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Who will lead?
Ed MorisonEconomic Policy AdvisorPurdue Center for Regional DevelopmentFebruary, 2009We are confronting a fundamental transformation: the way in which wealth iscreated is shifting. We are moving from vertically oriented business modelsdeveloped in our grandfather’s economy to business models based on opennetworks. This shift has profound implications for how regional economies buildcompetitive advantage.Our grandfather’s business models were designed to minimize costs. Traditionalpractices of economic development spoke directly to the managers of thesebusiness models by emphasizing low-cost land, labor and capital, bundled into agood "business climate". The legacy of recruitment strategies and the deep (andfor the most part unproductive) economic development incentives that fueled thestrategy still dominate most economic development organizations.Beginning about 20 years ago, new business models began to emerge based onnetworks. In the 1980s, Fortune 500 companies began to build globalmanufacturing networks. With improvements in telecommunications and logistics,supply chain integration emerged as an important strategy. In the 1990s,companies started connecting with their customers. Customer relationsmanagement emerged a critical strategy. In the mid-1990's, the Internet explodedwith the invention of the Web browser. The interactivity of the Web made purenetwork business models, like Google and eBay, possible.We are now faced with some clear realities:1. Traditional economic development strategies based on low-cost competitionare no longer effective. Low-cost land, labor, logistics and capital are increasinglyavailable anywhere.2. Sustainable competitive advantage for a company or a regional economy isrooted in the capacity to innovate. Innovation leads to business activities that cansustain a higher value-added per employee and lead to higher incomes in aregion.3. Increasingly, innovation is taking place in open networks. Collaborativeinnovation emerges within regional economies among clusters of related firmsand supporting organizations, like community colleges and research universities. These clusters form complex regional innovation systems to share informationand resources.4. To accelerate regional innovation, economic developers need to focus on
 
building these regional networks. These networks emerge around complexprojects that fall outside the four walls of any one organization.5. Open regional networks become the key feature of competitive regions.Regions with thicker collaborative networks learn faster, spot opportunities faster,and align their resources faster. In short, they are more competitive. Buildingmore entrepreneurial regions comes down to developing these networks with newtools and resources targeted to the needs of high growth companies.6. Competitive regions also need more effective networks for buildingbrainpower. The skill demands of high-value jobs are increasing, yet oureducational system has only made marginal improvements over the past 20years. At the same time, the Baby Boom generation is retiring and creatingserious skill shortages in professions demanding post-secondary education. Theconnection between educational attainment and economic prosperity isirrefutable. Regions that learn to innovate in building brainpower and boostingeducational attainment will prosper.7. New approaches to regional leadership are also emerging. In the pastcommunities and regions relied on a handful of regional leaders capable of projecting a "command and control" presents to lead a strategy. Now, theresponsibilities of regional leadership are far more distributed and shared.Regional leaders can emerge from almost anywhere, and they are just as likely tolead from the rear, as well as the front.8. Colleges and universities play a number of critical roles, as regions developinnovating networks. They are obviously a source of brainpower to fuel economicgrowth. They also often have access to expertise and technologies useful for high-growth companies. In some cases, they provide strong entrepreneurial resourcesto accelerate the volume and velocity of startup companies. Alumni networkscan provide informal capital networks to support emerging companies. Equallyimportant, colleges and universities provide a neutral space where regionalleaders can convene to conduct the often difficult conversations needed to shapean effective economic development strategy.At Purdue University and I-Open, we are developing the models and tools of OpenSource Economic Development to enable economic developers to understand andaccelerate the development of open networks within their regional economies.(We are also working on a close cousin, Open Source Workforce Development, tocreate innovating networks among schools, post-secondary institutions, andbusinesses.)We have identified the five key types of networks that regional economies need toprosper. We have developed new disciplines of strategic doing to replace theslower, more expensive practices of strategic planning. (In complex systems like aregional economy, strategy becomes a matter of following a handful of simplerules. Strategic doing is a simple, but not easy discipline of following some simplerules.)
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