Thursday, July 26, 2007

still working on this one... but if you want "the rest of the story" re Idaho's rankings, read on! NK

We’re Number 37! We’re Number 37!

Idaho is #1 in new firms, according to the annual Development Report Card for the States ( yet we are only #37 in the number of jobs created by those new firms. #1 in firms, yet #37 in creating jobs from those firms? What’s the disconnect?

Who's More Entrepreneurial? The Northwest or the Rustbelt?

The “entrepreneurial” Pacific Northwest states average 6th in new firms, yet averaging 45th in job creation by new firms. Yet, the boring Midwest averages only 43rd in new firms, yet their new firms average 5th in creating jobs. So what is going on?

Are we creating new businesses? Evidently!

Are we creating entrepreneurs who will grow…. And create jobs? Evidently… not.

Here are more stats that paint a pretty clear picture of Idaho's economy. These are also from CFED, but other indexes and scorecards keep showing the same clear patterns

The Good:

Here are areas where Idaho ranks highly -

* We are #1 in patents per capita and lest you think that this is all Micron, HP & INL, we're still #11 in inventor patents. Not too shabby.

* We are #11 in the percentage of our jobs that are in the high tech sector and #12 in R&D spending by industry.

* In terms of having a dynamic economy, we're #6 in 'churning' (business entries plus exits)

That tells us that we are probably pretty good at creating ideas and getting comfortable with a fast-changing economy. However...

The Bad:

Here the story is less encouraging -

* We are short-handed in IT professionals (#38) and even worse for knowledge workers (ranked #44) and they aren't migrating here (#45).

* We're #43 in broadband access to the internet.

* We aren't doing well on the global front either, only #43 in global businesses and #42 in package exports.

* Not only are we #37 in jobs from new firms, we are #41 in jobs created by high growth “gazelle” firms.

* Finally, we are #50, dead last, in manufacturing value-added.

Here's where our shortage of high-growth “gazelle” firms costs us dearly...

Only 0.9% of Idaho workers are employed in manufacturing industries that offer above-average value-added. Less than 1 percent? (The national average is 26.9. No matter how you rationalize it, there's a problem here.) It's more than we have relatively few jobs in manufacturing, our manufacturing is in industries driven by costs and shrinking margins.

And where do you find the most high-growth entrepreneurial firms? In industries where firms add enough value to earn that growth. High value-added industries are where entrepreneurs find the most opportunities for explosive growth.

Yes, we have a tech-driven economy, but we are not creating jobs or wealth. We need to build the tangible infrastructure (e.g., broadband) and the human infrastructure (e.g., knowledge workers and IT professionals). Most of all, we need to start creating businesses that are truly entrepreneurial and create wealth and create jobs.

So What Can We Do?

As I travel around, I get asked all the time “How do we make a place more entrepreneurial?” Yes, we do know an awful lot about what it takes to make organizations and communities more entrepreneurial. Across the US, across the globe, these best practices work.

However, getting people to listen can be tough. One way to do that is that we must never lose sight of the true goal: Creating economic wealth (which usually translates into creating good jobs)! Starting lots of small business simply is not enough.

Even urban Idaho needs to grow its own jobs. Long term, job creation only happens two ways: (1) New startups and (2) Growing businesses. The CFED stats suggest we can be optimistic about the first but really need to obsess about the second.

Creating jobs is very much a human process, driven by passionate, expert individuals. Increasingly, though, policymakers tend to take the bureaucratic view and look from “40,000 feet” –and a corresponding focus on institutions. (If we fund the right entities in industry, academe and government….jobs happen. But where are the humans?)

Brute Fact: Institutions don’t create jobs; entrepreneurs do.

Fortunately, policymakers are returning to the reality that job creation depends on people, on entrepreneurs and those who help them: That you grow an entrepreneurial economy – that you grow jobs - one entrepreneur at a time!

Consider the three key ingredients of job creation. The first two are “innovation assets” (Ideas) and “entrepreneurial assets” (People). Idaho is already investing in supporting those. Both are obviously essential but too often we lack the ingredient #3, what we call “bridging assets”. The critical leverage point is having and supporting those connectors who not only support the first two, but work energetically to proactively connect people, ideas and resources.

States and communities that champion their own champions create a lot more jobs and a lot more economic wealth for their citizens. (p.s. Having lots of gazelles also translates into higher future quality of life scores!)

Fortunately, Idaho has recognized this and begun the arduous, yet rewarding process of building the selfless partnering that generates and supports connecting people, ideas and resources. Led by the Governor’s Science & Technology Advisory Council, Idaho TechConnect, INL, the Idaho Economic Development Association, Idaho’s Economic Development districts and Idaho Rural Partnership, Idaho has begun to map out important new directions to grow jobs and begun to find ways to bring our existing resources into alignment with those needed new directions.

We have ideas and people, now we need to invest in connecting. We need to invest in the people who already know how to do this, they are your connectors.

Maybe the “entrepreneurial” Northwest lags the “boring” Rust Belt for a reason? And just maybe we can reverse that trend – using the power of connecting to grow jobs!



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