Every few months, I get the opportunity to review what I learned by preparing for classes at the Economic Development Institute. For a number of years, I have taught the Advanced Strategy Lab. This class is a four-hour session in which I introduce students (economic development professionals from around the country) to some of the newer thinking in economic development strategy. We spent some of the time working in small groups, as I provide workshop exercises that simulate the strategy sessions in which I frequently participate.
The Strategy Lab serves another important purpose. Within it, I try out new concepts and tools to see if the students find these approaches useful. The class has become a very good opportunity for me to evaluate new approaches to economic development strategy.
Conducting strategy for economic development is a difficult business. Unlike the corporate world, the primary actors in economic development strategy are only loosely connected. There are no lines of authority. No one can tell anyone else what to do. Half the time, when we start, we don't even know all the "stakeholders" in a process.
At the same time, within this civic space, we are charged with tackling some of the most daunting challenges. These are not challenges our own making, but challenges created by a rapidly evolving global economy. It is difficult to figure out what is taking place and how we can respond. We are all struggling with how we can create some agility and foresight to anticipate the consequences of some very fundamental economic and demographic shifts.
Borrowing corporate strategy models
Over the years, I've become convinced that the standard approaches of strategic planning do not work very well in economic development. These models, developed some 30 or 40 years ago, were originally designed to deal with the challenges of managing growth in multidivisional corporations. Beginning about 20 years ago, economic development professionals (more accurately the consultants serving these professionals) began transporting these models to economic development. The basic notion was fairly straightforward: treat a local or regional economy as a multi-divisional corporation with a portfolio of businesses. Use some straightforward analytics and identify your growth sectors. Focus most of your attention and resources there. Sounds simple, but as many of us found, there's a big gap between understanding regional dynamics and doing something about them.
The emergence of cluster models
By nearly 1990s, Michael Porter at the Harvard Business School introduced the concept of clusters, as an extension of Porter's corporate strategy model. As Porter began to develop his concepts on regional economies, it was clear he was on to something: companies do indeed tend to cluster. The insight is not new,though. Concepts of industrial districts have been hanging around traditional economics for a long time.
Porter brought some fresh perspective to an old insight by emphasizing the dynamic nature of clusters. He emphasized that non-business organizations -- government, education, and nonprofit intermediaries -- can play a vital role in aligning resources for competitive firms and regions. Finally, he directed our attention to the ascendency of regional economies. With the growth of global integration, Porter argues correctly, I think, that we need to focus our strategic thinking on regions. To meet the challenges set by the world, we need the resources of a region to compete.
The biggest challenge in applying cluster theory, however, comes in drawing practical implications. We have learned how to identify clusters using location quotients, and new mapping technologies have enabled us to see clusters more clearly. Yet, how do you develop this strategy? Porter's policy recommendations -- both for state policy and for local and regional economic development organizations -- is frustratingly vague.
Part of the problem lies in the fact that Porter's perspective is deeply grounded in the private sector. That perspective limits his view. Like it or not, economic development takes place in a civic space outside the four walls of the firm. Or, if you like, economic development takes place on the boundaries of markets where public returns appear strong, but private returns are too weak to draw enough investment. To capitalize on these public returns, we need collaborations or partnerships -- some publicly-led, some privately-led -- to make these investments.
Why economic development is different
Economic development forms a political economy (in the meaning of that term as it was used in the late 19th century). In short, corporate models do not translate all that well into the economic development arena. For this reason, I suspect, many economic development strategy reports prepared by corporate strategy consultants are relatively weak on implementation. Getting things done in the civic space is a tricky business, and few corporate strategy consultants have those skills. (I reach this conclusion as a one-time corporate strategy consultant.)
Over the past number of years, I've been developing an alternative approach to economic development strategy which I call "strategic doing". It's clear that regional economies are open systems, in which many different outcomes are possible. There is no one optimum point, no final outcome. Instead of trying to identify one point in the future, the real challenges is building civic disciplines that simulate productive patterns of collaborative investment. In other words, we need to find ways to strengthen the ties of collaboration, to innovate in an open system. We need partnerships -- hundreds of them -- translating fresh ideas into something valuable. (By the way, "translating fresh ideas into something valuable" is a good working definition of innovation).
Moving from strategic planning to strategic doing
Strategic doing is designed to build these partnership disciplines. It encourages disparate groups of people to come together and quickly decide on a handful of strategic priorities. It pushes people to focus and translate these priorities into meaningful strategic outcomes that we can measure. Next, strategic doing encourages people to align their resources, to "link and leverage" their assets to achieve these outcomes. Finally, strategic doing focuses on using metrics, not so much to enforce accountability as to encourage learning about "what works".
Can we adopt these disciplines in the contexts of an open system in which transparency -- sharing information and insights -- is the norm? Can we adopt these disciplines in the short windows of time that we spend together in face-to-face meetings? Can we sustain these disciplines over the time needed to implement, learn and adjust? And can we focus these disciplines on really complex challenges like reducing high school dropouts or increasing the number of young people going to college? Can these disciplines of strategic doing transcend organizational boundaries so that we can routinely follow habits that build trust and collaboration? Can we teach these disciplines of strategic doing in order to bring them to scale across many regions simultaneously?
These are all questions on which I'm working right now.