Hicks on Biz: Overcoming the "economic development” conundrum BY GRAHAM HICKS FIRST POSTED EDMONTON SUN: FRIDAY, JULY 01, 2016
"Economic development” is as loosey-goosey a business/government term as was ever invented.
But every province has an economic development department, which funds economic development agencies, including, in Alberta, the constantly restructuring Alberta Innovates. The federal government has so many economic development programs that even the bureaucrats can’t remember half of them.
Every city has an economic development agency, i.e. the Edmonton Economic Development Corporation.
Within the city, dozens of non-profit organizations help young businesses grow or get better — TEC Edmonton, Startup Edmonton, Alberta Women Entrepreneurs, Business Link, Northern Alberta Business Incubator (NABI), NovaNAIT and NINT Innovation Centre.
Having just wrapped a five-year stint as a part-time communications advisor with TEC Edmonton, I’ve gained some insight into the nature and value of business incubators/accelerators.
Are they needed?
Yes. If they do what they are supposed to do, i.e. help innovative entrepreneurs succeed, thereby creating skilled jobs and new wealth.
But economic development too easily morphs into large government-supported organizations with plenty of comfortable, secure jobs. They may or may not be doing a good job of economic development, but nobody really wants to know. A harsh independent assessment would upset the apple cart.
I find it ironic that hundreds of “economic development” specialists with secure nine-to-five jobs, holidays and direct/indirect government pay cheques are helping entrepreneurs with zero cash and 100-hour work weeks.
At business development functions, “economic developers” usually outnumber entrepreneurs.
TEC Edmonton overcame this conundrum by hiring business advisors on contract. TEC Edmonton looks for successful experienced entrepreneurs to sign up for two to three years. And if a TEC client wants to hire the advisor to run the company, by all means!
I remember a meeting between a federal business assistance agency and TEC Edmonton’s business advisory group. The federal folks were life-time employees, slow, old, going through the motions. TEC’s gang was young — mid-‘30s to late-‘40s, aggressive and fast.
TEC Edmonton CEO Chris Lumb argues that economic development is about small wins — that business incubation/acceleration is not about finding the next Microsoft, but about adding pennies to an ever-growing pile, about giving small businesses the tools they need to fly on their own.
Every year, TEC Edmonton does its own “economic outcome survey” of past and current business clients. Most of the 600 companies TEC Edmonton helped with business advice or technology management over the past nine years have a) survived and b) slowly grown revenues and employees.
While it’s an internal survey — the student is marking his or her own paper — the survey at least produces hard data to justify TEC Edmonton’s role in the Greater Edmonton economy.
That’s where economic development gets “soft,” in determining its own effectiveness.
Economic developers and their political masters are reluctant to accept that the free market picks winners and losers, that all the help in the world does not guarantee success. You can’t hit a home run if you don’t step up to the plate. But is it worth all the taxpayers’ money spent supporting the 10 previous batters who struck out?
To what degree can successful companies be “manufactured”. Did economic developers help BioWare, PCL, Stantec, EPCOR and Canadian Western Bank get off the ground when they started? Or were our city’s dominant wealth generators built without economic-development hand-outs or advice?
You can go back and forth on the argument. University research accounts for much technological advance. Campus researchers usually use some form of business assistance to commercialize their discoveries.
Edmonton’s emerging new health-product company cluster owes a great deal to TEC Edmonton’s health accelerator program. “Ecosystems” that help budding entrepreneurs are more comprehensive than before.
In Alberta, government has steered clear of direct investment in startup companies. Good. Private investor interest is a much better indication of future success than a entrepreneur’s ability to snag government grants.
On the other hand … startup business advisor Don Pare thinks Alberta should follow Chile’s example, giving $50,000 each to 300 new innovative Alberta businesses every three months. If you get 10 to 30 winners in each batch, he argues, the economy would quickly diversify.
That’s $60 million a year you want this cash-strapped province to come up with, Don?
Maybe if all economic development funds were diverted from the agencies above and reassigned to the Next Great Giveaway.