Capitalism is dead (so they say)! Long Live Community Capitalism!
It is said that a depression is a recession that the government is trying to prevent...
So the news aren't very good these days...well they were not very good for the pilot who got his two engines shot down by Canadian geese but he and his team managed to focus on what he could do to land the plane safely (!) on the Hudson River. And so he did. Was he lucky? You bet he was! So were Watson and Crick in discovering the DNA (they say so themselves in their wonderful book – The Double Helix – on their journey to this discovery). Luck favours the prepared mind...
Now folks in Kalamazoo (city population of 78 000 – region is 500 000) - Michigan, did not feel so lucky after being hit in the 90s by major restructuring in the pharmaceutical and auto sectors. They were loosing jobs and most importantly, skills accumulated over the last 100years. So they thought long and hard about what THEY could do to built a stronger more robust community.
Today, the state of Michigan has one of the highest unemployment rate in the US, due in part by the ailing auto sector. Despite the dire situation, Kalamazoo (Southwest of Michigan) is fairing better than other regions in the state. When Pfizer left, it meant that the largest pharmaceutical plant in the world was leaving. Today, they replaced this plant by 100 companies and jobs 2 to 1.
At the heart of their strategy was refusing to become a declining city so they had to figure out how they could succeed and thing ahead. Like Wayne Gretzky says about the game of hockey: you have to be where the puck will be not where it is.
Kalamazoo and their economic development organization, Southwest Michigan First, called this strategy: "Community Capitalism". The name fits: it is based on individual responsibility (no whining!), personal initiatives (you gotta wanna!) and seeing change as an opportunity (it is the law of life after all!).
More specifically, it is based on 5 key areas that must be addressed by the community:
1. Place
For them, it meant having a vibrant downtown. It is the heart of the city and is very important
for the sense of community. They invested in new and quality infrastructures that attracted private
investments and quality retail stores. They were set on having a downtown that was visually
appealing and safe (they even have heated sidewalks!)
2. Capital
Because of their strengths in life sciences (Pharmacia Upjohn and Pfizer) and medical devices
(Stryker), when faced with the massive layoffs in the 90s and again early 2000, they focused on
keeping the scientists and talented life sciences executives in the region. For that they needed
capital to help them start new businesses. Raising money for a life sciences VC fund in a region
like Kalamazoo (it's not San Francisco or Boston) was not easy at first but they managed to bring
on board other wealthy individuals and convinced them of the benefits for the region. They
built a $50M life sciences fund and invested in 10 companies.
Many communities will say they don't have that kind of money or wealth but it depends on your sectors (strengths). Life sciences is very capital intensive but remember that you don't necessarily need a lot of money to start a business (the average, according to the Kauffman Foundation on Entrepreneurship is $25 000).
3. Infrastructure
Facing the worldwide relocation of pharmaceutical operations in the 90s and 2000, one of the
leaders of the Kalamazoo community was stating: "We had a 100-year legacy of commercializing
pharmaceutical compounds, and we were within one working generation of losing that skill set".
In addition to capital, to make the scientists and other pharmaceutical executives stay and
grow other businesses in Kalamazoo, they needed wet labs, office spaces, etc. Southwest Michigan
First had a life sciences incubator ready when layoffs were happening so they could start new
businesses. In early 2000, they also started planning for a Business Technology and Research
Park that would surround their College of Engineering and Applied Sciences. In 2003, they welcomed
their first tenant, a medical device company.
4. Talent
Business author Jim Collins (Good to Great) likes to say: "People are not our most important
asset. The right people are." And again it goes back to playing your strengths (as an individual
but as a community as well) and not focusing on improving your weaknesses (as we are thought to do).
The leaders in Kalamazoo understood that it's not enough to fill an empty job, but that you have
to fill it with the person who is uniquely qualified to carry out the responsibilities and able
to perform. Every community has infrastructures, businesses, retail shops, but what differentiate
them from one another? They brought the best minds to educate them and businesses in their
community to learn and get very good at identifying talents because it is what get the job done
and it is what makes a community robust. Since no one thing can make a community great, when
something happens that make that something go away in Kalamazoo, another something has always
replaced it. It is the true statement of the quality of a community.
5. Education
Now if you have all that but you can't retain a population that wants to learn, work and build
businesses, your gains will be temporary. Hence, high quality public schools are the key. Poorly
performing school sends people packing like a centrifugal force. Early 2000, Kalamazoo had major
challenges in this area due to job losses and demographics; the students body was consistently
shrinking. This called for dramatic efforts and so they applied the same logic to this problem
as the loss of scientists and created in 2005 the equivalent of a VC fund that would invest
in their most valuable asset, their children. They call it "The Kalamazoo Promise". In this
system, K-12 and high school students were encouraged to pursue their education because they
could see a future after (going to College), thanks to the fund created for them in Kalamazoo.
The community and school board did also review education from the early age, focusing on
literacy at the K-3 level, dramatically improving the performance thereafter. Finally, they
also added internship program to help the city's need to get college graduates to remain in
Kalamazoo after graduation and increase the talent pool. Many other "Promises" has spun off in
other regions in the US.
Note: I will be speaking at the upcoming APDEQ-UMQ Conference in Drummondville, Qc, on April 23th 2009 about Community Capitalism. http://www.apdeq.qc.ca/3_8.asp
Contact Nuno ID today to find out how we can help !