This affords the profession an opportunity to rapidly mature and assume its rightful place as the branch of economics that achieves tangible results, as opposed to macroeconomists who merely debate whether the Federal Reserve should raise or lower interest rates.
The success of Austin, Texas; San Diego, California; Research Triangle Park, North Carolina; and Orlando, Florida prove that what happened in Silicon Valley can be replicated elsewhere.
These newer technology clusters show that dynamic innovation ecosystems do not have to occur as an accident. But before the economic development field can reach its potential, it has some growing up to do. Here are four goals it must achieve:
1. POLITICAL SAVVY
Learn how to achieve greater independence from the political cycle. Genuine economic development cycles can be measured in decades. When Research Triangle Park was unveiled in North Carolina in 1959, many people laughed at it and equated it with Seward’s Folly, the 1867 purchase of Alaska. It wasn’t until IBM opened a facility in the Research Triangle in the 1960s that it gained credibility. Today, of course, it is a major hub of innovation and manufacturing, including in the life sciences field.
The reality is that political cycles of election and re-election are often just two to four years. When economic development organizations (EDOs) are captives of that cycle and have to deliver results so that the mayor or governor can get re-elected, it results in reactionary opportunism (i.e. seizing the next deal coming down the road) rather than focused and deliberate long-term strategies. It also raises the risk that a state or city will use large tax or financial incentives to lure in a major company or a casino or a sports franchise to get a quick win. That may not be in the best long-term interest of taxpayers.
The key to reducing dependence on public sector funding is for economic development leaders to reach out to the CEOs in the private sector, both to sit on the boards of EDOs and to fund a percentage of their budgets. The Orlando Economic Development Commission, for example, receives 70 percent of its budget from the private sector. The Greater Phoenix Economic Council is
supported politically by 22 mayors and five county supervisors, but it turns to local CEOs to sit on its board and provide 65 percent of its funding. Those agencies are able to take long-term views, but too many EDOs cannot do that because they haven’t been able to persuade CEOs to support them.
Jeff Finkle, president and CEO of the International Economic Development Council, the industry’s trade association, says that building relationships with CEOs is one of the most critical issues that developers face. “I think there is a real issue about whether our business leaders are committed to the communities where they have invested,” says Finkle, who is based in Washington, D.C. “They are not taking leadership roles at the EDOs as their predecessors traditionally did. The question is, how do we get their engagement?”
One answer, says Chris Comacho, new president and CEO of the Phoenix economic council, is to run a development agency on the basis of research, long-term strategic plans, annual reviews and audits of the agency’s effectiveness. CEOs, who often are frustrated by the opaque and cumbersome decision-making methods of nonprofits, understand and appreciate those business concepts.
“We’ve built an apolitical evidence-based organization,” says Comacho, who at 34 is one of the rising stars of the profession. “We do have a percentage of funding coming from public sector, but we run our company like a private sector business model. We’re one of the most metric-ed organizations across the country. We have bottom-line performance measures we must meet as an organization.” That formula has worked to draw about 10 C-level executives onto his board.