Clusters of Opportunity: Strategies to Accelerate Regional Economic Growth

A Discussion with the Kaneohe Business Group Lisa H. Gibson President March 23, 2011

Background

• 35 Years in Marketing and Fund Development • 15 Years in Economic Development • Sustainable Oahu Initiative 1999 – Chattanooga Best Practices Tour • COO – Enterprise Honolulu – Co-Author of

Target 2005: A Five Year Pathway to Local Prosperity and Global Prominence

• Project Manager Hawaii Life Sciences Roadmap • Founder and Past President the Hawaii Science & Technology Council & Institute • Oct 2006 published S & T baseline data:

Innovation and Technology in Hawaii: An Economic and Workforce Profile

Today’s Discussion

• The Structure of Hawaii’s Economy • Hawaii’s Economic and Workforce Crisis • Role of Innovation in Global Competition • Strategies for an Economic Intervention – Role of Regions – Focus on Clusters of Opportunity – The Process – Potential for the Kaneohe

The Structure of Hawaii’s Economy

Imports (goods & services) $14.954B

Exports (goods & services) $ 2.194B

Visitor Expenditures $10.033B

(goods & services) Trade Deficit: $ -2.727B

Imports-(Exports+Visitor Expenditures) = Trade Deficit Foreign Direct Investment Federal Expenditures Source: DBEDT $11.63B

$ 9.015B

Hawaii’s Growing Gap Between Rich and Poor

• • • • • • • •

In comparison to other U.S. States, Hawaii ranks: Highest

# of households receiving government financial aid (2.9%)

Highest

# households receiving Food Stamps (12%)

3rd Highest

with 10.7% of population below 100% of federal poverty

4 th Highest

with 25.9% of population below 200% of federal poverty

7 th 43 rd Lowest

with a per capita income of $21,888

in Nation

for growth of average pay

47 49 th th

for economic diversification for home ownership Source: Honolulu Advertiser 10/23

The Role of Ideas

Tough Choices Tough Times

The National Center on Education and Economy “This is a world in which comfort with ideas and abstractions is the passport to a good job, in which creativity and innovation are the key to the good life, in which high levels of education….are going to be the only security there is.”

Global Challenges Facing America’s Communities

• New global innovation economy • New opportunities for prosperity • Raised stakes for participation • Disruptive – rewards regions which innovate and hardship for bystanders

Why Innovation is Central to Rising Living Standards

• The key to prosperity is productivity • The basis for increasing productivity is innovation.

• Only way to compete and raise our standard of living is to find new and better ways to use natural, human and capital resources to increase productivity.

• Better – Faster – Cheaper

Creating Prosperity is a Social Justice Issue

“Economic growth -- meaning a rising standard of living for the majority of citizens – more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy.” In contrast, when an economy stagnates, “the resulting generates intolerance, un-generosity, and resistance to greater openness of individual opportunity.”

The Moral Consequences of Economic Growth By Benjamin N. Friedman

Cannot Cut or Tax the Path to Prosperity

Hawaii Deficit nears $1B

Star Advertiser 3/11/11

Higher Alcohol tax will destroy restaurant and hospitality jobs

Star Advertiser 3/2011

GROWING ECONOMY DRIVES VITAL CYCLE

Regions as Critical Units of Economic Activity • Big enough to compete globally • Small enough to benefit from network economics • Regions are the scale at which to efficiently and productively deploy assets to create wealth • Communities and regions must focus on the systems and interactions which account for regional economic performance.

• Aspire to better understand systems, explore factors which influence performance, identify interventions which will be most effective

Challenges for Communities

• Regions must now compete on the basis of increasing productivity not simply costs • There is no such thing as a “high tech” or “low tech” industry anymore, only innovative or non-innovative.

• To achieve success, regions must understand the evolving nature of innovation.

• To recognize its own strengths, identify other regional “spikes” based on their strengths, and connect to those “spikes” for mutual benefit. • To transform the deleterious single interest/zero-sum game into the pursuit of integration to achieve mutual gain.

• NETWORKING AND COLLABORATION ARE KEY

How to Close the Gap Between Theory and Execution?

Two Quotes from Peter Drucker

“Innovation is the purposeful pursuit of opportunity” “Strategy is worthwhile when it degenerates into work”

Focus on Regional Clusters of Opportunity

• Mobilizes Cluster Leadership • Apply Business Planning methods to economic development • Use of data to identify clusters of opportunity and to measure performance • Create the framework for a continuous improvement process • Inclusive and transparent

A New Kind of Assessment:

Focus on Cornerstones of Innovation

• Assets • Networks • Culture • Community

Best Practices Examples

• California Wine Industry Cluster Map • San Luis Obispo Clusters of Opportunity Economic Strategy – Collaborative Economics

Cluster Mobilization Process Seeks to Answer Two Questions

• What are the opportunities for growth of your industry in this region?

• What are the requirements for promoting those opportunities?

PROCESS OVERVIEW

• ASSESS the region’s economy and identified key clusters of opportunity.

• CONVENE groups of employers by cluster to discover high priority opportunities and requirements for industry growth, vitality, and competitiveness. • FORM CLUSTER ACTION TEAMS based on these meetings, develop Action Plans, with specific outcomes, strategies, and implementation commitments. • COMPLETE an Economic Strategy Plan • LAUNCH IMPLEMENTATION PROCESS • MONITOR PROGRESS

CLUSTERS OF OPPORTUNITY ARE SPECIALIZED AND GROWING

UNIQUELY SAN LUIS OBISPO COUNTY:

SPECIALITY PRODUCTS & EXPERIENCES

“Uniquely San Luis Obispo” Action Plan

• Expand Funding to Promote Cluster • Launch a unified and Countywide branding and marketing campaign • Launch a parallel community awareness campaign • Promote local policy changes that support individual specialties and combinations of specialties

Why This Matters to Policy Makers

“

The global economic crisis has made it clear that our economies will never be the same and that we must all adjust to a new normal”

House Budget Chair Marcus Oshiro Honolulu Star Advertiser 3/18/2011 • Hawaii cannot cut its way to prosperity • There is no business plan to create a tax base for Hawaii • Must develop a business plan which focuses on existing and emerging clusters of opportunities.

• Process must be driven by business and regions

Need to Reframe the Question

How much does Hawaii’s GDP need to grow to achieve our economic, social, environmental and cultural goals?

Questions and Discussion

How is this process relevant to business in Kaneohe?

Mahalo

There is no sustainability if you don’t have a job

15 Steps to Regional Prosperity 4 Planning Phases

Building New Foundations Approach Promote your success Monitor your progress Leverage your resources Design implementation plan Prioritize your actions Define your actions Construct a vision statement Prioritize issues of concern Inventory assets & challenges Conduct baseline assessment Define your geography Frame your analysis Engage your leaders Call the region to action Assess your capabilities Execute Your Plan Formulate Strategies & Prioritize Actions Detect Regional Economic Advantage Lead the Planning Effort

29

CLUSTER ANALYSIS

Export Engine –

Direct /Traded

Additional Industries of same kind Primary

Indirect

Firms:

Local Indirect

Support Firms:

Local Induced

Demand

Export Engine 1

2 3 4 5

(9) Celebrate Success (8) Evaluate the Effort

* One tool to accomplish this is Targeted Economic Development

(10) Create an Ongoing Process (1) Begin/ Continue the Process (2) Engage the Community and Legitimize the Process

Community &

(3) Form Organized Structure & Partnerships

Economic Development

(4) Conduct Community/economic Assessment(s)* (7) Implement the Plan (6) Seek Community Feedback and Commitment (5) Develop a Strategic Plan