Impresa. Prospering in the Knowledge Economy. Roadmap. Prospering in a Knowledge Economy: New Rules for the Road Ahead. Complexity of the Economy

Transcription

1 Prospering in a Knowledge Economy: New Rules for the Road Ahead Impresa Joseph Cortright October 2003 Roadmap Thinking About the Economy The Landscape Metaphor Ideas and Things Ideas and Place Bringing it Home The Landscape Revisited People: The Young and the Restless For the Regional Leaders Seminar Series, Portland State University Institute of Metropolitan Studies Complexity of the Economy 1. Thinking About the Economy Nationally $10,000,000,000, GDP Nearly 300 million people 10 million businesses 1

2 What we still have in common with our ancestors of 100,000 BC Roughly the same cognitive ability and brain size How we cope: Mental models Simplify, Abstract Rules of Thumb Metaphors Capture essence, ignore irrelevance Economics is Metaphors Tight labor markets A soft landing Overheated economy What models do you use? Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slave of some defunct economist. John Maynard Keynes, The General Theory 2

3 The Landscape Metaphor 2. The Landscape Metaphor Physiocrats: All Wealth Springs from the Land Works well for traditional industries Minneapolis: Milling Pittsburgh: Steel Start with the Icons Under the Dome House Chamber Senate Chamber 3

4 The Douglas Fir Oregon s Forests Commodity Lumber Sheaves of Wheat 4

5 Dryland Wheat Farming Grain Elevators Grain Ships Home on the Range 5

6 Feedlot Cattle Molten Steel & Aluminum Primary Metal Fabrication 3. Ideas and Things A conventional view 120 Price Supply Demand Quantity 6

7 Neoclassical growth model: Formal Version Neoclassical Growth Model: Simplified Version Y Ú = ( k, l) Output is a function of capital and labor Capital: More & Bigger Factories More & Smarter Workers 7

8 Why are we richer today? Radical, Not Incremental Change + + = New Growth Theory Formal Version New Growth Theory Y Ú = ( k, l, t) Ideas are different from things Non-rival Ideas overcome decreasing returns associated with physical things; enabling and driving growth Output is a function of capital and labor and technology 8

9 New Growth Theory: Simplified Version Creating New Ideas How much scope for new ideas? How many ideas? 52 Cars: How many combinations? 51!=10 68 A trillion people A trillion computers A trillion combinations a second Every second since the Big Bang Odds of any given combination: 100 trillion to one against 9

10 The Pace of Change How Powerful are Ideas? New Technologies are often adopted quickly Which technology takes off is hard to foresee Millions of units sold Compact Disks Replace Albums & Cassettes Albums Cassettes Source: Figure drawn from Recording Industry Association of America statistics Compact disks Fax Machines for Business Use: Sales ($billion) $

11 Fax Machines Falling Price Drives Fax Adoption Personal Computers Mobile Telephone Adoption 11

12 Cell Phone Rates Dropping Sharply $0.50 $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Average Revenue Per Minute Internet Access US Population On-Line 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: FCC, :C-12 Latte Availability, Too Starbucks Stores 7,000 6,000 5,000 4,000 3,000 2,000 1, Television in the 50s Percent of US Homes with TV

13 What s the Next Tech Wave? 4. Ideas and Place Technological Evolution of Silicon Valley So, if its all about ideas... The Knowledge Spillover Model Does it matter where you are... Any economic activity can occur anywhere The Death of Distance Stanford or MIT Hewlett Packard DEC 13

14 A Two-Way Street Information v. Knowledge Strong Clusters Information Codified, flows anywhere Stanford or MIT Adjunct Faculty, Research $ Graduates DEC Hewlett Packard Knowledge Tacit, Embedded in people, companies, and places A conventional view Price Supply Theory: How Economies Work The efficient invisible hand vs Demand Quantity 14

15 Or... QWERTYnomics QWERTYnomics Complementary Investments Typists Learned Manufacturers Produced Lock-In QWERTY applies to many technologies DOS, VCR Why Clusters? QWERTY in Space Complementary Investments by Workers by Investors by Firms Lock In Evidence: Origins of Silicon Valley Vacuum Tube, Lee DeForest Palo Alto, 1912 Television: Philo Farnsworth San Francisco, 1924 Teens & Twenties Federal Telegraph, Magnavox, Litton 15

16 An Ecological Metaphor DNA = Knowledge Individuals carry knowledge Natural Selection Environments select viable knowledge Diversity Different environments select different knowledge Evolution Economies change over time Ecology of Knowledge A New Metaphor Think of the economy as a complex, evolving, interrelated eco-system, as rich and varied as the natural landscape Implications of Ideas Knowledge Matters Place Matters History Matters History Matters Denver: Cable Industry (Bill Daniels) [1940s] Minneapolis: Mainframes (Bill Norris), Medical Equipment (Earl Bakken) [1940s] Silicon Valley: Radio (Lee DeForest), Semiconductors, William Schockley) [1910, 1950] San Diego: Wireless Telecoms (Irwin Jacobs) [1960s] 16

17 Metropolitan Portland Metrics 5. Bringing it Home Definition: 6 Counties 1.9 Million Residents 50,000 Businesses with Payroll 1,000,000 Workers A $60 Billion Economy The Roaring 90s 200,000 new jobs in 10 years Dodged the national recession Outgrew the US 80% of the time 17 years without a year-over-year employment decline Incomes rose to 10% above US average Why? Success isn t Random While most jobs and businesses in every metropolitan area are the same Restaurants, grocery stores, hospitals, beauty salons, About a third differs: Traded sector 17

18 Traded Sector Drives Growth Strategies Differ Most jobs are here: schools, hospitals, grocery stores, restaurants Local Local Promote Efficiency & World Class Suppliers Suppliers Traded/Export Sector Sales to the rest of the world Suppliers Traded/Export Sector Build Cluster Competitiveness But firms in this sector drive the economy Clustering is Critical Traded sector success isn t random Similar and related businesses draw advantages from proximity Places specialize Portland produces 10% of US semiconductors Seattle produces none Clustering holds for most traded goods: autos, carpets, RVs, others High Tech Clusters Seattle - Software Portland - Semiconductors Minneapolis - SME/EDA - Computers - Display - Medical Devices - Computers Salt Lake City Boston Sacramento - Software - Computers - Computers - Medical Devices Silicon Valley - Storage Technology everything! Denver - Telecommunications Research Triangle Park - Satellite San Diego - Software Phoenix - Storage - Communications - Semiconductors Atlanta Austin - Database - Semiconductors - Telecommunications - Computers - SME 18

19 The Ecology of the Silicon Forest Origins: 1940 s Vacuum Tube Forest in Southeast Portland Tektronix Heike Mayer used by permission Source: Quanix Directory Metro Portland Industry Clusters High Tech Metals/Machinery Transportation Equipment Apparel/Sporting Goods Creative Services Professional Services Food Processing Forest Products 6. The Landscape Revisited 19

20 Commodity Lumber Value Added Wood Products Precision manufactured and precut to your precise specifications. Dryland Wheat Farming Grain Ships 20

21 Prospering in the Knowledge Economy Containerized Grain Our Daily Bread The transportation process is sealed from wheat field to final production, assuring quality. Feedlot Cattle Oregon Country Beef Portland, Oregon Phone 503/ October 2003 Page # 21

22 Hamburger or Steak? Molten Steel & Aluminum Primary Metal Fabrication Today s Metal Industry Aluminum Jet Boats (Grants Pass) 7. People: The Young and the Restless Bronze Art Castings (Joseph) 22

23 Knowledge Drives Metro Success Ten Best Educated Ten Least Educated Four Year Degree or More Annual Per Capita Income Growth % 1.8% 16% 1.0% Skidmore Fountain Good Citizens Are The Riches Of A City Fewer 25 to 34 Year Olds Future Outlook: Labor Shortage U.S. 25 to 34 Year Old Population 1990: 43.5 Million 2000: 39.6 Million Today 3.9 Million Fewer a 9% Decline Last 30 Years Boomers enter prime work years Women s labor market participation nearly doubles Educational attainment up sharply = Labor Surplus Next 30 Years Boomers retire; many early Women s labor market participation plateaus Educational attainment plateaus = Labor Shortage 23

24 25 to 34s: A Critical Demographic Well-Educated Highly Mobile Hard-Working Adaptable Cheap (Relative to Older Workers) = H.R. s Dream Demographic Big Shifts in 25/34 Population Among Metros % Change Year Olds, 1990 to % -20% 0% 20% 40% 45 Most Populous Metro Areas Young Workers Grew Rapidly in a Few Metros College-Educated 25-34s Also Concentrated % Change Year Olds, 1990 to 2000 % Change Year Old Col. Graduates Biggest Gainers & Losers -25% -15% -5% 5% 15% 25% Biggest Gainers & Losers -20% -10% 0% 10% 20% 30% 40% 50% 60% Las Vegas, NV-AZ MSA Austin-San Marcos, TX MSA Phoenix-Mesa, AZ MSA Atlanta, GA MSA Raleigh-Durham-Chapel Hill, NC MSA Portland-Salem, OR-WA CMSA Chicago CMSA San Francisco, CMSA St. Louis, MO-IL MSA Pittsburgh, PA MSA Buffalo-Niagara Falls, NY MSA Las Vegas, NV-AZ MSA Charlotte, NC-SC MSA Austin-San Marcos, TX MSA Portland-Salem, OR-WA CMSA Chicago CMSA San Francisco CMSA St. Louis, MO-IL CMSA Rochester, NY MSA Norfolk-Va. Beach, VA-NC MSA 24

25 Central County Growth Was Particularly Important % Change Year Old College Grads Selected Metros 0% 10% 20% 30% 40% 50% 60% 70% Las Vegas (Clark) Portland (Multnomah) Atlanta (Fulton) Charlotte (Mecklenberg) Austin (Travis) For More Information Impresa Raleigh Durham (Wake) Denver (Denver) Phoenix (Maricopa) Salt Lake City (Salt Lake) Orlando (Orange) Nashville (Davidson) Seattle (King) Later Presentations would cover Clusters in Detail Strategy etc 1. What is strategy? A strategy establishes a vision of how our region will differentiate itself economically from our competitors, and how various aspects of what we do around the region will fit together to accomplish this vision. 25

26 Strategy = Differentiation Competitive strategy is about being different. The essence of strategy is choosing to perform activities differently than rivals do Porter s Elements of Strategy Efficiency alone is not a strategy Strategy is about differentiation Strategy requires trade-offs Fit among activities makes strategy defensible Michael Porter, What is Strategy, Harvard Business Review, November-December 1996 Michael Porter, What is Strategy, Harvard Business Review, November-December 1996 Regional Economic Strategy Essentials A shared economic vision Strong leadership An overarching organization to coordinate Broad-based collaboration Rigorous analysis with mechanisms for translating ideas into action Regions need to overcome transition points Source: Porter, 2001 Hallmarks of Strategy Explicitly state goals Identify competitor regions nationally and globally State how we will be different and spell out the fit between different elements of our strategy Rule out strategies we re not going to pursue Measure progress 26

27 3. What are competitor regions doing? Why Regions? Hallmarks of Regional Efforts Examples of Competitors Why Regions? Globalization De-emphasizes importance of nation state Clustering Increases importance of local base and networks Metropolitan Centered Regions are New Competitive Units Hallmarks of Regional Efforts Examples of Competitors Many competitors regions have specialized institutions for economic strategy Mix of public and public-private, all with strong collaboration Focus: positioning, vision and assessment, building on industry clusters Activities: dialog and collaboration on the regional economy, but don t dictate policy to member institutions. Silicon Valley: Joint Venture Silicon Valley San Diego: SANDAG Regional Economic Prosperity Strategy Cleveland Cleveland Tomorrow Also Examined Nelson, Tasman Southern California Association of Governments Wales Northumberland (UK) Economic Development Strategy 27

28 The missing piece: specifics Economic Development Efforts Distinguishing Strategy & Tactics Characteristic Tactics/Local Plans Strategy Content Specific actions Positioning, direction Regional Local Regional Transporation and Land Use Planning Zoning Infrastructure Permitting Incentives Projects Positioning Brand Competitor Analysis Benchmarking (City or County Plans) Geographic Scope Site specific Region vs. Other regions Timing Immediate to Long term Long term Involvement One jurisdiction Many partners Authority Prescriptive, Collaborative Often binding with autonomy Action Vision Assessment Activity Measures Regional Performance A Starting Point for Strategy Evolution Occurs on the Fringes Autos: Japanese forced Detroit to change Biotechnology: Emerged from universities, new companies, not drug companies Computers: Homebrew Apple/Microsoft, not IBM Oregon Business Plan 28

29 Protecting complex ecosystems from monoculture The Economy is an Ecosystem, too Let s take a quick tour... Next Exit: Your Town? Some Local Cuisine Food Gas Lodging 29

30 Unique Shopping Opportunities Specialty Shops Home Brews Impresa For More Information 30

31 Technology Takeoff Jorge Reina Schement Institute for Information Poli Penn State University Jorge Reina Schement Institute for Information Policy Penn State University 31