TIP Strategies is a privately held Austin-based economic development consulting firm committed to providing quality solutions for public and private‑sector clients.
This blog is dedicated to exploring new data and trends in economic development.
March 11, 2014, marked the last day of this year’s SXSW Interactive. Austin’s premier tech event has grown steadily since its inception in 1994. One notable mark of its reach, that may be overlooked by the standard measure of badges sold and tourism dollars generated, is the heightened presence of economic development organizations at the festival.
The industry’s interest in SXSW was apparent from the number of US states and cities, as well as foreign cities, regions, and countries, that set up shop at SXSW, all vying for one of the most desired of economic development targets: tech start-ups and young entrepreneurs. No doubt about it, this tactic represents a sea change in what counts as credible economic development. Where in the past the profession’s holy grail was the relocation of a major manufacturing company, we now see a shift to technology and high growth start-ups (though manufacturing is still seen as the primary objective in many parts of the US). We’ll leave for another time a more thorough discussion of how successful these efforts are. (The short answer: it varies widely.) At one end of the scale is the possibility that bringing companies to SXSW will only speed their exodus from less tech-savvy regions to (you guessed it) Austin. At the other end is the ability to connect with and recruit entrepreneurs to new markets. My panel, “Start-up Grind: What Makes Austin a Startup Hub,” touched on these issues, as well as the question of what made Austin successful in the tech space.
Clearly, industry recruitment and expansion is not the stated objective of SXSW Interactive, nor is it likely to be the primary draw for most participants. As suggested by their mission statement—encapsulated in three values: creativity, innovation and inspiration—SXSW Interactive is about stepping outside your intellectual comfort zone. At a minimum, spending time in the presence of so many creative companies and individuals gives you an opportunity to rethink assumptions behind your business—even, and especially, at a fundamental level. From an economic development perspective, for example, this rethinking of assumptions raises the question of whether measuring success by jobs created is the best way to grow our economy. Abandoning this gold standard is, in some ways, analogous to growing a business without worrying about profitability. It’s a radical notion, and one that, on the face of it, makes no sense. Just don’t tell that to Amazon or to Facebook.
But testing one’s assumptions is not the whole of the SXSW experience. The real power of SXSW lies in what Tony Hsieh, of Zappos fame, calls collisions—connections that occur spontaneously and bring together individuals and companies that might never have connected before. The sheer number and variety of panels, speakers, and registrants makes this goal relatively easy to accomplish. It can be as simple as colliding with the AT&T team during the Ping-Pong tournament (and, in my case, losing to them) then learning what AT&T is doing, what their talent strategy is, and what their new product line will look like. If I’m busy “recruiting companies,” I miss out on these chance encounters; my agenda gets in the way of making real connections. Sometimes an indirect approach is the surer path towards one’s goal.
And even if you weren’t able to experience the randomness of SXSW, you couldn’t fail to miss this year’s driving theme. It was already apparent on the first day and gathered steam throughout the event: Internet privacy. First Julian Assange, via Skype from the Ecuadorian embassy in London, then Edward Snowden from an undisclosed location in Russia (routed through multiple ISPs). Whatever one’s political attitude towards Assange and Snowden, their message is coming through loud and clear and is being fully embraced by the tech crowd: privacy matters.
The question of Internet privacy has numerous dimensions. It is not exclusively governmental. It extends to transactional privacy with corporations and to the question of who owns our personal data (our Internet identity). The default answer should not be that this information is “owned” by corporations or the government (or health care providers). We—it is being argued—have an absolute right to our personal data and we ought not to be giving it up (or having it taken from us) without our informed consent. This, of course, is a discussion that requires a much larger platform. At a minimum, however, SXSW is signaling a shift in how we think about our use of the Internet. I’ll venture to say it signals a sea change, one whose implications may be profound.
Among the immediate insights that arise from taking a privacy perspective on data are the following:
- Bitcoin is interesting far beyond its effects on financial institutions. The way to think about Bitcoin is as a means of ensuring transactional privacy. What could only be done with cash, can now be done electronically with the same advantages – and, as we have discovered, some of the same risks.
- Our health records are ours, and do not belong to a health care system or the government. The realization that our health records tell our personal story and that their ultimate value belongs to us and needs to be managed by us is still a startling fact.
- Every online transaction, from simple browsing to Internet (and credit card) purchases, reveals information about us that we have the right to control. Commercial transactions, by definition, are between at least two parties. E-commerce exponentially increases the parties involved in each transaction. Data collected during the initial transaction becomes a commodity in itself, which can be shared and sold many times over. Whether we explicitly agree to this extension of our transactions or not, we are entitled to know which of our data is kept and how it is being used.
These points—and many more like them—could have enormous business and social implications. It is immediately apparent that they relate to one another and foreshadow a changing relationship to the data and metadata that increasingly define who we are. In fact, we can expect to see a new wave of disruptive technologies related to managing our on-line activity. We are already beginning to note distinctions where before there were none: distinctions, for example, between privacy and security, and what it means to own our digital identity. Add in social media (in its multiplicity of forms), and every on-line activity is subject to a major re-thinking.
SXSW has a way of making small ideas very big. This was true of Twitter, and it may be true of a new wave of privacy-related companies. Stay tuned.
By: Caroline Alexander & Siobhan Dilly
Via: TIP Strategies
In early May, the White House announced the Investing in Manufacturing Communities Partnership (IMCP) in an effort to grow the US manufacturing sector. The Economic Development Administration has allocated $4 million to support the development of 20 to 25 regional strategies. The EDA provides the following description of these projects:
“Successful projects will be regional in scope and focus on manufacturing sectors that demonstrate comparative advantages in the marketplace. Competitive applications should emphasize public-private and higher education collaboration. In addition, they will target investments that help stakeholders within a region to collaborate and build on existing regional assets to create a supportive regional economic ecosystem for business investment and innovation, increased international trade and exports, the creation of good jobs, and improved quality of life.”
The recipients of this round of funding will be eligible to compete in Phase Two of the IMCP, which will award six “challenge” grants of up to $25 million each. These Phase Two grants are intended to be supplemented by coordinated investments from several other federal departments and agencies.
Example projects include specialized research centers at local universities; business incubators focused on targeted technology sectors; community college programs to train workers in targeted industries; public works projects to upgrade infrastructure or enhance energy efficiency; viable export promotion plans; and well-integrated supply chains.
Phase One will be funded through the EDA’s Economic Adjustment Assistance program and can be up to $200,000. Grant applications are due June 13. For more information on how to apply, download the EDA’s PDF here.
This is an exciting opportunity. Please contact us now if you need any help pursuing it.
By:Kathleen Baireuther, TIP Strategies
The New York Times’ United States of Subsidies series published in December of 2012, raised a number of issues surrounding the use of business incentives by state and local governments. The Times “tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies.” The article also identifies 48 companies that have received over $100 million since 2007 and highlights the disparities in incentive awards among states through a searchable database of incentives.
Not surprisingly, the series has generated a great deal of discussion among development professionals. Although the $80 billion figure has been questioned for its inclusion of sales tax rebates, many of the key challenges surrounding business incentives discussed in this series should not be overlooked. The tactical hurdles associated with negotiating with private companies, measuring economic impact, tracking return on investment, and establishing mechanisms to monitor compliance are important to any community engaged in negotiating performance agreements.
At TIP Strategies, we appreciate the complexity of negotiating a policy for the effective use of incentives. If structured well, however, incentives are one of the many tools available to economic development practitioners that can be applied by community leaders to help shape the direction of a local or regional economy.
We were recently engaged by a client to analyze the incentives policies of peer communities. A review of the peer communities identified in the city’s strategic plan, major employers, and target industries resulted in the identification of eight possible competitors. Information around each community’s incentives policy, review process, compliance requirements, and return on investment metrics was gathered through phone interviews and web research October-December 2012. A brief summary of our key findings is below:
• Communities with formal incentives policies tended to also have a clearly-articulated incentives process and compliance review. Interviewees noted that the combination of a strategic plan for economic development and a formal incentives policy allowed them to negotiate performance agreements with more confidence. City councils generally upheld existing strategy documents and incentives policies when voting on specific deals.
• Many of the communities were willing to share examples of performance agreements. Overall, these contracts are highly-customized, detailed documents that include a number of provisions to protect the municipality in the event of non-compliance by the business partner. The agreements generally provide for a series of specific remedies, such as interest on fees owed to the city, as well as the cost of pursuing payments associated with a clawback agreement.
• Performance agreements are often “back-loaded.” Under this model, business partners are required to complete a formal reporting process before incentives (often in the form of tax rebates) are awarded. Agreements are generally tied to a timeline and are capped at a maximum dollar amount per year.
• Austin, TX, and Charlottesville, VA, do not generally award large incentives packages. The approval of local incentives makes it possible, however, for state funds to be leveraged as part of a negotiation on a case-by-case basis. For example, in the performance agreement between the City of Austin and Facebook, $200,000 in City incentives was awarded over a 10-year period. The State of Texas added $1.4 million to the deal.
• Many incentives policies that were developed prior to 2005 are currently being re-evaluated. Austin, TX, and San Diego, CA, for example, both plan to re-vamp their incentives policies during 2013 and have already assigned special committees with the task of reviewing existing policies.
• Although almost every community interviewed conducts some form of economic impact analysis prior to entering into a performance agreement, not all communities have clear, stated processes to evaluate return-on-investment on an ongoing basis. Of the communities interviewed, Austin, TX, has the most transparent and consistent compliance process.
• The strategic planning process can serve as a platform to enter into conversations about roles and responsibilities around economic development activities in a region and clarify expectations among parties. For example, the Portland Development Commission and the City of Loveland, CO, both have updated strategic plans that attach “responsible parties” to key strategies and actions. The importance of a strategic plan for regional efficacy in economic development is also highlighted in the 2012 Performance Audit of San Diego’s Economic Development Program. Not only does this audit highlight the role of a strategic plan, but it also emphasizes the how the City can play a central, coordinating role for the entities involved in economic development in the region.
At the IEDC Leadership Summit in Orlando this week, Jon Roberts will continue the conversation he began a year ago with his Future of Jobs Ignite presentation. The presentation discusses three perspectives (individual, firm, and policy) from which the term “job” can be defined to offer a historical context for our present conversation. In short, the term “job” as we understand it today suggests a specific employer-employee relationship that developed during the Industrial Revolution and has persisted over the last century.
Our notion of a “job,” however, assumes a relationship that is dissolving. Despite the gradual deconstruction of the employee-employer relationship, economic development professionals still use jobs as a metric for economic growth. If job creation is our objective, then whose job is it to create jobs? What roles should the public and private sectors play in job creation?
Jon argues that we are asking the wrong question. We should be asking: does a healthy economy even require jobs? No. Productivity is required, and that has been increasingly divorced from employment over the past 50 years. GDP per capita has more than doubled since 1960, while at the same time the share of the working age civilian population contributing to that GDP growth has increased only 4% overall in 50 years. Since 2000, the labor force participation rate has declined from its peak at 67.1% to its current rate of 63.7%.
If no one is responsible for creating jobs, and productivity is possible with fewer and fewer jobs over time, then we should ask: what are the conditions under which jobs are created? Or, more accurately, what are the conditions under which value is created? What does it mean for economic development organizations to support the creation of value? How should our evolving understanding of the labor market shape the practice of economic development?
Catch the Does a Healthy Economy Require Jobs? panel on Tuesday, January 29th, 11am-12:30pm.
Moderator: Raymond Gilley, Executive Counsel/Director, Thompson Wesley Wolfe, LLC, Orlando, FL
• Maureen Collins-Williams, CDM, Director – Entrepreneurship Outreach and Regional Business Center, University of Northern Iowa, College of Business Administration, Cedar Falls, IA
• Steve King, Partner, Emergent Research, Lafayette, CA
• Heidi Pickman, Communications Director, California Association for Micro Enterprise Opportunity, San Francisco, CA
• Jon M. Roberts, Managing Director, TIP Strategies, Inc., Austin, TX
The Iraq and Afghanistan Veterans of America (IAVA) is the first and largest nonprofit, nonpartisan organization for Iraq and Afghanistan veterans. IAVA’s programs are designed to empower a community of over 200,000 member veterans and supporters online and offline through Smart Job Fairs, the New GI Bill Calculator, and Community of Veterans, a veterans-only social network.
In addition to daily interactions through social media and other platforms, IAVA also conducts an annual member survey. This year, 4,278 members responded to 120 questions.
Key findings from the 2012 member survey include:
|•||IAVA members’ unemployment rate was almost 17% —significantly higher than the 12.1% average unemployment rate for Iraq- and Afghanistan-era veterans in 2011.|
|•||Almost half (49%) of unemployed members did not feel that employers were open to hiring veterans.|
|•||More than 50% of IAVA members are interested in starting a business in the next 3–5 or 6–10 years.|
|•||35% of IAVA members are already taking advantage of their New GI Bill benefits, and almost 50% plan to use it for themselves or their families.|
The 2012 survey also demonstrates the profound impact this cohort of veterans will have on the national workforce in the near future. Of the members who self-identified as “active duty,” 86% expect to separate within the next 3 years. The survey also indicates that 44% of this group plan to get a job, and 34% plan on going to school after separating from service.
Understanding the current and future labor force is an important first step in any economic development planning process. Workforce profiles add value in three ways: (1) a skilled labor pool is an asset that will aid in attracting companies to the community; (2) training programs can be tailored to specific local needs; and (3) talent retention and recruitment efforts should reflect identified gaps in the existing labor pool.
In order to support defense communities who seek to better understand their labor pools, TIP developed the Veterans Inventory in partnership with the Heart of Texas Defense Alliance (HOTDA). The primary objective of the Veterans Inventory is to characterize and catalog the post-military intentions, educational levels, skills, and desired employment of military personnel separating from service. It also captures the skills and desired career fields of military spouses. This information is valuable because it can be used as a tool to recruit companies to an area by highlighting local talent. It is also used to match existing employers with a qualified local workforce they might not have otherwise identified.
The short survey can be administered as part of the Transition Assistance Program (TAP), now mandatory for all military personnel separating from service. For business recruitment and workforce training purposes, the tool is most useful when administered longitudinally, as trends can be identified, and community leaders can respond accordingly.
Case Study: The Fort Hood Region Veterans Inventory Initiative
In 2006, the Greater Killeen Chamber of Commerce, TX, with support from the Central Texas Workforce Board (CTWB) and the Heart of Texas Defense Alliance (HOTDA), engaged TIP to conduct an economic diversification strategy. The Veterans Inventory Initiative was a key recommendation of the resulting Operation Economic Transformation plan for the Fort Hood Region. Since 2007, the survey has been administered consistently and HOTDA publishes quarterly reports summarizing the findings. Selections from the Fort Hood Region Veterans Inventory Initiative (April to June 2011) are highlighted here to demonstrate the valuable information that can be gleaned from such an exercise.
Intentions of Staying in the Region
From April to June 2011, 38% of departing Soldiers reported they intend to remain in the area. In addition, another 21% indicated they would stay if desirable employment was available. Over the past 15 months, 1,655 (36.5%) respondents intended to remain in the Central Texas region and another 945 (21%) respondents said they would stay if their desired employment was available. This data clearly demonstrates that desirable employment opportunities within the MSA is a driving force in retaining Soldiers following their service in the military.
Military Occupation Specialities (MOS)
Departing Soldiers represented 138 different Military Occupational Specialties in Q3 of 2011. However, 85% (745/880 respondents) can be grouped into seven general areas: Logistics/Transportation, Combat Arms, Maintainers/Repairers, Medical, Information Technology/Communications, Engineers, and Military Intelligence. This is the fifth time that Military Intelligence was ranked as one of the top reported specialties of departing Soldiers.