A strategic business mindset can turn Kingsport around

Kingsport seems to be in a perpetual state of flux. As we face our pains, perhaps an interesting question to ask might be, “How would Kingsport act if they were a business in similar circumstances?” There are several issues to consider.

What is it we are trying to sell and to whom? Our “product” is our community, the City of Kingsport. The demand for the product is people and businesses who would want to live or locate here; in essence those looking at “buying into our City.”

What is our competitive environment? Our competitors are other communities with similar characteristics in which the pool of potential prospects (people and businesses) could locate. These include other cities and counties in the local area, as well as, places similar to us throughout the Tennessee and Southeast region.

What is our current situation? There appears to be a flagging demand for our product. Furthermore, our competition appears to be attracting the people and businesses that are our potential market (e.g., retail expansion at the Pinnacle in Bristol and residential development in Johnson City).

However, that is not the entire story. All rural areas of the state are losing out to Middle Tennessee. Regardless of where the State tries to steer growth, businesses are increasingly clustering into the Nashville environs. Nothing succeeds like success.

What is Kingsport’s apparent strategy? Our current approach appears to be in trying to lower the price of our product, that is, giving significant subsidies to virtually anyone who shows interest in our community. This is exemplified by the PILOT (payment in lieu of taxes) payments given to several apartment complexes and many retail establishments. It is not that we have created subsidies (each case is different), it is that we used it wholesale to publicly attract business and this is what has devalued our “product” in the eyes of the outside world.

We have also undertaken a significant increase in capital expenditures to try to make our City more attractive (e.g. the ONEKingsport plan). We have dramatically increased the size of our bureaucracy (non-revenue generating overhead expense). This effectively increased our cost structure through required tax and fee hikes.

What has gone wrong? A fundamental problem rests with the fact that we have incorrectly defined success – prosperity. Clearly, our current City leadership has equated success with growth in tax revenue almost exclusively. The Mayor recently stated that, we need to “drive revenue for our cities so cities in turn can provide the services our citizens want and need.” To the contrary, what the citizens really want is a high quality of life at a reasonable (low) cost. Increased municipal expenditures may or may not create that. They are most assuredly not synonymous.

Our current actions are antithetical to what a business would do. A successful business would work to increase revenue (in our case, the return on additional people and businesses) while cutting cost. We on the other hand, we have convinced ourselves that by lowering the price of our product, we will somehow make ourselves more attractive. At the same time, we have permanently increased our costs. Do we truly think this combination is the recipe for success?

What is the impact? Effectively, the City has “devalued” our “product” (the community). How do you get the next customer (business) to pay the full price for your product (move in and pay full tax rate) when you have demonstrated to the market that it is not worth that price? We have created a self-fulfilling downward spiral that will not lead to profitability (prosperity for our community).

What is the appropriate approach? We must become more “businesslike.” However, we must recognize that there is no silver bullet that will solve all our problems.

The first step is to actually define what we want to become balanced against what we can realistically be. We must scrap the “grow at all cost” and “bigger is better” approach.

Next, stop trying to go “head to head” with other communities. Do we need to be like Johnson City or Asheville? People who want that already have those choices. Why don’t we try to find our niche’ where the competition might be less.

The dirty little secret is that we just might have to admit to ourselves that being smaller than Johnson City might be a fully acceptable, and dare I say – desirable, outcome. Perhaps a smaller, more business friendly and attractive place to live, with a lower cost structure than our competitors is an appropriate goal.

This would allow us to re-value our “product.” If we are unique and different, we have worth; perhaps attractive to a smaller market share, but having perceived value to them. Around this clearly defined vision, we could craft a new, externally-focused, marketing message.

In addition, we must also reduce costs. Actions would definitely include reducing regulations, ordinances and fees. We are absolutely stifling development because of the significant growth in regulations. Zoning, construction and development ordinances have all become more stringent over the past few years. Rolling some requirements back could spur development.

Furthermore, we must rationalize the ever-expanding public bureaucracy. We might implement a moratorium on hiring, consolidate functions and reduce payroll through attrition. The first place businesses look to save money is in head count because it is where the cost is.

Finally, we need a new strategy. ONEKingsport is not the complete answer. This program has relegated our future to City bureaucrats. While there are some useful programs, we need to scrap many of the wasteful expenditures.

Kingsport must adopt a more businesslike – strategic approach. A failure to do so will propagate an adverse trajectory that must be reversed if we are to be a successful city in the future.


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1 Response

  1. Bob Arrington says:

    Dave’s columns are always thoughtful. He gives us much to think about here.