in our current economic development system: fragmentation and turf wars. What’s the bottom line from this experience? Excellent economic development outcomes result when excellent economic development organizations focus on the mission. And, excellence will not occur in an environment where 1-2 person operations struggle simply to make ends meet. If we are to succeed, we must "scale up" so that we can effectively tackle pressing development challenges. Preferably, we would scale up thanks to an influx of new investment from private and public sources. If this source is not available, consolidation, streamlining, and the elimination of ineffective organizations have to be considered. As Cleveland’s leaders are finding, this is tough medicine. But, it is needed medicine if we are truly serious about promoting economic development. As the old saying goes, physician, heal thyself.

FORTHCOMING: This article discusses several regional strategies for dealing with "turf wars." In our next issue, we’ll look at some other interesting approaches coming out of the philanthropic community.