Archive for Best Practices

Carson City Library, Partner in Economic Revitalization

by Christine Hamilton-Pennell
Growing Local Economies, Inc.
May 10, 2011

Sara Jones, Director of the Carson City Library, is an entrepreneur at heart. The former state librarian took her current position because she wanted to have more influence at the local level. She had a vision that the library could be an integral part of Carson City’s community infrastructure and business support systems. The seed for developing a collaborative effort was planted when Jones attended my workshop, “Building Public Partnerships,” sponsored by the Nevada State Library and Archives. Sara also brought City Supervisor Robin Williamson and Carson City Economic Development Director, Joe McCarthy to the workshop. She returned to the library with a mission to serve Carson City’s small business community and thereby contribute to the area’s economic growth. Carson Nugget Casino

The state of Nevada faces enormous economic challenges. Its unemployment rate, at more than 14 percent (some estimate it is as high as 22 percent, if underemployment is included), is the highest in the nation. Its educational system is among the most poorly rated, with one of the highest dropout rates in the nation. The state budget is slated to be slashed by 50 percent. The economy in Carson City has faired slightly better than the state as a whole, but revenues are down, and both the government and the business community are hurting financially from the economic downturn.

The Carson City Library is located near the historic downtown area. It is bursting at the seams in its 21,000 square-foot, 30-year-old facility. Jones recognized that the voters would never approve expansion of the library if its value to the community could not be demonstrated. In what proved to be a smart move she hired Tammy Westergard, who had previously worked for the city’s economic development agency, as the library’s deputy director.

Together, Sara and Tammy are an unbeatable duo. Tammy grew up in Carson City, and cares deeply about the health and wellbeing of her community. She has contacts in every sector of the city; on a recent visit, we toured the area in her cherry-red VW bug convertible and met people everywhere we stopped who knew Tammy. She is a dynamo—politician, deal-maker, and superb networker.

Tammy Westergard in front of BRIC

Tammy Westergard in front of BRIC


Sara and Tammy found an ideal opportunity to position the library as a key player in economic development. After attending the Building Public Partnerships workshop, they wrote and received an LSTA grant to develop a Business Resource Center that would house the Carson City Office of Business Development, Small Business Development Center (SBDC), and a library business resource center in a joint location in the downtown area. The idea proved to be a catalyst for the city—which was also planning to move its licensing and regulatory departments to a new location—to place their offices there as well. They found the perfect solution in an office building vacated by the state. The city decided to obtain the building and renovate it, in order to house its own departments as well as local business support organizations and a business resource center staff by the library. Thus, the Business Resource Innovation Center (BRIC) was born. It was conceived as a multi-function business center that would support local entrepreneurs from the ground up by providing a centralized suite of services. Sara and Tammy already had a history of developing partnerships across the city, so it was a natural next step to collaborate with them to make the BRIC a reality.
Sara Jones by quilt in BRIC

Carson City Library Director Sara Jones in front of BRIC artwork


Upstairs, the BRIC houses the city’s Building Division, Business Licenses and Permit Center, Planning Division, and Engineering Division. On the ground floor there are offices for the Carson City Office of Business Development, the Nevada Small Business Development Center, the Capital City Arts Initiative, and of course, the Business Library. The building itself displays numerous pieces of local art, connecting commerce with culture. According to Mayor Bob Crowell, “it creates a sense of place in downtown that is welcoming, available to everyone, and is quite lovely. I can’t think of a better way to do business.”

Mona Reno, part-time Business Librarian for the BRIC, is the first point of contact for business owners. She directs them to the resources throughout the building that will help them with their needs, including business research. A recent project Mona worked on involved a local business owner who wanted to know which manufacturers in northern Nevada might have use for his company’s products. She used ReferenceUSA to produce a list of potential clients in the state and create a spreadsheet for him.

Susan Antipa and Mona Reno at BRIC

Adult Services Librarian Susan Antipa and BRIC Business Librarian Mona Reno


Adult Services Librarian Susan Antipa divides her time between the regular library and the BRIC. She was both excited and apprehensive to take on this new role at the BRIC. “I’m learning a lot,” she says. “It’s a whole new world for me. I never thought much about business. It can be intimidating, but if someone asks for something, I want to be able to help them.” Having other business service providers in the building has given her experts to consult with when she gets stuck.

Since August 2010, the BRIC has served more than 3,000 clients, the majority of whom use the center to attend workshops and access the center’s computers, which offer several business resources such as ReferenceUSA and Business Decision. The response from local business owners has been enthusiastic. One client wrote out a check for $500 to the BRIC because he said he “had never received this kind of help before.”

Sara and Tammy have not stopped with the creation of the BRIC. They have also taken a leadership role in moving forward a downtown economic development project. The City Center Project is a public-private partnership that aims to “achieve long-term sustainable and focused economic growth by building a diverse, innovative downtown economy that attracts high-wage, high-impact jobs that provide opportunity and prosperity for the City’s residents, businesses and entrepreneurs throughout the entire community.” The “catalytic civic investment” for the project is a new state-of-the-art 60,000 square-foot library, known as the Carson City Knowledge and Discovery Center.

Through the BRIC and the City Center Project, the Carson City Library has become embedded in the City’s economic, political, and community structure. It is a vital force for economic and community revitalization in turbulent times, and serves as a shining example of how public libraries can stimulate the local economy through innovative leadership and public-private partnerships.

View the Community First video on YouTube that was directed and produced by Tammy Westergard with help from a local high school student. It highlights the role of the proposed new Carson City Knowledge and Discovery Center in creating economic and lifelong learning opportunities for Carson City citizens and businesses.

Read the entire case study in our e-book, Creating an Entrepreneur-Friendly Public Library, for sale on our website at http://www.growinglocaleconomies.com/efriendly.

©2011 Christine Hamilton-Pennell, Growing Local Economies, Inc.

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Out of Poverty: Design Thinking for Survival Entrepreneurs

By Christine Hamilton-Pennell
Growing Local Economies, Inc.
February 24, 2011

Dr. Paul Polak, psychiatrist, entrepreneur, innovator, and founder of International Development Enterprises (IDE), has a crazy notion. He believes that poor people are poor because they need to make more money. This simple but revolutionary concept has spurred his work among the world’s poorest people for 30 years. Polak asserts that traditional development approaches to ending poverty have been misguided, expensive, and mostly haven’t worked. There are around 800 million people who live on a dollar a day, mostly rural farmers with less than an acre of land. These subsistence-level farmers typically grow staple crops during the monsoon season, sometimes supplementing them with vegetables such as tomatoes and cucumbers. Most of the food is consumed by their families, and if they are lucky, they have enough to cover their basic needs and a little left over to sell in the marketplace. In bad years, they may go hungry for part of the year.

After talking to thousands of such farmers in Nepal, Bangladesh, India, Vietnam, and other developing countries, Polak determined that if they could irrigate their plots during the dry season, they could grow and sell high-value, labor-intensive products, such as off-season fruits and vegetables, to customers who can afford them. The challenge, then, was to figure out how to develop and market low-cost drip-irrigation systems that would be affordable and accessible to dollar-a-day farmers and allow them to increase the revenue from their land.

So, in the spirit of Thomas Edison, Polak and his team at IDE set out to develop just such a technology. IDE used the principles of “design thinking,” long before it was a fashionable concept, to solve this problem. Tim Brown, CEO and President of IDEO, an innovation and design firm headquartered in Palo Alto, defines design thinking in a recent Harvard Business Review article as “a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.”

After much trial and error, IDE designed and developed a human-powered treadle pump that cost $25.00 and could irrigate a half acre of land.

Polak knew that this was not enough. Subsistence farmers also needed new markets capable of bringing them the inputs they needed to grow their crops, such as seeds and fertilizer, as well as new value chains capable of bringing their goods to market at reasonable prices. Polak and his colleagues took eight practical steps to make this happen. IDE:

1. Did not accept subsidies from government or development agencies for their products, choosing instead to sell them at fair market value to the farmers. Their experience showed that subsidizing the costs of products and services undercut the local market mechanisms.
2. Lowered the cost of their products by simplifying the design and finding less expensive materials, and by providing different quality standards at different price points for consumers.
3. Recruited small-scale manufacturers to build the pumps.
4. Recruited village dealers to sell the pumps.
5. Trained well-drillers to install the pumps.
6. Opened access to microcredit.
7. Implemented marketing and promotion initiatives.
8. Established strategically placed demonstration plots.

IDE energized 75 small-volume workshop entrepreneurs who each invested $500 to $2,000 (US) to get into the treadle-pump business. In addition, more than 2,000 village dealers and 3,000 well-drillers now earn their living by making, selling, and installing treadle pumps at an unsubsidized fair market price of $25.00.

The results? More than one-and-a-half million treadle pumps have been sold to subsistence farmers through these private sector supply chains, irrigating more than 750,000 acres at a fraction of the cost of conventional systems. More than 17 million people have been able to move out of poverty because of the additional income their land has been able to generate. IDE has gone on to develop many other devices and systems that allow subsistence farmers to efficiently store and deliver water to their fields and homes.

Polak hasn’t stopped there. He sees market opportunities among the millions of dollar-a-day slum dwellers as well. Instead of viewing slums as hellholes of misery and deprivation, he sees them as “a beehive of grassroots enterprises” where people who eke out a living making and selling simple products could leverage their low-cost labor and learn to produce higher-value goods to sell outside their local areas.

Polak doesn’t minimize the need for international aid to support education, healthcare, and infrastructure in poor communities. He has repeatedly found, however, that when farmers and slum dwellers begin to move out of poverty, they do make investments in education and healthcare for their families.

If design thinking and simple market mechanisms such as these can have such a profound impact on the world’s survival entrepreneurs, what lessons can be learned for our situation here in the U.S.? Research shows that the number of “necessity entrepreneurs” in this country—those who have launched a new business out of necessity after losing a job or not being able find employment—has risen dramatically in the past several years. How can we find simple and affordable solutions to support the business, technical, financial, and market needs of these start-up entrepreneurs, many of whom live in low-income communities with minimal business support systems, and help them move to the next stage of becoming “opportunity entrepreneurs?”

I welcome your thoughts.

©2011 Christine Hamilton-Pennell, Growing Local Economies, Inc.

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The Goals of Economic Development: To Create Hope, Wealth, and Choices

By Christine Hamilton-Pennell
Growing Local Economies, Inc.

In 1989, Phil Burgess, President of Denver’s Center for the New West (now defunct), gave a presentation called “Expanding Choices in America’s New Economy.” In his talk, Burgess, who is credited with first coining the phrase “economic gardening,” argued that “new hope, increasing wealth and expanding choices are the universal goals of economic development.”

These goals “invoke themes with deep roots in American culture: faith in the future, the desire for freedom, and the demand for choice. They resonate with most people….Perhaps most importantly, though, they are good standards by which to measure progress at any level—the family, the firm, the community, the region or the nation.”

More than 20 years later, these goals are more relevant than ever. Thriving communities—whether small or large, rural or urban—have citizens who believe they have options for their future, that they can make their lives (and those of their children) better in some way. People have hope instead of fear. They believe that they can find – or create – jobs for themselves. They are confident that their fellow community members and political leaders will support their business enterprises and address their social needs. They support local entrepreneurs, who in turn create or expand their businesses and give back to the community in many tangible ways.

The community itself provides adequate educational opportunities, financial resources, a trained workforce, a safety net for those in need, and support for quality of life amenities such as libraries, arts, recreational opportunities, and green spaces that make it a desirable place to live and work.

In short, a thriving community exhibits a spirit of optimism instead of despair, and offers options and choices to its citizens. Its citizens are motivated to take action, both on behalf of their own aspirations and hopes, and those of their neighbors.

I believe all of us want to live in such a community.

Burgess makes the case that economic expansion and area development follow a specific pathway. They are driven by civic leadership, which encompasses the political realm, the business sector, education and labor leaders, and community organizations. These leaders envision and negotiate the elements of area and regional development—factors such as development of human capital and financial resources, physical and quality of life infrastructure, and government regulatory support. These resources contribute to expansion factors such as a skilled workforce, new and improved technology, and improved capital availability and utilization, which in turn lead to the development of new and expanding markets and innovation within the private sector. New and expanding enterprises produce more jobs, higher income, and increased productivity. The end result for the community is new hope, increasing wealth, and expanding choices.

Each community will find a different path to achieve the goals of new hope, increasing wealth, and expanding choices. But three things are clear: each community must assess and build upon its existing assets, address the gaps in its resources, and develop a support system at the local level that creates a positive instead of a negative cycle for all its citizens. It is the task of the community’s leaders to initiate and drive this virtuous cycle, and the task of every citizen to contribute to the betterment of the community.

Community development and economic development cannot be separated. They are part of the same ecosystem, one which ultimately produces both hope and expanding choices for all its members.

Sources:

Philip M. Burgess, “Expanding Choices in America’s New Economy,” Points West, Winter 1990. (Posted by Dan Ripke on Scribd, http://www.scribd.com/doc/38481612/Expanding-Choices-in-America-s-New-Economy)

Christine Hamilton-Pennell, “Ten Tips for Implementing an Economic Gardening Project,” free white paper, www.growinglocaleconomies.com.

©Christine Hamilton-Pennell 2010, Growing Local Economies, Inc.

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Reflections on the Ideal Economic Gardening Audience

By Christine Hamilton-Pennell
Growing Local Economies, Inc.
Updated December 21, 2010

I’ve been thinking a lot lately about the best target audience for an economic gardening program, particularly in smaller or more rural regions. Over the past several years, I have worked with hundreds of small businesses, helped communities around the country implement their economic gardening projects, reviewed numerous research reports on entrepreneurs, collaborated with Don Macke of the Center for Rural Entrepreneurship, and learned from Chris Gibbons at the City of Littleton. I have concluded that EG programs have three main criteria they can use to determine their target audience: company size (e.g., number of employees and/or revenues), company age, and company growth factors—or a combination of these criteria.

After reviewing all the evidence, I believe I have identified the “sweet spot”—the ideal target audience for most EG programs. First, let’s look at some facts about each of the three criteria.

Company Size

YourEconomy.org, a website created by the Edward Lowe Foundation, reports data on the composition and growth of the business universe in the United States over time. I checked my analysis of these figures and my conclusions with the staff at YourEconomy.

In this database, resident companies are broken out by stage:

Self-employed (one employee)
Stage 1 (2-9 employees)
Stage 2 (10-99 employees)
Stage 3 (100-499 employees)
Stage 4 (500+ employees)

The data reveal some interesting facts that are pertinent to choosing a target audience for an economic gardening program.

First of all, during the period from 2000-2008 (the period for which figures are reported in YourEconomy.org), Stage 3 and Stage 4 companies across the U.S. as a whole experienced net losses, both in the number of resident establishments and net new jobs. I don’t know anyone who disputes the fact that even during the best of times, the job creation rate across the majority of Stage 3 and 4 firms has been around zero for many years, and losses have only accelerated during this current recession. One exception reported in the literature (Stangler and Litan) indicates that the oldest and largest firms (10,000+ employees), still produce positive employment growth.

Current wisdom in the economic gardening world is that most of the high-growth companies are found in the Stage 2 group. This may very well be true, but this does not mean that targeting this group as a whole is more productive. The data in YourEconomy.org from 2000 to 2008 do not seem to support this conclusion. During that period of time Stage 2 companies across the U.S. averaged 10.6 percent of all resident establishments and contributed 2.0 percent of net new jobs. During the period from 2006 to 2008, the percentage of Stage 2 establishments fell to 7.7 percent of resident establishments, and they contributed to a loss of -1.9 percent of net new jobs.

By contrast, from 2006 to 2008, the self-employed (nonemployers) and Stage 1 companies taken together represented almost 91 percent of all resident establishments and created virtually 100 percent of net new jobs.

A significant factor to take into account is the “churn” characteristic of nonemployer and Stage 1 companies. A large number of these firms start or expand each year, creating a substantial number of the net new jobs, but a large number also shrink or close, eliminating a percentage of the jobs. In fact, fewer than 50 percent of new firms still exist after five years. Nevertheless, the net effect on job creation is overwhelmingly positive.

Many EG programs have discovered that providing extensive services to early Stage 1 companies and nonemployers (“aspiring” entrepreneurs or those in the planning stages) is not very productive in terms of job growth. The exception is when the planned business start-up has high potential to become a growth company.

Taking all of these factors into consideration, it appears that using company size alone as a criterion for selecting a target EG audience does not guarantee the greatest economic growth for a community.

Company Age

In the recent Kauffman report, Where Will the Jobs Come From?, authors Litan and Stangler analyze Census data, which reveals that two-thirds of new job growth comes from companies that are between one and five years old. Job creation comes from three sources: startups; young firms, ages one to five; and the largest and oldest companies. Taking into account the “churn” mentioned in the section above among the youngest companies, i.e., job creation and destruction, as well as the dynamic interaction between the youngest and oldest firms, they reach the following conclusion:

“…new and young companies and the entrepreneurs that create them are the engines of job creation and eventual economic recovery. The distinction of firm age, not necessarily size, as the driver of job creation has many implications, particularly for policymakers who are focusing on small business as the answer to a dire employment situation.”(http://www.kauffman.org/research-and-policy/where-will-the-jobs-come-from.aspx)

Another study by NBER, Who Creates Jobs? Small vs. Large vs. Young, supports this conclusion. The authors’ main finding is that “once we control for firm age there is no systematic relationship between firm size and growth. Our findings highlight the important role of business startups and young businesses in U.S. job creation. Business startups contribute substantially to both gross and net job creation. In addition, we find an ‘up or out’ dynamic of young firms. These findings imply that it is critical to control for and understand the role of firm age in explaining U.S. job creation.”

Company Growth

The most important criteria to consider when selecting an ideal EG target audience is the growth companies in the mix. From the time of David Birch’s seminal research studies in the 1980s—in which he first coined the term “gazelles”—to the present, research has conclusively shown that a small number of high-growth companies create the majority of new job growth. These companies are buried within the universe of existing companies and are the ones that break away from the pack and create an extraordinary number of jobs, as indicated in a recent report from the Kauffman Foundation.

High-Growth Firms and the Future of the American Economy shows that the top-performing one percent of firms generates roughly 40 percent of new jobs. The “average” company in the U.S. economy creates roughly two or three jobs per years, whereas the “average” company in this top-performing one percent contributes 88 jobs per year. And fast-growing young firms, while they represent less than one percent of all companies, create roughly 10 percent of all new jobs in any given year, or 27 jobs per company.

High-growth companies are found in all sectors (including retail and services) and nearly every geographic region. They are relatively young (three to five years old), and in their early stages are subject to a significant amount of “churn.” The fastest growing young firms (five percent) generally have 20 to 249 employees, although a significant number are larger. Once these companies have stabilized, their failure rate is very small (about three percent).

Since high-growth companies clearly have the greatest economic impact on the economy in terms of job creation, isn’t this the logical audience for an EG program to target?

The “Sweet Spot”

There are a number of reasons why local economic gardening programs might find it difficult to target these high-growth companies. Being relatively rare and often flying below the radar, these companies are hard to find, and may not even exist in every community. In addition, their needs are very specialized, and local communities often do not have the technical resources to help them. A recent study in Connecticut found that “while firms with low margins may worry chiefly about the high costs of taxes and healthcare, for fast-growing companies the primary issues have to do with networks—both social and physical.” They are looking for both strong professional networks and state government support for their needs.

Creating the best conditions for their growth generally entails policy decisions at higher levels of government than can often be affected at the local or regional level. Finally, the entrepreneurs who establish these companies are driven to create them whether we help them or not.

On the other hand, the high-growth companies had to start somewhere, and much of their initial growth spurt happens when they are late Stage 1 or early Stage 2 companies. The key is to identify these potential high-growth companies early in their life and help them avoid the pitfalls that may lead to early failure as they begin to grow.

These companies will not all become high-growth companies, but if they experience continuous—or sporadic—growth at all, they will likely contribute new jobs to the economy.

So what does this mean for a local or regional economic gardening program in terms of targeting a particular audience (or audiences) for its services? Taking all of this data into account, I have come to the following conclusion:

I would argue that the “sweet spot” for most economic gardening programs is to target entrepreneurs who have started a venture that is between one and five years old and want to grow it, regardless of its size. These ventures aren’t necessarily “high-tech,” but they have developed some sort of innovation in their product, process or delivery method. They also have a potential or actual market outside the local economic region, and create quality, living-wage jobs.

Finding these entrepreneurs is the tricky part. They may start out as a home-based business, or look like a secondary business such as a local retail or service business that is exploring an outside market through the Internet or franchising. We will explore the problems with finding growth-oriented entrepreneurs in a future blog entry.

According to Don Macke of the Center for Rural Entrepreneurship, an EG program should ask three questions of potential candidate for its program:

1. Do they have a niche where they are competitive?
2. Are they committed to growth?
3. Are they actively exploring creating an external market footprint?

By getting help at this crucial phase, Stage 1 and early Stage 2 growth-oriented entrepreneurs will be more likely to make good decisions that will allow them to remain viable and sustain their growth to reach the next level, however we define it.

I welcome your discussion and responses.

Sources:

©Christine Hamilton-Pennell 2010, Growing Local Economies, Inc.
 

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Economic Gardening with Public Librarians

by Christine Hamilton-Pennell
Growing Local Economies, Inc.

The research component of an economic gardening initiative must be implemented by professionals with skills in both business research and strategic business counseling. Successful programs need to find a way to marry and coordinate these two functions. A logical place to look for partners with business research skills is in the library world. Librarians in both public and university libraries know how to search for and find information, and usually have access to one or more business databases through their own library or a larger consortium. Several libraries are involved in economic gardening initiatives in the U.S. A couple of them are profiled below.

One of the first economic gardening initiatives to seek the assistance of local libraries was in the city of Greeley, Colorado. Economic Development Manager Kelly Peters approached librarians at High Plains Library District and the University of Northern Colorado Libraries to assist with business research for clients of their Economic Gardening program. Two public reference librarians stepped up to the plate and volunteered to do research projects for the businesses. Peters found that the public librarians, even though they had limited knowledge of business research at the outset of the project, were eager to learn. Along with two business librarians from the local community college and university, they created a small learning group that began meeting regularly to discuss business research tools and techniques. They also met with the businesses they were assisting to hear first hand what the business owners needed. The librarians completed three large research projects in the first six months, including one supporting the county airport in its efforts to recruit aviation-related businesses to its industrial office space.

When Peters left the City of Greeley to become the Chief Operations Officer of the Rocky Mountain Innovation Initiative (RMI2) in Fort Collins, Colorado, she again approached business librarians at the Poudre River Library District and Colorado State University Libraries to assist with research for RMI2 clients, who comprise high impact scientific and technology start-up companies in Northern Colorado. The Initiative was formed by an alliance of Northern Colorado municipal governments, academic institutions and economic development organizations. Anne MacDonald, business reference librarian at the Poudre River Library District, assists with the business research. She reports, “I love the projects and truly think this—economic, market and industry research for local economic development efforts—should be in the job description for any public library business librarian.”

A more recent entrant into the economic gardening field is the Douglas County (Colorado) Libraries. When the Douglas County Economic Development Manager, Meme Martin, approached the Chamber of Commerce at Highlands Ranch to host a pilot economic gardening (EG) program, the library took a seat at the planning table and became part of the initiative.

Rochelle Logan, Associate Director of Research and Collections at the library, serves on the steering committee for the Economic Gardening project. She says it is a natural partnership. “One of our goals at Douglas County Libraries…is to reach out to answer the community reference question. It’s a natural fit to partner with local economic development entities such as the Highlands Ranch / Douglas County EG program” (Your Hub-Roxborough, June 25, 2008). The library was already providing classroom space in three of its locations for business start-up workshops offered by the local Small Business Development Center.

The Douglas County reference librarians received training in basic business strategy and information sources, and began promoting reference services to start-up business owners through the library. They purchased additional business database tools and began conducting more in-depth business research on behalf of the EG center clients.

“We are extremely excited about the partnership we have with the Douglas County Library System and the Chamber’s Economic Gardening program. Douglas County is very fortunate to have the Douglas County Library System as a resource. They continue to stay on the cutting edge,” reports Steve Dyer, President, Chamber of Commerce at Highlands Ranch. They are now a year into the collaboration and the librarians report having completed more than 20 successful research projects for local business owners so far in 2009.

© 2009 Christine Hamilton-Pennell

Growing Local Economies

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Business Start-ups Are Like Orchids

Several months ago, my son brought home a flowerpot containing two bare sticks from the flower shop/urban café where he was working. Orchids, he told me. The owner said she didn’t think they would bloom. He rescued them from the trash.

So we watered and fed them for two or three months. The leaves came along nicely, but the sticks still looked like, well, bare sticks.

orchidsThat’s why I was so astonished a couple of weeks ago to see two blossoms on one of the twigs, with more budding out on both sticks. They are exquisite white orchids that amaze me every time I see them!

It struck me that the orchid story is an analogy for the business start-ups I’ve worked with or observed over the years. You can nurture them and support them and cajole them to take certain actions. It takes time for the new business idea to germinate and take root.  Research shows that maybe a quarter of these aspiring entrepreneurs actually create a new enterprise. In fact, most of them don’t bloom. But you never really know for sure which ones will burst into flower until they do.

Scott Shane points out in his book, Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, that the majority of people starting new businesses enter a field they already work in, most of which are already saturated with small businesses (think massage therapists, construction, or pet grooming businesses). Many of these aspiring entrepreneurs have never been in business before and usually have not done an analysis of the market potential in their area before they decide to put out their shingle. 

In terms of “economic gardening,” not all start-ups are created equal. The ones with the most promise of high impact have several defining features. They have some kind of leg up on their competition—an innovative idea, process or product; they have a good management team to execute their idea; they have a solid market that is broader than the local region; and they want to grow their business (the majority of entrepreneurs don’t have a growth focus). These are the orchids. Daisies are far more common, of course, but they don’t have the same value (at least monetarily).

Perhaps the lesson here for local communities is to focus more time and resources on the orchids than the daisies, but to remember that daisies can also be a very important part of a beautiful garden.

(c) 2009 Christine Hamilton-Pennell 

Growing Local Economies

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