Economic Development: The Importance Of Being Modern

Through their policy makers, communities must create environments that encourage individuals and companies to pursue modernization, and success.


https://businessfacilities.com/2021/07/economic-development-importance-of-modernization/
Through their policy makers, communities must create environments that encourage individuals and companies to pursue modernization, and success.
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The Importance Of Being Modern

Through their policy makers, communities must create environments that encourage individuals and companies to pursue modernization, and success.

Economic Development: The Importance Of Being Modern

By Jacob Everett, CEcD

Communities across the globe are in a constant cycle of modernizing nearly every facet of life: housing, infrastructure, education, amenities, transportation and public policy, to name a few. All need to be in optimal condition for residents to live full and fulfilling lives.

modernization
(Credit: Getty Images /metamorworks)

In the U.S., modernization can be seen at a macro level. The United Mine Workers of America agreed to a plan that will transition this country away from coal and other fossil fuels. 

Changes at this level are extremely difficult to grapple with given their tremendous impact on families and communities. Generations of Americans and countless communities thrived under the success of the fossil fuels industry. But successes of the past often do not translate to success in the future. This entire group of workers has chosen to embrace change and acknowledge that they must adapt, evolve and modernize in order to prosper. 

Economic development is deservedly another constant focus area for communities that wish to modernize. However, economic development means different things to different people. To understand the impact of modernization on community growth and prosperity, consider these two applications of the word “modern” in today’s economy:

1. How modern is the foundation of your community’s economy?

As the saying goes, the only constant is change. As 2020 demonstrated, things can shift drastically in the blink of an eye, and technology swiftly fills the voids caused by change. Entire industries go through significant change on a continual basis. This is driven by innovation, consumer behavior or other market forces. The inflows and outflows of those altered industries are forever changed. 

Are your community’s base employers – those forming the bedrock of your economy and importing wealth – keeping up with emerging best practices? This is a challenging yet critical question for most communities to answer. Are the base employers in your area aggressively investing in new technology? Do these companies serve as industry leaders in process and product innovation?

If a high number of firms answer “no” to these questions, economic development officials should recognize this as a challenge that must be addressed proactively. Without proactive innovation and investment, most companies in most industries simply cannot remain successful long term. This situation can occur anywhere companies are falling behind in the market. Many states and regions around the world are dealing with widespread innovation degradation, either in a specific industry or within entire clusters.

Companies and industries may appear healthy but contain significant risk within. Economic development organizations (EDOs) should use their relationships with private sector leaders in the area to gauge the status of industry/cluster modernization. Retention visits, surveys and executive roundtables are some of the tactics EDOs can use to capture this important information.

Here are some questions that need answers to assess the key industries/clusters in the community:

  • Are recent and planned investments tied to the continuation of old processes and strategies, or are they related to innovative approaches to improve quality, efficiency and output?
  • Have employees recently been trained on new equipment and processes? 
  • Do companies have formal programs/training related to Six Sigma, Kaizen, continuous improvement or Industry 4.0?

Beyond collecting this information, EDOs should educate themselves on the key industries in their economies. Supplementing the insights gained from local industry leaders with additional research about the direction of those industries worldwide provides a window into the greater forces shaping the market, such as disruptive changes in technology or customer behavior. Speaking with experts at colleges and universities in your area is another great way to learn how certain industries are expected to evolve in the near future.

After gathering this information and conducting your own research, communities should have an objective understanding of how forward looking their key industries are. Communities experiencing a high degree of modernization within key clusters should take heart and continue to support this activity in the private sector. Communities finding a lack of modernization in key sectors should prioritize engagement with local and corporate leadership to discuss innovation possibilities and work with state and local public policy makers to encourage increased modernization in the area’s private sector.

Remember, very few industries are static. Failure by companies to modernize will likely lead to irrelevance and eventually obsolescence. To position themselves for long-term economic success, communities must understand this key issue and continually monitor critical companies, industries and clusters.   

2. Does your state and community public policy support modern companies?

A new company announcing it is coming to town is reason for celebration. New jobs, new investment and, in most cases for new operations setting up, cutting-edge processes, equipment and strategy. But does your community get as excited five years later when that same company wants to invest in its facility to improve efficiency? What about the company right next door that has been in town for 75 years and wants to replace a 25-year-old production line with a new one that provides 50% more output and consumes less inputs?

While most would express excitement for both opportunities, public policy often falls short. States and communities, through both formal and informal policy, focus on new jobs. Indeed, job creation is a pillar of economic development, but should a company investing to remain relevant be precluded from accessing the same tools and support available to any other important employer? 

Many elected and appointed officials have expressed reluctance to financially support projects that do not create new jobs. While the sentiment is well intentioned, the impact can be counterproductive. If companies in your community are not continually investing to improve themselves – regardless of new job creation – their existing workforce is undeniably temporary. It is not a question of if those jobs will disappear, but when.

Forgoing community support for company modernization can very easily translate to future job losses and facility closures. Most companies, especially base employers, have multiple choices when deciding where to deploy capital. While many factors impact those decisions, communities that understand and support the need for modernization are positioned to develop deeper, longer lasting and more successful relationships with the private sector.

Job losses and communities left behind are painful realities of economic evolution, but they do not have to be a death knell. The path forward is shown by the 2021 coal miners: modernization. Industries, no matter which one, and workers, no matter which kind, must invest in themselves in the continual pursuit of tomorrow’s success. Communities, through their policy makers, must create environments that encourage individuals and companies to pursue this path. Tomorrow depends on it.

Jacob Everett, CEcD, is a consultant for McGuire Sponsel, a national advisory firm assisting CPA firms and businesses on specialty tax solutions and economic development credits and incentives. Everett advises growing companies on their investment, location and job creation strategies. Previously, he served in various local and regional economic development roles. You can email Jacob here

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