A community’s economy is an important part of its resilience. Globally, we’re still trying to claw back from the Great Recession. While the US economy is doing better than most, many local communities have still not bounced back to pre-Great Recession levels. In this post, I want to explore a relatively new approach to economic development at the community level that has proven successful – Economic Gardening.
If the whole world is a stage, I’ve played many parts in my life. Applied social scientist (aka interrogator of POWs), technology lead for dealing with nuclear waste, science advisor to the director of a national laboratory, resilience scholar and several others. Perhaps the biggest stretch for me, though, was leading a fair-sized (20-35 professionals + student interns) research organization.
In the oh-so-euphonius words of my boss, “John, there are two kinds of dogs: yard dogs and huntin’ dogs. Yard dogs lay on the porch and wait for somebody to throw ‘em a bone. Huntin’ dogs have to catch their own dinner. [Your group] better be a bunch of huntin’ dogs.” In other words, we were a small business dependent on ourselves for our continued existence.
I quickly learned a lot about the needs of smaller enterprises like mine. We’d been in business for over a decade but had no real strategy and only one real customer (who actually didn’t care for us all that much!). None of us were businessmen or women. We sort of knew who our competitors were but had no real clue what our markets could be.
In spite of that (and in spite of the handicap of having me in charge!), we were able to triple our revenues in about seven years. One of the best things I did was to put together an advisory board. They helped me to think more strategically as well as identifying opportunities to pursue.
And that in a nutshell is what Economic Gardening is about – providing smaller firms with specialized resources to become more competitive. It focuses on “second stage” companies: those past their entrepreneurial gestation period and who have 10-99 employees. As the accompanying graph shows these businesses (see the two green lines) are responsible for almost 30% of the nation’s jobs. Their condition thus has a huge bearing on our nation’s economic health.
And yet, these small companies are on the brink – ready either to grow into the next Apple or Amazon or to fall back into economic oblivion. They have neither the money nor the staff for an R and D department or a corporate risk manager. Most often they outsource their website development to a third party. Any social media needs are met haphazardly if at all. They don’t have a government relations or compliance staff. When the federal, state or local government imposes a new requirement, it’s another overhead charge that directly impacts their bottom line. And as the graph indicates, they are unlikely to have the resources to respond as quickly as large companies to upsets such as the Great Recession.
Economic Gardening started in Littleton, CO, in 1987 in response to Martin Marietta cutting its workforce in half. This meant the loss of 7,500 jobs. Rather than going the more traditional route of trying to lure a big company with incentives, Littleton’s business development professional decided to focus on helping existing small firms to grow. The results were dramatic – over the next two decades the number of jobs doubled while the population increased only 23%.
There are Economic Gardening (EG) networks supporting small companies in over half of the states. These are “short burst” (a few hours at a time over just a few weeks) engagements with each company’s leadership. The EG professional provides a company’s leaders with targeted help in areas such as
- Corporate intelligence (new markets, trends impacting their industrial sector, competitors);
- Sales leads;
- Improving search engine visibility;
- Strategic planning.
There have been some very significant successes. In 2013-14, the Florida network helped companies add over 3500 (net) jobs to the state’s economy. State and local tax revenues increased by more than $18 M (again net), with a return of $6.74 for every dollar spent on the program. Just as important, the investment is made locally and stays in the community – very different from some of the corporate giveaways many states use to lure big businesses to relocate. Typically, the cost per job created is on the order of $2,000 (compare this with the ~$200,000 per job created by the federal stimulus program starting in 2009).
This is a great approach which is having a truly positive impact on American communities. There are some caveats, however. In order to work, a community needs enough of these smaller companies to justify having an EG program. While the gains noted above are impressive, they may mean only 4-5 new jobs per business. Though the time commitment for each company is low, it may still be too much for many of these small firms. In some communities, the program will be politically unpopular because it exemplifies the “tortoise” approach to strengthening the local economy rather than the flashier “rabbit” approach of bagging a new big business.
That said, these second-stage businesses are the engines of economic growth throughout the developed world and in much of the Emerging Market countries. A resilient community must rely on a healthy economy for the resources to recover from crises. Wise gardeners cultivate plants that will flourish in their native soil. Wise economic developers should do the same. Economic Gardening is an important tool communities should consider as they move to become more resilient (For those interested in learning more, visit the website of the Edward Lowe Foundation).