Clusters of Opportunity:Strategies to Accelerate Regional

Economic Growth

A Discussion with the Kaneohe Business Group

Lisa H. GibsonPresident

March 23, 2011

Background• 35 Years in Marketing and Fund Development

• 15 Years in Economic Development

• Sustainable Oahu Initiative 1999 – Chattanooga Best Practices Tour

• COO – Enterprise Honolulu – Co-Author of Target 2005: A Five Year Pathway to Local Prosperity and Global Prominence

• Project Manager Hawaii Life Sciences Roadmap

• Founder and Past President the Hawaii Science & Technology Council & Institute

• Oct 2006 published S & T baseline data: Innovation and Technology in Hawaii: An Economic and Workforce Profile

Today’s Discussion

• The Structure of Hawaii’s Economy

• Hawaii’s Economic and Workforce Crisis

• Role of Innovation in Global Competition

• Strategies for an Economic Intervention– Role of Regions– Focus on Clusters of Opportunity– The Process– Potential for the Kaneohe

The Structure of Hawaii’s Economy

Imports (goods & services) $14.954B

Exports (goods & services) $ 2.194B

Visitor Expenditures $10.033B

(goods & services)

Trade Deficit: $ -2.727BImports-(Exports+Visitor Expenditures) = Trade Deficit

Foreign Direct Investment $11.63B

Federal Expenditures $ 9.015B

Source: DBEDT

Hawaii’s Growing Gap Between Rich and Poor

In comparison to other U.S. States, Hawaii ranks:• Highest # of households receiving government financial

aid (2.9%)• Highest # households receiving Food Stamps (12%)• 3rd Highest with 10.7% of population below 100% of

federal poverty• 4th Highest with 25.9% of population below 200% of

federal poverty• 7th Lowest with a per capita income of $21,888• 43rd in Nation for growth of average pay• 47th for economic diversification• 49th for home ownershipSource: Honolulu Advertiser 10/23

The Role of Ideas

Tough Choices Tough TimesThe National Center on Education and Economy

“This is a world in which comfort with ideas and abstractions is the passport to a good job, in

which creativity and innovation are the key to the good life, in which high levels of education….are

going to be the only security there is.”

Global Challenges Facing America’s Communities

• New global innovation economy

• New opportunities for prosperity

• Raised stakes for participation

• Disruptive – rewards regions which innovate and hardship for bystanders

Why Innovation is Central to Rising Living Standards

• The key to prosperity is productivity

• The basis for increasing productivity is innovation.

• Only way to compete and raise our standard of living is to find new and better ways to use natural, human and capital resources to increase productivity.

• Better – Faster – Cheaper

Creating Prosperity is a Social Justice Issue

“Economic growth -- meaning a rising standard of living

for the majority of citizens – more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy.” In contrast, when an economy stagnates, “the resulting generates intolerance, un-generosity, and resistance to greater openness of individual opportunity.”

The Moral Consequences of Economic GrowthBy Benjamin N. Friedman

Cannot Cut or Tax the Path to Prosperity

Hawaii Deficit nears $1B Star Advertiser 3/11/11

Higher Alcohol tax will destroy restaurant and hospitality jobs

Star Advertiser 3/2011

GROWING ECONOMY DRIVES VITAL CYCLE

Regions as Critical Units of Economic Activity

• Big enough to compete globally• Small enough to benefit from network economics • Regions are the scale at which to efficiently and

productively deploy assets to create wealth• Communities and regions must focus on the

systems and interactions which account for regional economic performance.

• Aspire to better understand systems, explore factors which influence performance, identify interventions which will be most effective

Challenges for Communities• Regions must now compete on the basis of increasing

productivity not simply costs

• There is no such thing as a “high tech” or “low tech” industry anymore, only innovative or non-innovative.

• To achieve success, regions must understand the evolving nature of innovation.

• To recognize its own strengths, identify other regional “spikes” based on their strengths, and connect to those “spikes” for mutual benefit.

• To transform the deleterious single interest/zero-sum game into the pursuit of integration to achieve mutual gain.

• NETWORKING AND COLLABORATION ARE KEY

How to Close the Gap Between Theory and Execution?

Two Quotes from Peter Drucker

“Innovation is the purposeful

pursuit of opportunity”

“Strategy is worthwhile when it

degenerates into work”

Focus on Regional Clusters of Opportunity

• Mobilizes Cluster Leadership

• Apply Business Planning methods to economic development

• Use of data to identify clusters of opportunity and to measure performance

• Create the framework for a continuous improvement process

• Inclusive and transparent

A New Kind of Assessment:Focus on Cornerstones of Innovation

• Assets

• Networks

• Culture

• Community

Best Practices Examples

• California Wine Industry Cluster Map

• San Luis Obispo Clusters of Opportunity Economic Strategy – Collaborative Economics

Cluster Mobilization Process Seeks to Answer Two Questions

• What are the opportunities for growth of your industry in this region?

• What are the requirements for promoting those opportunities?

PROCESS OVERVIEW• ASSESS the region’s economy and identified key clusters of

opportunity.

• CONVENE groups of employers by cluster to discover high-priority opportunities and requirements for industry growth, vitality, and competitiveness.

• FORM CLUSTER ACTION TEAMS based on these meetings, develop Action Plans, with specific outcomes, strategies, and implementation commitments.

• COMPLETE an Economic Strategy Plan

• LAUNCH IMPLEMENTATION PROCESS• MONITOR PROGRESS

CLUSTERS OF OPPORTUNITY ARE SPECIALIZED AND GROWING

UNIQUELY SAN LUIS OBISPO COUNTY:

SPECIALITY PRODUCTS & EXPERIENCES

“Uniquely San Luis Obispo” Action Plan

• Expand Funding to Promote Cluster

• Launch a unified and Countywide branding and marketing campaign

• Launch a parallel community awareness campaign

• Promote local policy changes that support individual specialties and combinations of specialties

Why This Matters to Policy Makers

“The global economic crisis has made it clear that our economies will

never be the same and that we must all adjust to a new normal”

House Budget Chair Marcus OshiroHonolulu Star Advertiser 3/18/2011

• Hawaii cannot cut its way to prosperity• There is no business plan to create a tax base

for Hawaii• Must develop a business plan which focuses on

existing and emerging clusters of opportunities.• Process must be driven by business and regions

Need to Reframe the Question

How much does Hawaii’s GDP need to grow to achieve our economic, social, environmental and cultural goals?

Questions and Discussion

How is this process relevant to business in Kaneohe?

Mahalo

There is no sustainability if

you don’t have a job

29

ExecuteYour Plan

FormulateStrategies &

PrioritizeActions

Detect RegionalEconomic Advantage

Lead the PlanningEffort

Assess your capabilities

Call the region to action

Engage your leaders

Frame your analysis

Define your geography

Conduct baseline assessment

Inventory assets & challenges

Prioritize issues of concern

Construct a vision statement

Define your actions

Prioritize your actions

Design implementation plan

Leverage your resources

Monitor your progress

Promote your success

15 Steps to Regional Prosperity 4 Planning Phases

Building New

Foundations Approach

CLUSTER ANALYSIS

2

3

4

5

Additional Industries of same kind

Export Engine

1

Primary Indirect Firms: Local

Indirect Support Firms: Local

Induced Demand

Export Engine – Direct /Traded

(2)Engage the

Community and Legitimize

the Process

(1)Begin/ Continue

the Process(10)

Create an OngoingProcess

(8)Evaluatethe Effort

(3)Form Organized

Structure & Partnerships

(6)Seek CommunityFeedback and Commitment

(5)Develop a

Strategic Plan

(9)CelebrateSuccess

(4)Conduct

Community/economicAssessment(s)*

(7)Implementthe Plan

Community & Economic

Development

* One tool to accomplish this is Targeted Economic Development