What are the words on every community leader’s tongues right now? Recovery and Resiliency. Some regions have been lucky enough to receive CARES Act funding to help put together a plan to recover from the COVID-19 pandemic and build resiliency against any future pandemics of this size. The problem is: there is no standard operating procedure. No road map. We are in a new space here, folks. So, what should we do? Of course, focus first on stopping the bleeding. What are the urgent needs in your community? Likely, it is helping small businesses survive. Live in a small, rural community? Then the backbone of your economy is your small businesses. Live in a densely populated urban center? Then the backbone of your economy is your small businesses. How? They often are the providers of childcare, maintenance, and other support services that allow others to stay in the workforce. Many communities have been great role models for how to react to serious economic shocks, re-structuring and deploying existing, yet flexible funding pools to help the immediate needs of its businesses. However, now is time to focus on the longer-term recovery and ultimately build a new path towards long-term resiliency. How? Diversification of your industrial base.
Why is Diversification Important?
Similar to an investor’s portfolio, industry diversification of a community’s economy helps protect it from shocks in the market. As part of a diversification approach, any plans for Recovery and Resiliency should include recommendations designed to empower the local leadership and stakeholders to take control of the factors that shape their local economic ecosystem, increase community knowledge, and enable informed action. Fundamentally, the Plan is geared to help leaders develop their community into a transformational economy.
Lessons-learned from the negative effects of having a homogeneous industry concentration, as the auto industry in Detroit, can help lead communities toward a sustainable path of diversification. While there is no magic recipe or one-size-fits-all approach to diversification, research from the World Bank identifies a number of elements that provide the foundation for private sector-driven diversification. Here are 3 things you can do right now:
Conduct a thorough economic analysis to understand the industrial supply chain and talent crossover opportunities into different sectors.
Invest in infrastructure and policies to reduce cost. Understand where cost and efficiency integrate to determine where diversification can be achieved.
Establish a pertinent and calibrated incentive framework. Review policies to ensure effective competition in key markets.
Effective policies to support the reallocation of economic resources to new initiatives. Talent-centered policies that remove mobility obstacles and access to finance will help the move toward diversification and address flaws in the market.
What’s Next?
It’s best to take bite-sized chunks to achieve long-term diversification success. If you want to learn more about the process and results from the diversification work I’ve done, please contact Courtney Zaugg, CEcD at courtney@plakaassociates.com.
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