When a community calls me in to provide counsel on matters of economic development, the end goal is almost always the same – economic growth.
Communities want to know how they can be more competitive in order to attract or support corporate investment. (This would include both recruitment and business retention and expansion. Never forget existing industry provides the most new jobs in any given place.)
Communities also want to know if they are pointed in the right direction and are barking up the right (or wrong) tree.
I like to keep things clean, simple and understandable, not only for the benefit of my clients but for me, too. Clients are not paying me for going down the wrong rabbit holes.
To that end, I like a structured planning method to evaluate the strengths, weaknesses, opportunities and threats of a community.
A SWOT analysis involves specifying the objective. Again, it’s almost always economic growth and identifying the internal and external factors that are favorable and unfavorable to achieve that growth.
This past week, Tim Feemster, the managing principal of Dallas-based Foremost Quality Logistics, and I spent three days in a rural Texas community engaged in a SWOT analysis.
Confidentiality prevents me from naming that community, but I will tell you that it faces many of the same problems that other small, rural communities throughout this country have to deal with.
By virtue of it being small and rural, there are limited opportunities, principally because of the size of the universe with fewer people (and jobs) with certain skill sets. And this corresponds with what vocational education opportunities are made available and existing infrastructure.
But we don’t give up the ship. All places have strengths, which can be leveraged with planning and execution. In the dozen or more interviews we did over the course of two days (and we’re not done), it was clear to us that people in this small town were proud of their school system and hospital, both of which were excellent.
Without going into great detail, we asked questions about the local labor market, financial capital, transportation and access to markets, buildings and sites, infrastructure and utilities, education and training, business climate and quality of life.
And in the course of our investigation, I learned, among other things, about shooting wild pigs, Charles Goodnight, and the Comanche, who were truly fearsome lords of the plains.
Tim’s strength is that he is a logistics guru par excellence. On a corporate site search for a manufacturing client shipping product, you can bet that I’m bringing Tim into the equation to analyze cost structures involved shipping product both in and out of a proposed plant site.
Believe me, this is a huge cost that is frequently not factored in during the site selection process. Tim has an expertise that I don’t possess and besides, he’s fun to work with and be around.
Then there is my homie, Jason Hamman with the Hamman Consulting Group based in Cleveland. Jason is a topnotch geographic information systems operator and all-around data base dude. Think Wizard of Oz guy behind the curtain and you get the idea.
Mark my words, utilizing Big Data effectively to target opportunities and potential customers will separate the winners from the losers in business and economic development in the future. It’s already happening. Jason will be examining our subject community through a host of data bases.
Me, well, my strength as a consultant is that I ask a lot of questions. I was a business journalist for many years and I am not too shy about probing and trying to determine what is real and what is not. When I get conflicting information or stories, it just makes me want to dig more.
Now pointing out the truth can get you fired in Corporate America and even in economic development, but as consultant, that’s what I am being paid to do. I’m not trying to embarrass anyone by pointing out shortcomings.
Rather, we want to point our clients in the right direction as a result of our findings and provide practical counsel on achieving their goals. Now let’s briefly take a look at the elements of SWOT and how it works.
Strengths: This would be characteristics of the community that would or could give it an advantage over others.
Weaknesses: Naturally, this would be just the opposite — characteristics that place the community at a disadvantage relative to others.
Keep in mind that strengths and weaknesses are internal factors in that they are internal to community. Then you have your external factors, those presented by the environment external to the community.
Opportunities: These are the things that the community could exploit to its advantage.
Threats: These are the things in the environment that could potentially cause trouble with a capital T.
External threats are things like tornadoes and hurricanes, ISIS, and cyber criminals. Sometimes you just feel kinda helpless about them.
But external factors may also include macroeconomic matters, such as low interest rates and low fuel prices. They can include technological change, legislation, sociocultural changes, as well as changes in the marketplace or in competitive position. (Interstate highways, railroads and airports have hugely influenced growth for some communities.)
The purpose of identifying strengths, weaknesses, opportunities and threats is important, because the analysis can be used in coming up with recommendations. And that’s what we do. It’s why communities and companies turn to us.
When we find a strong connection between strengths and opportunities in a community, well, that’s a good thing, because it allows for embarking on an aggressive strategy of business development. But if we come across a strong interaction between weaknesses and threats, then we point that out as a red flag and advise on defensive measures that we think should be considered.
Ideally, we want to identify a competitive advantage by matching the strengths to opportunities. We also hope, when possible or practical, to convert weaknesses or threats into strengths or opportunities. Finding new markets is one way to do that, although it’s easier said than done.
Competitive Advantage is Key
Companies and communities that want to grow are looking for a competitive advantage, attributes that allow an organization to outperform its competitors. These attributes may include access to natural resources, inexpensive power, highly skilled personnel, geographic location, etc.
New technologies, such as robotics and information technology, can also give a community a competitive advantage, especially if it is being taught in local schools or being utilized in a big way by existing industry.
A community typically hopes to exploit its competitive advantage in two ways: lower cost or differentiation. The advantage derives from the attributes that allows a community to outperform its competition.
On the cost side, a community would want to demonstrate that there would be a distinct cost advantage to making a particular product or providing a particular service in relation to its rivals.
I think a community should want a company to earn a good profit, as that increases the odds that the company will expand and create new jobs. Kinda basic, but you would be surprised how many folks don’t get that.
Being Different Matters
The goal of differentiation strategy is to provide a variety of products, services, or features that competitors are not yet offering. For an innovative company like Apple, this is the central strategy. It’s what makes them different and a star.
Communities can also look for ways that differentiate themselves from other places. They may not be the low-cost provider, but they are providing something else, something different.
Silicon Valley comes to mind. Certainly not a low-cost environment, but the innovation taking place there sets it apart and makes it different.
So there in a nutshell is what we are doing with SWOT and how we are trying to leverage it in ways for a community to find a competitive advantage.
Economic developers should be all about building and sustaining competitive advantage. At least that’s what I think. I believe Tim and Jason would agree.
If they don’t, I reckon I’ll hear from them. In the meantime, I’ll see you down the road.
Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. If you liked what you read here, invite Dean to speak at your next meeting. He can be reached at firstname.lastname@example.org at 972-767-9518.