The Older I Get, the Less I Know

I’ve built my innovation career on a number of basic principles, primary among them that new knowledge drives economic growth (and that economic growth is a good thing). My worldview is that new jobs will be created, as they have been for centuries, with the development of new technologies. I’m holding tight to that point of view, but it’s fair to say that many folks are having second thoughts. There are a substantial number of observers of current trends in artificial intelligence and bioscience who now believe that billions of people will become unemployed and unemployable. They are advocating for guaranteed income and other similar measures.

Another basic question that came up this month is about which entrepreneurs should be supported by public programs. I’ve always advocated for high-growth, traded sector companies, rather than generic “small business.” But I’ve recently changed my mind. We’re not so great at figuring out who will become high-growth, nor which sectors could transform from locally-serving to traded. Think about the craft beer revolution for a moment. It started out as entrepreneurs who just wanted to make small-batch beers for their local communities. Now, it’s broadening to a national movement where these beers are exported, where supply chains are kickstarting innovations in local farms and where the effect on sectors other than beverages is significant.

A more important question is What if this fixation on “high-growth” is really just a smokescreen for supporting entrepreneurs who look like us? Entrepreneurs come in many sizes and colors, and prejudging that a minority-owned or woman-owned business is “just a lifestyle business,” for instance, means that lots of opportunities are left on the table. I’m trying to come to grips with how my perspective has been shaped by my own (admittedly elitist) experiences (white, privileged, Harvard-educated) and to make room for alternative explanations that also support the facts of the matter.

How about you? What do you think?

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WV on my mind

Happy August! Hard to believe that we’re halfway through summer. Here in Maine, we hold onto each day, as summer is so fleeting. But I did leave for a few days to present at the Development District Association of Appalachia’s professional development seminar in Charleston, WV. This meeting of economic developers in Appalachia was organized by my friends and colleagues at the Center for Regional Economic Competitiveness (CREC), so I had to say yes.

Needless to say, Appalachia still encompasses many rural, distressed communities, even more distressed than many of the places I usually work. It was uplifting to see so many people dedicated to making things better in their communities, often against long odds. These are places where the decline of coal has hit home, where opioid addiction is rampant and where it’s easy to lose hope.

I was especially interested in a presentation by Ann Barth of TechConnect WV, a statewide economic development organization dedicated to the advancement of science, technology, and the innovation economy in West Virginia. She talked about the innovation and entrepreneurship initiatives in the state, one way that the organization is helping change the narrative in the state. One resource that inspired me was ChemCeption, the nation’s only incubator-accelerator focused solely on commercializing chemistry-based technologies, including traditional and green chemistry, biotechnology, advanced materials and more. Located in the former Union Carbide campus in South Charleston, ChemCeption has made the necessary pivot from being about producing chemicals to chemistry as an enabling technology. This means that breweries, distillers and CBD producers are potentially part of the mix, not just traditional chemical companies.

Talk about turning lemons into lemonade…

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What Entrepreneurs Need and How to Deliver It

I’m working on a series of case studies for a client about organizations that are a catalyst or gateway or intermediary for entrepreneurs, resources and programs. What’s striking is how unique each is, dependent upon the circumstances in each place. It seems to matter what partners are already there and involved in entrepreneurship, what funding is available and with what strings, and the local culture and “little p” politics (I mean relationships, not partisan politics).

The constant in all of the examples is that the needs of entrepreneurs are generally well-known. They need help with improving and accelerating the growth of their businesses, including access capital, knowledge and services. In the places where entrepreneurs are doing well, the communities are tight, with lots of events and other opportunities for networking and “happy collisions” where one and one can equal three. These can be disguised as social events, but really the objective is for entrepreneurs, service providers, researchers, students, and potential employees to get to know each other better. After all, as a friend of mine used to say, “People do business with people they know and like.”

But there’s also a significant school of thought that says these organizations must be run by and staffed by entrepreneurs in order to be credible. Folks say, “No one in government knows anything about starting a company. There is nothing government can do to help.”

That always gets me fired up. For one, government is paying for those universities and research labs that did the basic research you are relying on, who are producing the well-educated people you want to hire, and who create a level of prosperity in your community that not everyone gets to enjoy. And, government is there with tax credits for investors so they will be able to invest in your company. Another point is that many entrepreneurs know what worked for them, but not necessarily what translates into help that works for others. So, professionals who have training in building businesses can often be more helpful than peers. Truth is, some entrepreneurs turned funders and mentors are great, other not so great, and the same is true for other folks who help, even if they work for government.

So, keep an open mind, and keep connecting.

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Free 3-part Video Series on Innovation-Based Economic Development

In the almost thirty years that I’ve been involved with innovation-based economic development, the field has continually gotten broader and more sophisticated. In the beginning, we focused on growing research and development in our states. Other organizations had the lead in supporting entrepreneurs. Few organizations thought about industry clusters, culture or workforce. Capital was always a concern, but very few organizations had their own funds to invest.

Today, all of these are part of innovation-based economic development, and many organizations, at the state, regional and local levels, are involved in all of them. It makes for a complex field, especially for those who come to it from other endeavors.

How does a person who is new to the field get up to speed? There are great conferences, usually once a year. A few training classes exist, if you have a week of free time and the budget to travel out of state. Or, you can go online.

This week, we are launching a free series of 3 online videos to help people get up to speed in innovation-based economic development. These videos answer questions we get asked all the time, and will enable you to make some first-level progress on bring innovation and entrepreneurship strategies to your community. We hope you will join us! Sign up here to get all 3 videos delivered to your inbox starting June 5! Click HERE.

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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.

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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.

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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.

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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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