The October 2012 issue of Business Xpansion Journal carried an article entitled “Quality of Place Leads to Quality Returns”. It is a great article encouraging economic development professionals to consider the long-term implications of strategic choices on asset creation, infrastructure investment and public policy reform. Scoop.it
“Quality of Place decisions can result in immediate returns, though they pay the highest dividends when developed as an economic asset benefiting not only current residents, but possible future ones as well.” [source: Page #11, October 2012 Business Xpansion Journal]
I am particularly interested in this topic because of the work I am doing with Xavier University to introduce their American Dream Composite Index as a performance measure in economic development. The Xavier University data, and data from market research I had conducted in my previous role as Executive Director of the Ohio Business Development Coalition, have convinced me the capital investment decision is far more complex than simply meeting project requirements and providing the best project NPV. We actually know in our guts this is true, because if it were as simple as looking at the numbers site visits wouldn’t be as important as they are.
The reality is that for most projects the due diligence process will yield 2-3 location options that on paper are essentially identical. The CFO would be happy with selecting any of them. But, when there is no longer a rational basis for selection, how does a CEO choose? The answer is on emotion. The CEO exercises her/his judgment and selects the location that feels like the best long-term fit for the Company, its employees, and its shareholders. CEOs get paid to make decisions in the face of uncertainty. They use data to minimize the risk of making a bad decision, but ultimately the decision is made on an emotional level.
There is actually scientific research to support the notion that emotion plays a critical role in decision-making.
“Neuroscientist Antonio Damasio studied people who had received brain injuries that had had one specific effect: to damage that part of the brain where emotions are generated. In all other respects they seemed normal – they just lost the ability to feel emotions. The interesting thing he found was that their ability to make decisions was seriously impaired. They could logically describe what they should be doing, in practice they found it very difficult to make decisions about where to live, what to eat, etc. In particular, many decisions have pros and cons on both sides. Shall I have the fish or the beef? With no rational way to decide, they were unable to make the decision.” [source: http://changingminds.org/explanations/emotions/emotion_decision.htm]
Perry Marshall, author of a book on Google Adwords, claims “All people make buying decisions based on emotion; therefore your marketing must use emotion to sell what people want, not what you think they “need” or want them to need. Yes, this is really, actually true. Engineers, accountants, executives, attorneys, housewives, and ministers – PhD’s, delivery truck drivers and farmers – and butchers, bakers and candlestick makers – We all fundamentally make all of our decisions based on emotion, not logic. Logic supports our emotions and is used to justify our decisions after we have made them. Logic plays a part, but emotion is the core ingredient.” [source: http://www.perrymarshall.com/marketing/m11/]
For perspective, sustainable economic development was a big topic in the 2012 IEDC Annual Conference. The discussions encouraged you to think longer-term about how your community develops and recognize that not all jobs are created equal. Companies are looking for sustainability in their business success in all areas from energy availability to qualified labor access.
So, what does it mean and why does it matter?
It means you must deal with more than having a competitive set of assets and incentives if you want to stack the odds in favor of your community as the ideal location choice. You need to also care about the culture of your community.
I wrote an article about this for Global Corporate Xpansion magazine. I titled the article “The Smell of The Place”. The article discussed how a location’s ability to foster work:life balance is a competitive advantage, and how it impacts a Company’s bottom line performance. In the article, I shared a quote from Greg Oberland, Executive VP of Northwest Mutual the company that sponsored the study. At the time, he had said “What we’re seeing very clearly from this research is that the ‘personal balance sheet’ is considered the primary yardstick for success.”
I think Greg was on to something. If I were to write that article today, I would include a discussion on how the ability of a community to enable a Company’s employees to realize the American Dream is a meaningful competitive advantage. I have come to believe people’s personal balance sheet can be summarized by the degree to which they are able to realize the American Dream. The reason I didn’t take that position at the time is Xavier University’s American Dream Composite Index wasn’t available.
The 35 dimensions of the American Dream Composite Index can easily be thought of as a personal balance sheet. The ability to realize each contributes to an individual’s perception of achieving the American Dream. Once Xavier University finds a way to make the American Dream Composite Index available on a state and major MSA level, its utility as a performance measure will increase dramatically. When CEOs can begin to assess final location options on the differences in their employees ability to realize the American Dream, it is not hard to imagine them using the Index as an emotional tie-breaker in their choice of where to grow and expand their business.
What should my community do?
The first step is to ensure you understand your community’s core promise. What is it? Is it competitive?
If you determine your community promise is not competitive, you need a plan to get it competitive. There is nothing you can say that will make it competitive. You need to improve your community’s value proposition and this should be the main focus.
There is an old saying – “You can put lipstick on a pig, but it is still a pig.”
If your community will be viewed as seriously deficient versus alternatives you need to address the deficiencies quickly and decisively. In the consumer packaged goods world, we say, “fix your product first”.
Once you have a competitive promise then you are in a position to invest in telling your community’s story and attracting capital. And, you should design and deploy strategies to ensure your community’s promise remains competitive. This requires a longer-term perspective than a 4-year election cycle.
What is the process to do all this? Check out my blog post entitled “Four Step Process For Building A Brand”.
Leave a comment with your thoughts on one or more of the following questions.
- What is the quality of your place? How do you determine this?
- Do you have data that gives you insight into the question? Where can you get it?
- How well does your Region enable the American Dream for people living in your area? Does this align with your assessment?
- If it scores low, what can you do locally to make your community the positive exception? Which of the 35 dimensions can you impact?
- What is your community’s promise? How do you find out?
- Is it competitive? How do you know?
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