Address given to the Annual Conference of the Australian and New Zealand section of the Regional Science Association International (ANZRSAI)
29th September 2005.
Roy Powell
Centre for Agricultural and Regional Economics, Armidale NSW
Economic development seeks to increase the level of economic activity, wealth and better communities. Additional economic activity can be stimulated by better performing local businesses and recruitment of new businesses. Recently, the focus has shifted to growing local businesses, often referred to as economic gardening.
In Australia, Keniry’s (2003) review of regional development noted that many regional businesses had less access to the skills, information and management systems that are required to run a modern business than their city counterparts. While there are many reasons, a structure to provide these services was required.
A new approach has been trialled in Grenfell, NSW with considerable success. The development of a combined internet and personal support structure to offer a nationwide economic gardening program was launched at Country Week in Sydney. The core of the program is a resource centre of materials that build the management capacity of the individual business according to the needs and potential of the business. A range of personal support structures and networks are available to assist assess to the program by businesses, Councils and business advisers. The structure also allows for the development of specialist variations for particular needs such as the materials specific to 'Mensheds'
There are a small number of propositions that underpin the developments that are outlined in this paper. We believe that they are not in contention although debate may result in some qualifications of a minor nature.
First, healthy regions require a healthy and growing economy. The past decade in Australia has demonstrated the advantages of many years of sustained economic growth. It has generated wealth and has provided the capacity to take initiatives to make it a better country. (There is much debate about whether we have taken the right initiatives, but here the issue is whether we have the capacity.) The national situation applies also at the region level, regardless of the nature of the region.
Second, the healthy and growing economy is a reflection of the collective performance of the businesses in it. The government is able to influence business performance by the institutional, regulatory and financial settings that form the business operating environment. But that is no guarantee of success. There has to be the capacity and motivation for business to perform well and seek growth.
Third, as the economy picture is disentangled into its components, the performance is highly variable across regions, industries and businesses. There are many factors that contribute to that variable performance and research has been developing our understanding of those issues. The capacity of the business owners and operators is an important factor in all situations.
The astute observer will have noted that most regional communities have a range of business types with big variations in performance. There are only a few businesses that achieve most of their potential performance level. On the ground, there is some capacity to advise those businesses about how their performance might be improved, but that advice is not often sought.
At the same time, the complexity of business operations increases, the regulatory environment changes and everything seems to have to happen faster. And even then, the changes keep on coming! One might wonder if small businesses are an endangered species.
Business Review Weekly in its review of private companies had this to say.
The sector is in trouble…Research shows that 53% of family businesses do not have a long-term strategic business plan, that too many pay little attention to marketing, shun international expansion, are too risk averse and resist ‘professionalising’ their companies. (BRW, July 2005)
They also pointed out that these businesses represented about two thirds of economic activity and employment in Australia. It may be even higher in the non-metropolitan areas.
The Keniry Report (2003) on Regional Business provided to the Federal Government was the first to recognise officially that many regional (non-metropolitan) businesses were operating at a significant disadvantage to their city counterparts.
Many regional small businesses are not keeping pace with changes that affect their markers and their competitiveness.
Regional business operators cannot access the training they require to develop these skills.
We would agree with those comments, but would disagree with the recommendations that the solution lay with government action through the Council of Australian Governments (COAG). The fact that nothing has happened to date is illustrative of why that is not where the response should be based.
There is a growing recognition that there are added challenges in running businesses and that the small businesses and the remote businesses have special needs. Yet there are constraints on the supply side with the large business advisory firms poorly equipped and unwilling to provide the service as an affordable price, and governments ‘shy’ in dealing with individual businesses.
At the regional level, there are other constraints. There is limited capacity to recognise the need and to supply the service. The tendency to seek the ‘quick-fix’ to development through business relocation is alive and well, mostly in the larger regions (and states) with the capacity to pay the ‘bribes’ associated with it. The smaller regions with limited financial capacity are left without a paddle! (Even though it might not work anyway!).
Our mythical astute observer might have noted that there are some businesses that do perform well in regional areas. The observer might also have made the link that the same businesses appear to be doing well in many locations. Going further, they might be identified as belonging to a national network of some kind, a business with many branches or a franchise with many franchisees.
Then we can take the quantum link to ask if it is possible to provide a similar support system that is potentially accessible to all businesses and delivered to all the remote locations too? If that can be done, then we may be able to create a pandemic of successful small businesses throughout the country.
We are now in the territory of economic gardening. These ideas have been brewing for some time. Here is a little history for those unfamiliar with it.
Economic gardening has evolved as an economic development strategy over the past decade. The idea arose in the 1980s from the confluence of two thoughts. One was the possibility that many businesses and the people working in them would not find a new location attractive for a variety of reasons. Second, most communities have unique skills and knowledge that can underpin marketable products and services if they are nurtured in the right way.
As a result, the business recruitment strategy (or ‘economic hunting’) was challenged by one based on nurturing local businesses and talents (‘economic gardening’). This evolution of thinking about economic development parallels that of our society from ‘hunting and gathering’ to the structure we know today where many identify with their location.
In economic program terms, economic gardening began in 1989 under the guidance of Chris Gibbons, the director of economic development for the City of Littleton, Colorado. Chris remains at the leading edge of refining the approach, and has been joined by a collegiate army of economic gardeners.
Research at the USA Centre for the New West supported the early development of the economic gardening strategy. The idea was introduced to Australia by Phil Burgess, then Director of the Centre for the New West. His 1995 visit was coordinated by the ANZ Section of the Regional Science Association. His theme was ‘building high performance communities’ with economic gardening being a critical element.
Burgess spoke of categories of businesses and focused on the small businesses where most of the jobs growth occurred. He referred to (p11-12):
While the economic gardening program can assist all businesses to run better, a strategy to seek economic growth will focus on the swashbucklers and explorers, the gazelle or would-be gazelle businesses.
Economic Gardening is a widely-used term with a Google search now turning up about 900,000 entries. That is symbolic of the momentum that has been built up around an alternate strategy to regional development.
A decade has passed since Burgess‘s visit to Australia.
So the ideas are there about what to do. If that is combined with new technology, we can cover the country. The development of the Internet and associated technologies that are coming at us at a rapid rate can provide ready access to more knowledge, information and ideas than we could possibly use in several lifetimes. The investment in infrastructure to support modern telecommunications systems will then allow this access to be nationwide. It is possible to have an on-line library of materials and an interactive back-up support system in the one package.
There is an opportunity to establish and operate the equivalent of a nation-wide business support system. Something like a generic business franchise that any business can subscribe to. That is Economic Gardeners Pty Ltd.
Economic Gardeners is the necessary bringing together of knowledge, information and technology to support the widespread use of economic gardening throughout regional Australia. That action at the local level will be the catalyst to bring forth additional resources from government and corporations to sustain and enhance a new era in regional development.
The principles of the initiative are:
The program has materials to support business generally, some specific areas of business (men’s sheds, tourism and heritage) and economic development and community development organisations and their programs. The objective is to result in:
The Resource Centre can be imagined as a well-organised library focused on all matters related to economic gardening. It is a repository for:
This is an expanding compendium of materials that will serve as your first point of reference on any issue.
The Resource Centre is a consolidation of a vast amount of material into one place. It is like a library and serves as your first point of contact on any development issue. This saves endless hours searching the web for the information you need.
From the user perspective, all member categories are expected to be familiar with an ever-broadening horizon of needs and requirements. This frequently leads to areas where the member has little familiarity and the potential to use a lot of time looking for it on the web. The Resource Centre provides a convenient place to begin. If the material is not in The Resource Centre, then Economic Gardeners will find it (and subsequently add it to the Resource Centre).
The material is organised into a structure that is easy to access. At one level the material is structured by user category such as business development, tourism, community organisations etc. The material is also structured so that there is a gradation from ‘basic’ to ‘advanced’ in each category.
The Resource Centre uses leading-edge technology that makes it easy to:
The Resource Centre is upgraded regularly, extended in response to newly identified needs and includes the archived ‘News’ that is supplied to members on a regular basis.
The Resource Centre provides a networking and communication structure where members can communicate with each other to help solve problems, share ideas and build networks.
While the Resource Centre is the first point of contact, it also is used to make personal contact with the specialist Economic Gardeners staff. There are links beyond Economic Gardeners to other specialists and complementary services that members may need from time to time.
The businesses in a region can be categorised in a number of ways. Perhaps the most useful is the following:
Economic Gardeners has something to offer all of these business categories. In terms of potential results, the gazelles are the most obvious potential. There is less potential in the national businesses and some franchises that have structures behind them that are simular to the services offered by Economic Gardeners. Within the Pilgrims, they can apply the full array of ‘basics’ to secure the stability of the business and to run the business with less effort and more time for other activities.
There are many forms or EDOs but most have their role determined by local councils. Many local councils have limited understanding of the ways in which economic development can be implemented and the preference for the ‘preparation of brochures and the recruitment of some icon business’ remains the implicit strategy. Building economic growth through small gains in many businesses is politically unattractive and the people councils’ appoint often do not hold the skills required.
This situation can be addressed if Councils become well informed about economic development approaches and strategies. For many, developing a strategy would be a breakthrough, and to do the strategy ahead of appointing staff is outstanding! Even then, many Councils are hesitant about allowing their officers or their EDOs to give advice to individual businesses because of the liability issues involved.
Economic Gardeners has a number of roles to play in this situation. These can include helping to provide Councils and others involved in EDOs with a better understanding of the planning and implementation of an economic development plan. That can include a better understanding of the strategies that could be considered. At the implementation stage, the staff of the EDO can access information from Economic Gardeners to assist them in effective management and operation. Finally, Economic Gardeners can be used in the implementation of those parts of the strategy that is focused on the improvement of local businesses. The structure of those arrangements is the next issue to be considered.
The principle arrangement will be that between individual businesses and Economic Gardeners. Where it is possible Economic Gardeners would prefer to be operating within the local economic development strategy rather than independent of it. Where that can happen, it would enable some participation of the local EDO even if they are not involved in providing direct advice to businesses. This includes:
There would be a negotiated financial arrangement with Economic Gardeners that is consistent with their participation in the program. Economic Gardeners would encourage some local performance monitoring of the program so that there is accumulated information about the performance of the program and how it can be improved.
Members will pay a fee to participate and will pay for one year in the first instance. Local supporters may be tempted to assist local businesses to participate by offering a fee subsidy. Such an approach should be considered carefully as subsidies to businesses would seem to best be linked to outcomes from participation (such as employment growth) rather than participation itself.
In our experience we note that many businesses in local areas are reluctant to share information about their business activities with local advisers apart from the necessity to have tax returns prepared. That is likely to also include the local EDO in terms of being able to give good advice on an individual basis. Economic Gardeners by being arms length from the local community goes some way to removing this constraint.
Our experience has also show how isolated many EDOs are in terms of support for their work. In the smaller communities, this might be a part-time position for a local with an appropriate qualification but little relevant experience. Economic Gardeners is designed to provide a backup support system to EDOs enabling them to have ready reference to the materials and the back-up support.
Finally, by taking business advice out of the responsibility of the EDO, then it allows them to concentrate on the ‘public goods’ aspects of their work and the management of enquiries and other projects.
Economic Gardeners fills an identified gap in the provision of support and guidance to assist individual businesses. Developments in technology make it possible over all geographic areas at an affordable price. The materials have been prepared to take account of the needs of businesses in the current environment in which they operate.
The project now moves to the operating stage where the technology, the materials and the promoters will be on trial. The experience to date indicates that it will work, but we expect that there will be more to learn and continuous improvements made to the materials and the approach. In short, Economic Gardeners itself has to operate like a gazelle and apply all of the principles embodied in the materials.
Roy Powell is the Executive Chairman of the Centre for Agricultural and Regional Economics located in Armidale. He has been involved in regional development since the early 1970s and was Chair of the NE-NW Regional Development Board for six years. CARE is an associate with Economic Gardeners. The potential to provide a structured support program to businesses fills an important gap in the regional development toolkit and promises better regional development outcomes.
