Dean Barber

Archive for July, 2013|Monthly archive page

Grow the Island

In Economic Development, Places on July 28, 2013 at 8:14 am

Last week, I attempted to provide some context as to why the House of Detroit had fallen onto hard times, resulting in the largest municipal filing for bankruptcy in U.S. history.

I went through a litany of principle causes — an overdependence on the automotive industry, which has had its own trials and tribulations, population loss thereby resulting in tax base loss, racial tensions and overtones, political corruption and malfeasance. All of these factors are intertwined, are decades in the making, and represent pretty complicated stuff.

So it would take a lot of cojones (a Tejano term which rightly applies to many Texans) for me to pronounce that I have the answers and solutions. No, it is doubtful that anything I have said or will say about Detroit is altogether new.

Still, I am gratified to report that the Detroit Regional Chamber has taken me up on my offer to provide 20 hours of free consulting time. More on that later.

I am emotionally drawn to Detroit, hence my offer. Maybe it’s because of what the city once was that has captured my imagination. There was a time, not too long ago, when Detroit was ground central to our manufacturing might. It was the “arsenal of democracy” during World War II and the fourth largest city in America.

Today, it is the poster child of urban decay and the pain, having shrunk from 2 million souls in 1950 to about 700,000 today.

Now we can study the what-the-hell-happened until we are blue in the face (and I think already have) or we can lean forward with what we have learned and forge a new Detroit that represents opportunity. Actually, that Detroit, or at least a small segment of it, already exists. You are just not hearing about it much.

And Now the Rest of the Story

I did not tell the whole story last week. (Nor could I.) I only scratched the surface, and to some extent, was just piling on. But the good news is that there are market forces currently in place that could transform Detroit into a much better place. This is not the same old top down renaissance hype, a path that we’ve all been lead down before. 

No, this is real and it is actually happening. There is a bona fide story here about a surge of private and civic investment and business and residential growth that is taking place in a seven-square-mile downtown and midtown core, which admittedly represents only a small fraction of Detroit’s nearly 140-square miles.

But within this relatively small island in the city, there are roughly 5,400 businesses, employing more than 135,000 people. And there are also 29,000 students there from Wayne State University.

Dan Gilbert, the founder of mortgage provider Quicken Loans, recognized the opportunities on this downtown/midtown island. In 2007, he moved his company’s headquarters from suburban Farmington Hills to downtown Detroit.

Gilbert and his firm Rock Ventures now own or control more than 30 properties downtown, totaling 7.5 million square feet. That’s a huge bet by anyone’s measure.

Enlarge the Beachhead

So that’s what you build on. That downtown/midtown area is your beachhead to be enlarged. In my capacity as an economic development consultant (I also do corporate site selection consulting), I tell communities to leverage their strengths and work on their weaknesses. That might sound obvious or even trite, but it’s foundational to making positive things happen.

So if you build on success, you follow in the footsteps of success. In that regard, you listen carefully to those who are risking capital on this island. It’s hard for me to think anything that would be better for Detroit than other business people following Daniel Gilbert’s lead by investing entrepreneurial capital into the city. Of course, it’s got to be a good bet. 

Gilbert’s purchases and building plans are all part of his Detroit 2.0 revival vision, “a lively live-work-play district in the heart of the city based around entrepreneurial companies in the digital economy.”

That type of economy will attract a young, upwardly mobile group people, and we are seeing young entrepreneurs and creative people moving in the downtown and midtown as a result. Rundown buildings are now being converted into loft apartments, hotels, restaurants, and offices.

Freshmen to the Rescue

Now you could argue this young creative class is acting rash and foolish by choosing to essentially live on an island surrounded by a sea of economic despair.  But sometimes ignorance is bliss.

Many of these young creative entrepreneurs simply don’t follow the same rules, largely because they don’t know the rules. In a sense, they have not been conditioned to know what doesn’t work, and that can be a good thing. However, they do recognize opportunity, often in the form of cheap real estate, when they see it. Detroit offers that many times over.

I am reminded of the American doughboys of World War I. They didn’t know that they couldn’t storm German trenches, so they actually went ahead and did it, to the disbelieving awe of the war-weary French and British.

These freshmen don’t know what they don’t know, but in a perverse sense, it actually gives them an advantage. Certainly they will experience failure, which I believe is a prerequisite of success, but they will not be put off by talk of what cannot be done.  If any of us listened to such defeatist language, none of us would be in business today. Rather, we would all run for city council.

Roadblocks to be Breached

Speaking of city council, it is clear to me that a dysfunctional city government in Detroit has come into being, because it is largely run by people who have not a clue as to why private investment happens. Their lack of knowledge is not helpful.

Bankruptcy can provide for a platform for growth, but only if and when a dominant political class that has run things is essentially replaced wholesale.

So I am hopeful that executives who have a track record of fixing things will step forward. Almost by definition, these people will come from the private sector, men and women who have developed almost instinctual knowledge as to why and when and how private investment takes place. In short, the future leaders of Detroit will come from the ranks of the risk takers.

But it will not be easy. There are long-term historical roadblocks to be breached with racial divisions and suspicions at their root. Justin Fox, the executive editor of the Harvard Business Review Group, put it aptly when he wrote:

“To an extent unparalleled in any other major American metropolis, private economic activity in metro Detroit came to almost completely bypass the actual city. This was very much a racial divide; whites avoided the city, while blacks gravitated toward the government jobs that were the best things on offer within the city limits. The result was a city governing class clueless about and to a certain extent disdainful of economic reality and a regional economic elite with few ties and little loyalty to the region’s main city.”

This divide, this gulf, has to be repaired, and I am confident that it can be with a younger generation taking the lead.

No Choice But One

While not addressing this aspect specifically, Gilbert said bankruptcy  represents a “first step toward a better and brighter tomorrow” for Detroit.

“Bankruptcy will be painful for many individuals and organizations but together we will get through it and come out stronger on the other side. We simply do not have a choice,” he said in a prepared statement.

Gilbert is right. What other choice is there? Next month, I will be in Detroit for a few days, talking with business leaders who have made their choice. I want to know why they have drawn a line in the sand and have essentially said, we choose to stand and build here.

I want to know what they see and how they think their city can be transformed. I am looking forward to this trip, and I want to thank again the Detroit Regional Chamber for extending the invitation to me.  I have pledged to give the Chamber 20 hours of free consulting time.

Maybe my best advice before arriving will be the same after leaving — leverage your strengths. Enlarge your beachhead, grow your island, build upon the gains that already have been made by reducing capital investment risk whenever possible. I’ll grant you that it’s not especially brainy advice, but in my world of corporate site selection consulting, risk management takes center stage.

I will be piggybacking my visit to Detroit with the Pure Michigan Test Drive, an event that will allow me to visit with companies and communities in Michigan as well as attend the NASCAR Sprint Series’ Pure Michigan 400, which is always fun. I already know that Michigan has done much to improve its business climate and have to believe the Gov. Rick Snyder has been largely responsible. He is a fix-it kind of guy.

On the day that the city filed for bankruptcy, Dan Gilbert published a prepared statement, a portion of which I quoted here. He went on to say that “we are all in.”

That’s key. For Detroit to have a future, private investors have to be all in and vote with their money in the sincere belief that their investments are safe and sound for the long term. From where I sit, I can see that is already happening, despite the horror stories.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com Telephone: 972-767-9518 Email:dbarber@barberadvisors.com

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Advertisements

A Time of Reckoning

In Economic Development, Places on July 21, 2013 at 6:48 am

So on Tuesday, I got this email from a young and no doubt industrious economic developer from the Detroit Regional Chamber touting her region’s aerospace and defense cluster.

Then on Wednesday, she sent me another email, informing me of how important the automotive industry is to the local economy.

At that point, I could not resist. I playfully responded, saying that I had no idea that the automotive industry was so important to Detroit. Then I told her that I had met with Michael Finney, president and CEO of the Michigan Economic Development Corp. when he and members of his team had visited Dallas not long ago.

“I am glad to see the industry make such a good comeback and Michigan’s effort to be more business friendly and competitive,” I wrote. I told her that I had written about Michigan in this blog. (See “Blessed Are the Peacemakers” and “The Wave Will Spread.”)

She wrote back asking that “Maybe Detroit can get a shout out” in a future blog.

The next day (Thursday), Detroit filed for the largest municipal bankruptcy in U.S. history. So the remainder of this blog is my shout out to Detroit.

Berlin, 1945

The last time I was in Detroit was a couple of years ago and I remember driving through certain areas and thinking, “This looks like Berlin 1945.”

For youngsters who do not know their history, Berlin was a bombed out shell by then, Germany’s Third Reich having fallen short of its intended 1,000-year reign. Many of the B-24 Liberator bombers that rained hell on the German city during World War II were made in Detroit.

But here I was looking at sections of Detroit that looked like it had been laid to waste. Had Canada, our stalwart neighbor to the North, launched an attack? It was obvious that something very wrong had happened here. I was literally looking at ruins.

A Cornerstone of Industrial Might

How could this happen? Detroit, once the nation’s fourth largest city, was the cornerstone of our industrial might. This was ground central for the American Dream.

Southerners, black and white, flocked here to get good paying jobs in the automotive plants. Home ownership was not only possible but expected. Detroit became our Mecca for the middle class.

But things started to unravel, and many chose not to notice. Those who did were voices in the wilderness.

The automotive industry, the King Cotton to our nation’s industrial heartland, started showing signs of vulnerability. There were the Japanese with their toy cars, not real cars, mind you. But people are starting to buy them. Can you believe it? And what the hell is this Volkswagen Beetle thing? Didn’t we just beat the Germans and the Japanese in a war?

Why wouldn’t someone buy a Packard, an Edsel, a Pontiac or an Oldsmobile? Now those are real cars.

So Detroit was centered on an arrogant industry that proved to be none too brainy about being competitive. Witness the market share declines of the Big Three and the eventual bankruptcy filings of General Motors and Chrysler. It was only because of federal intervention that they remain today.

There is prophetic statement that comes to mind when it comes to any community too dependent on a single industry: “You live by the sword, you die by the sword.”

Five Days in July

Then there is this matter of race, which is inexorably linked to how things evolved in Detroit. In the early morning heat of July 23, 1967, a police raid on an after-hours bar popular with blacks touched off one of the deadliest and most destructive riots in U.S. history. It lasted five days and required military intervention.

The riots became a watershed moment, accelerating a massive white flight to the suburbs that began in the 1950s. In 1950, when Detroit’s population had swelled to 1.85 million, about 82 percent of the population was white. Today, the city’s population has dwindled to 700,000, and about 82 percent of those who remain (black middle class families left, too) are black.

Upon leaving office in 1994, long-time Mayor Coleman Young, the city’s first black mayor, wrote this in his memoir:

“The riot put Detroit on the fast track to economic desolation, mugging the city and making off with incalculable value in jobs, earnings taxes, corporate taxes, retail dollars, sales taxes, mortgages, interest, property taxes, development dollars, investment dollars, tourism dollars, and plain damn money.”

Plain damn money is right. Most Detroiters don’t have any or at least not enough, with a median household income of $28,000 a year. That compares to about $46,000 for Michigan as a whole. The city’s unemployment rate stands at 16 percent and is probably well higher than that.

Dysfunction and Corruption

A loss of population has hampered Detroit’s efforts expand its tax base, much less manage the city government’s health care and pension costs. Annual deficits in the city’s operating budget have been climbing since 2008, and city services crippled by an aged computer system, poor record-keeping and widespread dysfunction have declined dramatically.

A culture and history of embezzlement and malfeasance in office has been sadly evident. Mayor Kwame Kilpatrick resigned in 2008 after pleading guilty to obstruction of justice. Earlier this year, Kilpatrick was convicted of running a racket while in office to enrich himself, friends, and family by shaking down city contractors.

Today, nearly 80,000 buildings are abandoned or seriously blighted and 40 percent of the street lights don’t work and 66 percent of ambulances are out of service. The average age of a fire station in Detroit is 80 years, which means most modern fire trucks could never fit inside.

The average police call response time in Detroit is 58 minutes, compared to the national average of 11 minutes. Keep in mind that Detroit historically has had among the highest homicides rates in America. So there will be blood.

And let me tell you that matters of quality of life, such as crime, and the proficiency of local government, such as garbage pickup and fire response time, do factor in corporate site selection. Government services are simply expected.

Kicking the Can Down the Road

Detroit is not unique in the sense that other cities have grappled with loss of industry, declining populations and mismanaged government finances. New York City in the 1970s came close to filing for bankruptcy.

But leadership matters. In Detroit, a political class arose that refused to see the writing on the wall and take their medicine by cutting costs. They kept spending, borrowing, making promises and kicking the can down the road, hoping the debt problem would somehow solve itself.

The result – obligations of between $18 billion and $20 billion among 100,000 creditors, according to the Chapter 9 bankruptcy filing on Thursday.

Pension debt makes up half of the shortfall, so it doesn’t take a great mind to realize that retirees on a fixed income will be taking a haircut. That may not be fair, but it’s going to happen. Just you wait.

A Time of Reckoning

But I believe this historic filing for bankruptcy should be viewed as an opportunity, but only if the city follows through. With the permission and guidance from the court, Detroit can take its medicine and then build upon a doable future. So this is a time of reckoning.

In the end, the city must reinvent itself. Pittsburgh might be worth studying. Leveraging its universities, Pittsburgh transformed itself as a biotech/health sciences hub after its steel industry collapsed.

I am not saying that biotech is the answer for Detroit. It probably is not. What I am suggesting is that there are likely existing ingredients present for a reinvention to be acted upon. This will be a long if not painful journey. Certainly, it was for Pittsburgh.

And because I want to see Detroit stop this downward slide into oblivion, I will pledge 20 hours of my consulting time gratis – no charge – to the proper economic development authorities. You should know how to reach me if so interested.

Positive Signs

But we are seeing some positive signs. While I have seen no definitive numbers, I hear that young people are moving to Detroit, largely because of cheap real estate.

 Dan Gilbert, chairman and founder of Quicken Loans Inc., has been steadily buying up downtown buildings and making large investments in mixed use development and quality of life improvements for the nearly 10,000 people employed by his portfolio of companies who live and work downtown.

So there is hope and proof that Detroit can work. But first this debt issue has to be resolved, a repayment plan has to be negotiated and enacted, and city government has to prove itself as viable and responsible.

Leaders Must Lead

Mayor Dave Bing, Gov. Rick Snyder and Detroit’s emergency manager, Kevyn Orr are intelligent men. But now they have got to come together and lead because those before them simply refused to make the needed tough decisions.

Gov. Snyder in particular impresses me as a man who wants to get stuff done. It may cost him his job (Snyder has an approval rating of less than 40 percent) should he seek re-election, but I believe he is trying to do what is right by his state and by Detroit.

Detroit remains the elephant in the room. You cannot divorce Michigan’s future prosperity from that of its largest city. Trying to do so would be a big mistake.

I have noticed that a culture of economic development really starts at the top. If a governor has a keen interest in economic development, a positive, can-do attitude is typically displayed, one that is infectious within the ranks of state and local economic organizations.

When a governor doesn’t show much interest in economic development, well, that too usually becomes quite evident and I’ve seen morale actually suffer within economic development communities.

I sense positive vibes coming from Michigan, now a right-to-work state. I cannot say with certainty that these positive vibes are because of Gov. Snyder, but he has not been shy about making changes.

Detroit cannot be shy about making changes either. This bankruptcy filing can be the beginning of a long journey, no doubt a tough one, in which the city can be reinvented and renewed.

Again, if I can help, well, I am here to help.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com Telephone: 972-767-9518 Email:dbarber@barberadvisors.com

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

 

A Defining Combination in Mexico

In Manufacturing, Places on July 14, 2013 at 6:45 am

Maybe you have heard me say it before, but it bears repeating: I’ve never met a state that I didn’t like.

Of course, I’m playing on a quote by Will Rogers, who said he never met a man that he didn’t like. Well, I wish I could be so generous, but some folks just don’t sit right with me.

I was a northern state not long ago, a fine place indeed, good people. But this one fellow, an economic developer, said the damndest thing that really stuck in my craw. He said that people working in automotive plants in the South were, and this was his words, mostly “barefoot hillbillies.” I swear I am not making this up.

I think my jaw may have actually dropped. And for just a moment, the Scots-Irish rebel in me emerged as I had this sudden urge to slap his jowls, call him a scoundrel and challenge him to a duel.  But this was a dinner party, and Cracker Dean didn’t need make an unpleasant scene.

But I could not let his snide slur about my people go unchallenged, as I consider myself a hybrid son of the South. (My mother was from Chattanooga, Tenn., and my father from Pittsburgh, and I grew up in both the South and the Midwest).

“Well, if what you say is true, and let me assure you that it is most certainly not, then you are essentially asserting that Mercedes-Benz, BMW, Volkswagen, Toyota, Honda, Nissan, Hyundai, and Kia were all wrong for having built assembly plants in the South. Let me get this straight, is that what you are saying?”

He looked at me in a dazed manner as if I had planted a two-by-four between his eyes. I don’t recall him saying much to me the rest of the night, which was fine by me. But despite his ignorance (talk about the pot calling the kettle black), I would never hold that against his state or region in a site selection project. There are people who say dumbass things everywhere.

No doubt, I have written a few in this blog. So I forgive Mr. Yankee Dumbass and will ask for your forgiveness as well.

The Big Fish Swam Away

Earlier this year, I was sitting in the office of an economic developer in the South who spent most of his career in the automotive industry. He had worked in senior management positions for both domestic and foreign automakers. Leave it to say, he has a deep understanding of the industry.

We were talking about Audi’s decision to build a $1.3 billion assembly plant in Mexico.  My host was genuinely perplexed. “I don’t understand that decision,” he said.

Keep in mind that economic developers in Tennessee, Georgia and Alabama were biting at the bit over the prospect of getting this Audi plant. They knew it was coming, and they knew they were in a very good position to get it.  It all made a great deal of sense.

Any future Audi plant could use many of the same suppliers now in place for parent company Volkswagen, which had completed an assembly plant in Chattanooga and began turning out Passat sedans in 2011. There were also a host of other nearby German tier one and tier two suppliers serving Mercedes-Benz in Tuscaloosa, Ala., and BMW in upstate South Carolina.

In short, economic developers in the South just knew they had another big fish circling their bait. But then the big fish unexpectedly swam away.

To many, Audi went off script by choosing Central Mexico for its first assembly plant in the Americas, although VW has a plant in nearby in Puebla City and an engine plant in Silao. But the more you look at it, the more it makes sense.

A Dream Moment?

Audi Chairman Rupert Stadler said something quite revealing at May 4 ceremony to lay  the foundation stone for the future plant, which will build 150,000 of the Q5 sport-utility vehicle annually starting in 2016,

“Mexico was chosen very deliberately,” Stadler told more than 500 industry and government officials gathered outside the town of San Jose Chiapa. “It is situated between North and South America, making it a linchpin between the two regions.”  Mexico was, according to Stadler, an “ideal export base.”

Audi executives touted Mexico’s good infrastructure, competitive costs and existing free-trade agreements in picking the site, which will cover an area the size of 400 soccer fields. They called the Mexican plant a “dream moment,” a bit uncharacteristic for Germans. But maybe the beer and tequila, not an especially good combination, were flowing by then.

Being on the doorstep of the United States certainly doesn’t hurt. But it’s worth noting that Mexico has 12 free trade agreements with 44 countries, while the U.S. has 14 trade deals covering only 20 countries.

Also, Mexico’s total compensation per worker was $3.94 an hour in 2010, only slightly above that of China, where wages are rising and transportation costs are greater because of the distances involved. Compare that with $34.59 in the United States and $52.60 in Germany.

“Mexican auto factories and Mexican manufacturing offer First World productivity and quality at Third World wages,” said Harley Shaiken, a professor of education and geography at the University of California at Berkeley in an interview with The Washington Post. “That is an unusual combination, and right now it is a defining combination.”

That defining combination is attracting billions of dollars of new automotive investment every year.

But Wait, There’s More

Just this past week, Denso, a tier one Japanese automotive supplier, said it would spend $51.4 million to expand operations at its production facility in Silao. The expansion involves adding a new product line to build alternators beginning in October 2014 for North American customers including Ford and Toyota.

Also last week, Nissan said it had signed a deal with real estate developer firm Vesta for the construction of an industrial park near its assembly plant now being built in the central state of Aguascalientes. Nissan expects that the proximity of the park to its manufacturing facility will allow for certain advantageous production flow processes.

Nissan will begin phase one operations at the $2 billion plant later this year. The Japanese automaker currently exports to 115 countries from Mexico.

Last month, General Motors, which employs 15,000 people in Mexico, said it would invest $691 million to expand its Mexican operations. About $211 million will be spent on expanding its Toluca plant, where GM builds V8 and four-cylinder engines.

The company will spend $349 million for a new transmission plant in Silao that will build 8-speed transmissions, and $131 million to expand the next-generation transmission plant in San Luis Potosi. 

The U.S. automaker, which has operated in Mexico for 78 years, builds the Chevrolet Silverado and GMC Sierra pickup trucks in Silao; Chevy Sonic and Captiva, and Cadillac SRX vehicles in Ramos Arizpe; and the Chevy Aveo, Trax and Tracker vehicles in San Luis Potosi.

Only a few days following the Audi ceremony, Honda announced that it would build a $470 million transmission plant in the central state of Guanajuato, not far from an $800 million assembly plant now under construction and expected to begin operations in early 2014.

Mazda’s new $650 million plant at Salamanca is scheduled to start operations in March 2014. Already the company has announced plans to raise production by 90,000 units to a total of 230,000 units within two years. The plant will eventually employ 4,500 people, and marks the return of Mazda manufacturing to North America after Mazda6 production was moved back to Japan last year.

Mexico’s Gain Not a U.S. Loss

Last year, Mexico attracted $3.7 billion in announced investments by automakers alone, matching the U.S. total, according to the Center for Automotive Research in Ann Arbor, Michigan. IHS Automotive estimated that investments by automakers in Mexico over the next few years could total $3 billion annually.

But Mexico’s gain does not mean a U.S. loss. Automotive jobs will grow on both sides of the border, making the broader North American economy more competitive against Asia and Europe.

“Mexico is not siphoning off jobs from the U.S.,” George Magliano, senior economist at IHS Automotive, an industry research firm, told The Washington Post. “North America is becoming a new hub for export production, and the bulk of it is occurring in Mexico,” he said. “But some of it is happening in the U.S.”

Of the more than 15.5 million vehicles estimated to be built in North American auto plants last year, more than 10 million were built in the U.S., while Mexico produced about 3 million and Canada 2.5 million. By 2020, IHS projects the industry will make 11.7 million in the United States, 4.1 million in Mexico and 1.9 million in Canada.

That is what I would call a good deal, both for the U.S. and Mexico. Canada, not so much, which I am sorry to say.

Now I could show my chauvinistic ignorance and lament why all these automotive companies are making such horrific blunders by building new plants in Mexico and employing people who don’t really know much of anything. But then again, I don’t believe that. I don’t think these big investments are blunders at all.

No, I think these companies have found something good down there in Central Mexico, which is removed from the drug cartel violence at the border. Matter of fact, I’m sure of it or they wouldn’t be lining up to spend billions down there.

They’re speaking with their actions and that tells me something. I hope to learn more about it and if I do, well, I’ll be sure to let you know. In the meantime, hasta la vista or … 

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com Telephone: 972-767-9518 Email:dbarber@barberadvisors.com

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

 

 

 

 

 

 

 

 

 

 

 

 

 

Have Product, Will Travel

In Economic Development on July 7, 2013 at 6:38 am

As anyone who reads this blog probably knows, I have no desire to write like an academician or a typical business consultant, if there is such a person. That is simply not my voice.

Please plant a firm kick to my shins should you ever hear me lapse into that stilted and yet purposely vague “consultantese,” an abhorrent language designed to impress rather than inform. I much prefer a fine and wonderful language called English.

I am not so gifted as to be a natural storyteller, although I have met some who clearly are.  Story telling is a wonderful American tradition that goes far back into our history.

The mountain men, those who ventured into the wild recesses of the Rocky Mountains during the 1830s to trap beaver, were none too shy about inventing tall tales to entertain themselves and each during annual rendezvous, hell raising affairs to be sure.

As one historian put it, “To be a liar was as much a part of mountain honor as hard drinking or straight shooting. Embroider your adventures, convert to use any handy odyssey, and spin it all out in the firelight. The only sin is the sin of being dull.”

Business is War

That sin of being dull has largely been embraced in today’s civilized world, and is most notably evident with most business literature. And yet it doesn’t have to be that way. Business is war, as the Japanese say, and by its very nature, war is far from being dull.

As a former business journalist, I considered myself a war reporter of sorts. While I was never in harm’s way, I certainly wasn’t bored and I hope that was reflected in my published work at the time. Being a reporter gave me the opportunity to see things and tell it like I saw it.

I had a grand old time of it. And today, as a consultant, I am having fun as it offers me a certain degree of freedom. Like reporting, consulting affords me to opportunity to tell it like I see it. Sometimes clients don’t want to hear it, but if they are paying me, I figure I owe it to them. It is my responsibility to them, which I take quite seriously.

A Skeptical Community

This past week, I got a request from an economic developer in the Midwest to write down my views about a certain community that I had visited recently for the benefit of certain stakeholders. There is apparently some hesitancy within this community about making certain investments and probably a skepticism about this whole notion of economic development.

Now I can actually appreciate that. There is a degree of voodoo economics to economic development. There are few if any guarantees that if you do this or that, such and such will result. Of course, that is true of private enterprise in general. In short, we are not living in a chemistry lab.

(I recently saw a spec building that has sat unoccupied for 18 years proving that point. Judging by its architecture and location, it may sit another 18 years without a tenant.)

Also, I can understand the city fathers having this overarching desire to be prudent and judicious in the spending of public tax dollars. They have a fiduciary responsibility that must be taken seriously. I applaud them for recognizing that and having a fiscal conservative nature.

An Offered Truism

But I am going to flip the coin as there is an old adage in business which I think is true: You have to spend money to make money. In short, a community has to invest in itself if it is to have any chance at having an outside source, a company for example, invest in it.

Now that community investment can take many shapes and forms. It can be education and  workforce development. It can be infrastructure. It can be aspects of quality of life, parks for instance, or it can be real estate for commercial or industrial use.

As a site selection consultant, I will tell you that I am partial to publicly-owned industrial parks or parcels. Much of the time, although not always, a majority of the infrastructure is in place and there is no profit motive to overcome. Rather, the community (if it is smart) will empower a local economic developer to do a deal with job creation as the motive.

I know many places where, given a certain project of a certain size, if the ROI or cost-benefit analysis formula works, that community would give free land to a prospective industrial user as an incentive. I’ve yet to meet any private developers or owners willing to do that. Nor should they.

You Must Have Product

But the bottom line is a community has to have suitable product in terms of buildings and/or sites. And that is because there is and always will be a real estate aspect to site selection, although a proper site selection process will always transcend real estate matters alone. That last point is something many real estate brokers do not understand, as they are consumed with the transaction, which is understandable as that is how they get paid.

Of course, I could argue that is just but one reason which sets my consultancy apart. I will never attempt to place a corporate client on a piece of property where I will make more money, which is why I work on a flat fee basis. No real estate commissions here.

Enough on that. This blog is not meant to be an overt advertisement for my services. Notice I said overt.

But going back to my two bigger points, which are this: A community has to have product and it has to be continuously investing in itself if it is to successfully compete for jobs and private capital investment.  Those will be the only places that I will travel to as finalist communities in a site selection project. That’s just the way it is.

With the Best of the Best

I wish I could have reported that the Fourth of July was completely restful for me, but my wife, aka “the little general”, would not have it. A former Army paratrooper, she had me participate with about 100 others in a 10-mile hike through mostly shadeless terrain in searing temperatures.

But it was for a good cause. The North Texas Military Association is an organization formed to help military veterans and it is quite evident that the organization is doing great service to assist those who have served our great country.

So essentially I was hiking with soldiers, marines, sailors and airmen, many of whom were still in active service and some of whom were humping a 60-pound rucksack wearing fatigues and desert boots. 

I can tell you they are the best of the best, these veterans. They give so much for love of country. It was an honor to walk with them.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas — http://www.barberadvisors.com Telephone: 972-767-9518 Email: dbarber@barberadvisors.com

If your company needs an optimal location for future operations due to expansion or consolidation, we can help. If your community needs to improve its competitive standing by leveraging strengths and addressing weaknesses, we can help. All requests for information are considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.