What Distinguishes Taimerica from our Competitors?
Taimerica uses a new strategic planning model that sets us apart from the competition. Our model is based on Liebig’s law of the Minimum, the paradigm that revolutionized agricultural production 150 years ago. Why is this relevant to you?
Estimates are that 90 percent of economic development strategies fail. The more than 150 attempts to clone Silicon Valley in the 1990’s, with monikers like “Silicon Bayou” and “Silicon Prairie”, are enough evidence that cloning success in other communities is not an effective recipe for strategy. Neither is the embrace of untested concepts like Richard Florida’s Creative Class.
To identify strategies that work in practice, Taimerica used robust statistical research to test a cookbook of strategies and tactics used in economic development over the last 15 years. Much of this research has been published in our quarterly newsletter, which is available on our corporate website. The most common fallacies in development strategy can be termed: The Accountant, the Economist and the Educator.
The Accountant This is the most common view in economic development and site selection. It assumes that productivity is constant across geography and that investment locations can be screened on the basis of low operating costs. We tested this idea in December 2012 and found that the variance in job growth in 92 Canadian and U.S. communities over the last decade in 19 industries was not explained in any way by KPMG’s global location cost data. The only statistically significant relationship was between software development and high cost locations! This finding has particular importance for understanding what is really driving regional and community competitiveness.
The Economist Development economists staffing the World Bank and economics departments in universities have struggled for fifty years to explain why some regions witness long-term growth and others continually languish. Their thinking is based on the idea that modeling optimum production within companies is a logical device for modeling community economic development. Most of the academic ideas about economic development strategy, such as Michael Porter’s cluster concept, evolve from these models. The problem with The Economist is that the global economy is based much more on transactions than on production. Douglass North won the Nobel Prize in Economics in 1993 for identifying this connection. Modeling production costs in local firms does not identify the best development strategies in a transaction based world.
The Educator How many times have we heard the mantra that America must invest more in higher education to restore historic jobs growth? The argument is that economic development boils down to one critical factor and that everything else is unimportant. Dietrich Doerner at the University of Bamberg has demonstrated that this kind of development thinking is destined to retard rather than accelerate economic development. North America has the highest rate of college graduation in the world yet our secondary graduation rate is comparable to Mexico and many third world nations (See our December 2013 newsletter article). Putting more eggs into the education basket while ignoring other development factors will not accelerate economic development.
Laying the Foundation for Successful Development Strategies
Ideas from agricultural science provide a better paradigm for economic development strategy than the economic tools that the profession has been using to construct strategy. The problem in agriculture is akin to economic development strategy in that it encompasses combinations of many plant nutrients. Plants need a combination of nitrogen, phosphorous, and potassium for growth with trace amounts of other minerals. They also needed sunshine and water. What is the optimum combination for delivering the most growth for the least cost?
Justus von Liebig’s Law of the Minimum provides the answer. Liebig’s Law of the Minimum is simple: Growth is not constrained by the total amount of resources available (The Educator), or by the optimum combination of private resources (The Economist) or by the lowest cost inputs (The Accountant) but by the scarcest resource, what is called the limiting factor. Applying more nitrogen will not accelerate plant growth if the limiting factor is phosphorous. In economic development, applying more education will not work if the limiting factor is infrastructure.
A truth we have learned is that you can’t identify the limiting factor by self-assessment. It only becomes apparent when a community looks at its strengths and weaknesses in a comparative context. Our five principles of successful community development are based on this concept (see list below). Our process of developing community and regional economic development strategy is based on this simple model.
Five Principles for Successful Community Development
1). Look for root causes. If the main problem is a lack of resources, focus first on growing and diversifying the economy, then on the other problems of community development.
2). Identify the scarce resource. Liebig’s Law of the Minimum is a framework for doing this.
3). Build a consensus on the facts, then search for a consensus on priorities. Leaders often disagree on priorities because they base their judgments on individual experiences. Providing a common set of relevant facts to leaders is the first step in an effective planning process. Taimerica does this by comparing your community to competitor communities, rather than relying on self-assessments by residents and leaders of a community’s strengths and weaknesses. When leaders see their community as outsiders see it, they often shift their thinking. We also use sophisticated tools like Condorcet voting to ensure that development priorities in fact reflect the consensus view of the community.
4). Involve all elements of the community’s leadership in the process. Business, education, and government all have to be part of the process if the community is going to succeed. Private investors make the majority of the investments needed to grow the economy, so they have to be engaged in the development process.
5). Do not expect different economic results if you are repeating the past. If past economic growth has been weak, the current economy is unlikely to provide a framework for faster growth in the future. Economic diversification is a critical element to success in these conditions.