All Others Bring Data

I’m a self-professed data geek and I love the saying, “In God We Trust. All Others Bring Data!” For most of our projects, we rely on US Government statistics like those from the Census Bureau, Dept of Labor and Bureau of Economic Analysis. We augment those data with structured interviews, a method borrowed from case study analysis to gain detailed and nuanced information. Often, we also use survey data – in a current project we are using a survey to gather data about alternative concepts – a way to get information directly from a targeted audience.

But not all data is created equal. There’s another great saying: “”There are three kinds of lies: lies, damned lies, and statistics.” I think it’s really important to view any data with a critical eye. For instance, I recently ran a report on venture capital investments in biotechnology companies in Maine. At first glance, it looked like amazing news – there was one year recently with more than $16 million invested! When I dug deeper, there was just one investment, for $16 million. That leads to a completely different finding.

Another example are all of these indexes and cross-state comparisons that dominate the Internet. We’re click happy for anything that says “My State” is First in Anything! Or the Top 10 Anything! You want to dig into these to find out how solid is the data they are based on, how do the authors define the category, and how are various components weighted. So, a recent Kauffman Foundation finding that Maine was #1 in the country in first-year survival rate for entrepreneurs sounds really good. Kauffman calculates this rate from data that originates from the ES202 forms that all firms submit quarterly, a very robust source. However, a look at Maine’s ranking on this measure over the past twenty years shows that the 2017 number of 88% is a blip, not a sustained measure (yet). So, best to take it with a grain of salt.

My overall advice: Run the numbers. But understand where they come from, what assumptions are being made, and how sensitive your decisions are to any one data point.

Are you ready to learn more about innovation and entrepreneurship-focused economic development? Get started with this complementary pdf.

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Innovation Isn’t Only for High-tech Businesses

In Maine, the legislature is currently debating slowing or eliminating an increase in the minimum wage enacted last year after a citizen initiative passed. Small businesses came to Augusta to argue that they couldn’t raise their prices, and so the increase in their labor costs was too high.

For small businesses who sell products based on price alone, it’s probably true that raising prices isn’t possible. But why don’t these businesses try to offer new products or services that aren’t commodities? Why don’t they try innovation as a strategy? It may be that many small businesses think innovation is only something that high-tech companies can do. Here are some examples, all small Maine companies, that prove them wrong:

Gelato Fiasco, a small business based in Brunswick, ME, wanted to enter the crowded ice cream business. But, instead of making ice cream like everyone else, they decided to make gelato, an Italian type of ice cream. By being different, they were able to gain a large following. Today, Gelato Fiasco’s Brunswick store is still crowded on summer evenings, but their product is also sold in grocery stores nationally.

Sea Bags, based on the waterfront in Portland, ME, makes tote bags. You’d think that tote bags are all the same. But Sea Bags decided to make theirs out of old sails. So, not only are they a sustainable business, using recycled materials, but their bags are very different – each one is unique, depending on the sail it was made from. By the way, they aren’t cheap! But, by being unique, Sea Bags has earned their price point. Sea Bags has grown to have 19 retail outlets and sells online as well as to corporate clients.

What’s more a commodity item than compost? Coast of Maine, based in Washington County, ME, made compost into a higher priced, designed product, by incorporating locally sourced materials such as shellfish (lobster & crab shells), salmon, wild blueberries, and cow manure. Additional local ingredients include: tree bark, worm castings, and seaweed. Coast of Maine distributes organic retail bagged goods to independent garden centers along the Northeast, Mid-Atlantic, and parts of the Mid-West.

Luke’s Lobsters is another innovation story. It seems like almost everyone in Maine sells lobster rolls. Luke and his brothers saw a unique opportunity – sell lobster rolls where people least expect them to be! His first food truck in the Lower East Side in Manhattan was wildly successful. Now, they are in multiple locations in Manhattan, Philadelphia, Washington, DC and soon, back home in Portland. To make this happen, they have had to be innovative about their supply chain and distribution network.

Innovation is new ideas, products, processes, business models that get implemented, that come to market. And, innovation can be defined, to quote Doug Hall, as something that is “meaningfully unique,” something that your customers would be willing to pay more for! When you uncover a need that potential customers have, and you meet that need in a way that is important to them, they will generally pay more for it! If something is really unique, versus being more of the same, you will generate new revenues, either from your normal customers or from new ones.

Are you interested in learning about innovation and entrepreneurship-focused economic development? Get started with this complementary pdf. https://pages.convertkit.com/d33a2124c1/13b87cf746

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Don’t Throw Tech Babies Out with Amazon

It’s not surprising that Amazon’s recent announcement that they are abandoning their plans to add 25,000 jobs in New York after a year-long and much anticipated competition for HQ2 has reopened the debate about economic development incentives. The move came soon after Virginia’s General Assembly had approved the incentives offered to Amazon for their new location in Northern Virginia. Critics in New York argued that the $3 billion package offered to Amazon, arguably the world’s highest-valued company owned by the richest man in the world, was detrimental to New York State taxpayers.

Those rejecting incentives are often against anything that benefits a large company, claiming that incentives such as offered in New York to any company that expands, regardless of need, unnecessarily subsidize already successful enterprises. And, it is true that best practice for economic development incentives includes a “but for” test – a company asking for incentives should prove that they would not be able to make the investment without the added financial assistance.

This need, often a very real challenge in a development deal, is behind project financing incentives such as Historic Preservation Tax Credits, New Market Tax Credits and Tax Increment Financing. These incentives go a long way to increasing investment in properties and communities that are in distress and have been proven empirically to have long-term local economic benefits.

The commentary around Amazon, however, has also tapped into to a rising anti-tech sentiment. Giants such as Amazon, Google, and Facebook have come under increasing scrutiny in recent years for their lack of diversity, for their ethics, for increasing housing costs in their communities and for killing jobs. The same folks who are terrified of autonomous cars, artificial intelligence and robots now don’t support tech at all.

This is short-sighted at best. Those of us in the innovation-based economic development community have been saying for decades that high-growth companies that start entrepreneurially can go on to become large employers, paying good wages, and supporting economic growth. Amazon, Google and Facebook, along with thousands of other tech companies that have emerged in the past 25 years, are the poster children for this economic development strategy, and have indeed created millions of jobs and billions in economic value.

And their success demonstrates another economic growth reality – that while each wave of technology displaces an old way of doing things and old jobs, many more new ones emerge. We don’t mourn the demise of buggy-whip manufacturing jobs while we welcome the advent of coding jobs or wind-turbine technician positions. What is also apparent is that many workers need training and assistance to blaze their own trail through this changing landscape, but that has also always been true.

So, if you don’t want Amazon in your community, so be it. But don’t extend that ban to the entrepreneurial and innovative tech (and non-tech) companies around you that can contribute a great deal to the vibrancy and quality of place where you live.

Are you ready to learn more about innovation and entrepreneurship-focused economic development? Get started with this complementary pdf. https://pages.convertkit.com/d33a2124c1/13b87cf746

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Are Rural Economies Terminal?

In December, the New York Times published an article about rural America that painted a bleak picture of declining populations, declining employment, increasing opioid addiction and death. The article suggested that the decline is inevitable and perhaps irreversible. “This is the inescapable reality of agglomeration, one of the most powerful forces shaping the American economy over the last three decades. Innovative companies choose to locate where other successful, innovative companies are,” said the authors.

To paraphrase Mark Twain, I think the rumors of the death of rural economies are greatly exaggerated. It is undoubtedly true that some small communities are vanishing, having to close their schools due to lack of enrollment, and eventually losing their post offices, local governments and local businesses. And, I have met folks from across the country who are proud that they have fought off any development efforts from anyone with outside capital.

On the other hand, all across this country, I’ve visited (and lived in) small towns from Maine to Indiana to Virginia to Colorado to New Mexico that are flourishing. Sometimes the ones that are flourishing are just miles away from those that aren’t, providing a natural experiment to determine what makes a difference and what works. There are quite a few commonalities among the towns that are doing well.

One that stands out is that these thriving places have high-speed internet service and reliable cell service. What seemed like a “nice to have” only twenty years ago is absolutely a baseline requirement these days to attract and retain citizens and businesses.

Another commonality is what some people call “place-making.” Most of these towns have invested in themselves. They spruced up downtowns with new sidewalks and street lights. They helped landlords repair and enhance storefront facades. They supported the real estate investors who come in and rehabilitated signature, historical buildings, like old textile mills in New England, tobacco warehouses in North Carolina, Victorian-era houses in Colorado mining towns and adobe buildings in New Mexico. Most of all, these towns celebrate their history, rather than tear it all down.

A third commonality is civic engagement. In many of these places, a major anchor entity –Colby College in Waterville, ME; Corning Glass in Corning, NY; the Naval Surface Warfare Center in Crane, IN – makes a commitment that goes beyond enlightened self-interest and starts to invest in the community and takes a leadership role, bringing others along with them. Often, these moments of civic engagement occur because of a crisis, or a generational change in leadership – a base closure; a weather-related disaster like a flood or tornado; a major plant closing. Smart leaders know the value of a good crisis – it’s a window of opportunity when resistance to change is lowest, and the willingness to try something new is highest.

But the most important thing that all of these thriving small towns have is an entrepreneurial spirit. There are entrepreneurs who are thriving in Maine’s small towns and in small towns across the country. In these places, you will meet intrepid entrepreneurs who have seen a need and created a product to meet it.

  • Joshua Davis and Bruno Tropeano, two recent college graduates, decided it was too bad that they couldn’t get gelato in Brunswick, ME. So, they opened their flagship store, Gelato Fiasco, on Maine Street in 2007. Today, their gelato is distributed nationwide.
  • Shannon Kinney, Founder of Dream Local Digital in Rockland, ME, came home after years of traveling and working with large corporate clients. She started an internet marketing agency in 2009 and had grown to nearly 40 employees, supporting clients all over the US and in Maine too.
  • Hannah Kubiak started Sea Bags on the Portland, ME waterfront fourteen years ago. When Beth Shissler learned about the company in 2006 and joined in, a dynamic entrepreneurial team was born. Sea Bags makes custom, fashionable tote bags and other accessories out of used sails. Now with eighteen company retail locations, a corporate sales arm and distribution in specialty stores nationwide, this company leads the way in sustainability, and is bringing back traditional textile work.

Visit most any small town with a thriving downtown, and you are highly likely to find a great coffee shop that’s locally owned, a co-working space or a maker’s space, restaurants serving food from India, Thailand, and Greece, as well as locally sourced, farm-to-table meals with micro-brewed beer. Talk to folks in these places and you will probably meet young, well-educated people, who have moved home with their families because it’s affordable, they can find interesting work, and be part of a community. No, these rural places aren’t dead, not by a long shot.

Are you ready to learn more about innovation and entrepreneurship-focused economic development? Get started with this complementary pdf.

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Nostalgia for the “Old Days” is Misplaced

A recent op-ed written by a local economic developer about the rural economy in Maine generated a lot of comments showing clearly the live wire he touched. Leaving aside the usual name-calling and insults that unfortunately inhabit most comment sections, several points of view emerged. One was the idea that if people don’t find opportunity where they live, they should move elsewhere. Another was that we should revive the traditional ways of making a living (i.e., forest products, fishing, agriculture) and embrace them. A third was that reliable cell service and high-speed internet offer people a way to make a living where they are. Perhaps all of these things are valid to some extent.

What many of the comment writers, and indeed, the author of the piece all have in common is nostalgia for the “old days” when the rural economy was strong, when young people didn’t leave to move to the “big city” and when you didn’t need a college education to make enough money to raise a family. A great narrative to be sure, but there’s a problem. These “old days” never existed. Whether you go back a generation to the 1950s or to the start of the last century, rural communities have always been characterized by hard work and marginal living. Young people have always heard the lure of anywhere but where they grew up. And more education has always been correlated with higher incomes.

Like it or not, shift happens. Economies change. Places change. People (sometimes) change. For rural economies today, this means that new technologies are changing and potentially reviving traditional ways of making a living. Whether this is the advent of aquaculture or bio-based products made from wood pulp, or the use of sensors and drones in agriculture, nothing stays the same for long. The race is won when people, and their leaders, see the opportunities ahead and seize them.

Are you ready to learn more about innovation and entrepreneurship-focused economic development? Get started with this complementary pdf. https://pages.convertkit.com/d33a2124c1/13b87cf746

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Erick James Innovation Award

Yesterday, at the 6th annual Innovation Engineering Conference, I was touched to be included in a group of IE pioneers to be awarded the Erick James Innovation Award. Erick was a truly amazing innovator who passed away a number of years ago after a horrific car accident. Erick was one of those guys who was absolutely fearless when it came to innovation. No idea was too crazy to say out loud. No test was too difficult to try. No obstacle was too much to overcome.

I remember being on a team with him at a learning session. The goal was to create new ideas for a guitar maker. We came up with the idea of a guitar that would change its sound based on the type of music you were playing. The wild part was the prototype that Erick constructed in about five minutes to demonstrate the idea. He cobbled together his iPad, some cardboard for the neck of the guitar, and programmed the iPad to play different genres of music. It got the idea across and the client loved it! Most of the rest of us (including me) would have been fearful of showing the idea that way. Erick was triumphant instead.

IE teaches that meaningfully unique ideas, the big ones, come from stimulus (new information), leveraged by diversity, and undeterred by fear. Erick embodied that ideal, and taught us all so much. We miss him terribly.

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Celebrating Success

Amazing! The Portland Press Herald, our local newspaper, actually had an editorial this week that said that innovation and entrepreneurship was the key to economic growth in Maine! Now this isn’t a radical statement at all. What’s amazing is to hear this nuanced statement from the media! The PPH was writing about a local company, Howe and Howe, this is being bought by a large conglomerate, Textron. Howe and Howe is a defense contractor that has developed several innovative projects, like a remote controlled tank, based on government-funded R&D. The company is 13 years old, and has grown organically to 50 employees, a success story by any standards.

Two things surprised me about the editorial. One, the paper didn’t call this a small business. Rather, they did distinguish between Main Street businesses and an innovation-based business like Howe and Howe. Second, they didn’t cry about this exit taking money out of Maine. Many local companies get acquired by large companies from “away;” (there aren’t very many large companies that aren’t from “away.”) And, when local entrepreneurs have their success validated and monetized, they and their workers have the opportunity to reinvest in the local economy, whether the company stays local or not. In most cases, the companies do stay local because the quality of Maine workers and the cost of doing business here are both very competitive.

All of this points to the great value of local success stories. They inspire local entrepreneurs, and also put a place on the map in the broader context. So congrats to Howe and Howe and the many other Maine entrepreneurs who have had exits this year.

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A Clear and Compelling Vision for Economic Growth

You can tell from the nearly constant attack ads on television during the evening news that we’re in the middle of at least two contentious campaigns this fall here in Maine: one for Governor and one for the 2nd Congressional District, where a Republican Congressman is trying to keep his seat. Both races are very close. However, in all the noise, one thing is startlingly missing: a clean and compelling vision for how to improve Maine’s economic prospects. This is because the choices continue to be framed as less taxes and regulation for business against more rights and benefits for workers.

I recently reread Rob Atkinson and Stephen Ezell’s 2012 book, Innovation Economics, which reminded me that the answer is something completely different from this false paradigm. There are only three ways to get an economy to grow: increase productivity, create new firms or add activities that create new value. You increase productivity by increasing the revenue of each employee: improve processes, add technology to increase output, or add new products and services. Similarly, new firms or activities that create new value boost economic activity overall. Atkinson and Ezell say there are three things that build vibrant, healthy business establishments in globally traded sectors in order to improve economies: business leaders who will take risks, do research and development or create new products, and add new plant and equipment; workforce that supports these changes instead of being afraid of new technology; and government that supports investing in the future.

There are bright lights in many of the communities where I work, where entrepreneurs are taking risks, where business leaders recognize the need to invest in creativity and where civic leaders are adopting innovation and entrepreneurship as guiding principles for their cities, towns and states. Here’s hoping that grassroots change will save the day.

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Seize the Day

Summer is fleeting in Maine. One minute, it’s the first warm beach day; the next, it’s what my grandmother called “the Fall-ish change.” We learned quickly to get in as much outdoors time as possible in June, July and August, take every opportunity to eat lobsters, corn-on-the-cob, and blueberry pie, and savor each moment against the reality of winter ahead!

Many involved in economic development, however, don’t recognize how fleeting their opportunities are. But the world around us is changing so fast that by the time we understand what’s happening, the window to act is already closing. Policy windows, especially, can be very narrow. The time leading to a gubernatorial election, for instance, is short, but often the only real chance in eight years to influence an incoming administration. The time when an industry or region is in crisis, and previously antagonistic players are willing to work together is also usually short.

Fear can interfere with the willingness to “Seize the Day.” But we must overcome this fear in order to take advantage of the opportunity. So, I’m taking the afternoon off to go kayaking. What are you doing to do today that you might not be able to do tomorrow?

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Don’t Fall in Love with your First Idea

I have had the great privilege of working with an entrepreneur since February as a mentor in Maine Center for Entrepreneurship’s Top Gun accelerator program. We were part of the first ever aquaculture cohort, in cooperation with Focus Maine, the Gulf of Maine Research Institute, Maine Aquaculture Association, Maine Aquaculture Innovation Center and CEI.

The entrepreneur and I worked on customer discovery during the 16-week period, and by the end, we thought we had come up with a great idea that really addressed an important problem in aquaculture. Imagine our surprise when he pitched the whole idea at one of the sessions and the feedback was, “We don’t get it. What problem?”

Our first reaction was annoyance, and denial, but then we thought, “We’re not telling the story well enough.” We went back to the source (customers!) and refined our problem statement. In fact, we uncovered a much bigger and more important problem, one that meshed even better with our idea.

When the entrepreneur pitched at the regional pitch-off, the final version with this bigger and “badder” problem statement was well received, and he is continuing to have productive and impactful conversations with potential backers using the pitch deck we worked on.

Lesson learned: Keep digging. Keep asking questions, especially of potential customers. Don’t fall in love with your first idea, a better one may be just around the corner.

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