We must look at economic development in a new light

“Everyone wants things to be different, but no one wants anything to change.” That could be the mantra of our region. Yet changes, in technology, culture, business activity, as a result of the Pandemic (and more) are driving us towards a new economy. This evolution has been underway for decades, but the path forward is only now coming into focus.

It is time for a makeover. Our region needs to think beyond the past and even the present. We must transform, become forward-looking. This does not mean we forsake who we are or diminish who we have been, but it does require us to embrace the developing environment.

Economic growth now spring from emergent concepts rather than iterations of existing operations. This is represented in the “big picture” by companies like Tesla, Amazon or Google. But there is a “small picture” as well. These companies are altering the way we live and operate. From mobile apps to medical innovations and even manufacturing, new ideas and processes are emerging. These companies are literally building the future and, if we want to be a part of that world, we need to adapt to make ourselves attractive to them.

It is easy to see the positive outcome of such an attitude in areas with more vigorous economies, from Silicon Valley to Nashville and Chattanooga. All of these are characterized by a robust higher-level entrepreneurial ecosystem.

We must create a structure that can attract and nurture innovative startup and early-stage companies that have the potential for rapid grow and scale. We are not yet equipped to do so.

It is time to develop an alternative model for regional economic development. This does not negate or supplant the current industrial recruiting programs; however, the existing operations are not tailored to meet the challenges of the entrepreneurial sector in the new economy. They are typically designed to recruit established entities that have clearly defined parameters. They will need a certain type of real estate (we have incentives for that). They will employ a projected number of employees (we have incentives for that). In short, they are “known quantities.”

What about an early-stage company that has a brilliant idea or a prototype? Their funding and growth projections have a great deal of uncertainty. They simply don’t fit the current paradigm and taking action based on the existing model will likely be insufficient to have much impact.

Fundamentally, there are two ways to view this process (and they are the flip-side of each other). First, there are companies that are physically located elsewhere, but could integrate some component of their operations into the economic fabric of the community. A group I am working with has established an accelerator program that has been able to attract such companies and there are prospects, from advanced manufacturing to clinical trials, that may be available to us as a result.

Second, we are actively working to locate (or relocate) these types of companies to our region. Our area has great natural and built environment. We have superb education systems. We have programs to train our workforce. We have the resources (across the region) to support them. We have Opportunity Zones and other designated areas where incentives might be available.

To capitalize on these, we must take a broader perspective. Early-stage companies are resource, not location, dependent. In other words, they will go where they can find the assets they need to develop and grow. Collectively, we are competitive. Individually we are not.

So, this new model has several distinct characteristics. It must be regional from the outset in order to marshal the necessary resources to be attractive. It must capitalize on the characteristics that make us unique. We need a “hook,” something that differentiates us from other locations. We need to build incentive structures that recognize the fundamental necessity of creating a robust entrepreneurial ecosystem which transcends the specifics of any single company. If we can attract five early-stage companies, getting the sixth will be much easier. Nothing succeeds like success.

Above all else, it must be comprehensive and universally accepted. No one component will be sufficient. It requires the participation of all the regional players: local and state government agencies, academic institutions, workforce training operations, and the private sector. The more entities that fail to participate, that follow a “go it alone” strategy or maintain a parochial attitude, the less likely we are to have the base necessary to attract and support new companies.

All of this happens under an umbrella of uncertainty. Early-stage companies often falter (Of course in today’s environment, many more established companies do as well). A startup can hit hurdles that take longer than expected to overcome (This is likewise not infrequent). On the other hand, such companies can also find sudden backing and move exceptionally fast, rapidly expanding beyond even their own growth forecasts.

This variability, and the broad range of other influences necessitate an alternative approach to recruit early-stage companies that define the new economy. We must learn to embrace change and harness it to our benefit. If we can do this, we open up a new chapter in the development of our region.