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Budding entrepreneurs become blooming successes, write Jane Robinson and John Grace.
Imagine you were given the challenge of creating an innovative strategy to grow a small regional economy. Where would you begin?
The problems facing economic development practitioners in regional Australia vary enormously from region to region and so do the potential pathways to economic growth. Some local government areas (LGAs) are blessed with large tracts of cheap land located in nationally recognised growth corridors. For practitioners in these areas, the choice is an obvious one – adopt business attraction as the core strategy.
But what are the options for practitioners in areas where there is no cheap land, or very little industrial land available at any price, and don’t possess those natural attributes that attract big city businesses?
In these situations, business attraction activities can be a case of ‘flogging a dead horse’ and run the risk of being a cannibalistic exercise. It sets local councils up in competition with each other, facing off in a kind of mating ritual with a handful of ‘footloose’ companies.
To make matters worse, most local economic development practitioners have access to very limited resources with which to create their strategies. They don’t operate the macro-economic levers that influence the direction of the economy. Nor do they control the planning instruments that determine the physical structure of their industrial and commercial environments.
For many decades, Shellharbour has supplied labour to the steel and coal industries based in the Wollongong LGA. In recent years, Shellharbour has been designated as a population growth centre. At only 154 square kilometres, Shellharbour City is geographically small but home to 62,000 people, a figure that is expected to reach 75,000 by 2020. Shellharbour also has a low workforce self-containment rate, with more than 60 per cent of its resident workforce commuting outside the LGA to work.
The city is heavily reliant on small business to provide local jobs and the majority of businesses operate in the retail, wholesale, hospitality and service industries. The narrow industrial base tends to limit jobs growth as well as the range of jobs for local residents.
These were the challenges that two partner organisations, the Illawarra Area Consultative Committee (IACC) and Shellharbour City Council, were seeking to address in 2004. It seemed logical that an endogenous growth strategy such as ‘business retention and expansion’ (BR&E) was an essential component of an economic development plan for Shellharbour. But which specific type of BR&E strategy would best suit Shellharbour?
Illawarra ACC identified a promising strategy that had originated in Littleton, Colorado, in 1987 called ‘Economic Gardening’.
The appeal of Economic Gardening is the way it seems to fit the circumstances of Shellharbour City. Economic Gardening does not rely on business attraction but focuses strongly on encouraging the successful expansion of local businesses. It assists potential high-growth businesses to expand, rather than helping struggling businesses simply to survive. The project partners had witnessed the failure of some high-profile business relocations in the Illawarra region and decided that the concept of growing the economy ‘from within’ was a more sustainable alternative.
Rather than just overlaying a US strategy on local conditions, the project team kept the core Economic Gardening principles and redesigned methods to suit the local resources and business environment. Kiama Council, the LGA south of Shellharbour, became a partner in the project. The University of Wollongong is evaluating the project methodology.
The Economic Gardening pilot project began in November 2006 and by November 2007, sampling of participating businesses showed that, on average, each business had grown sufficiently to hire another 1.6 workers. Survey feedback indicates that a majority of businesses are now undergoing planned expansion and that in most cases this is attributed to their involvement in the Economic Gardening project. By March 2008 more than 100 businesses will have been actively engaged.
Key attributes of the Shellharbour City project:
• Creation of strong networks within the small business community
• Identification of business operators who have an interest in, and potential to, expand their businesses
• Active engagement of these business operators in the challenge of growth
• Establishment of positive relationships and open communication channels between councils and the small business community
• Effective delivery of a package of information and services focused on business growth
• Learning experiences facilitated by successful business people rather than institutions
• Follow-up facilitation and coaching to encourage adoption of sound business-growth practices.
Each intake of businesses starts with a ‘Business Boot Camp’, an intensive one-day workshop which centres on a business simulation exercise. Participation is closely observed by the project team. Participants, away from their day-to-day operations, have time to analyse their business and their own behaviours in relation to their business. They are then offered a financial ‘health check’ from an external consultant.
The Boot Camp is followed by a series of ‘business growth workshops’ focusing on practical aspects of generating business growth as well as managing fast-growing businesses. Businesses identified by the project management team are offered one-on-one coaching to ensure the business owner is best able to implement the strategies presented in the workshops.
The program has funds available for the purchase of direct marketing lists for specific businesses identified as having a target market beyond the local region. The program also has the capacity to purchase marketing materials for businesses seeking to grow their business via a structured marketing campaign.
The Economic Gardening strategy places a strong emphasis on the need to harness the attributes of small business entrepreneurs.
Arguably, the Illawarra region does not have a strong culture of individual entrepreneurship. Its history is dominated by a ‘company town’ culture (BHP ran steel operations in Wollongong). The Economic Gardening partners wanted to play a role in helping to create an environment where budding entrepreneurs are encouraged to innovate and to grow their businesses. The ‘Illawarra Entrepreneurs’ web-portal has recently been launched as part of the project www.economicgardening.com.au.
Can local economic development practitioners have a positive influence on entrepreneurial activity? There isn’t a conclusive answer to this question yet. It is not the proposition of this article that the Economic Gardening strategy is the panacea to every region’s economic development problems. However, it seems to be proving effective in Shellharbour and Kiama, even after only 15 months in practice.
Growing small businessesWhy is it so important for regional economies to have strong and growing small business sectors?The small business sector has a total capitalised worth of $4.3 trillion; four times that of the Australian stock exchange. Plus small business employs around 3.6 million people or 47 per cent of private sector, non-agricultural employment. In addition, Prime Minister Rudd recently said that “small business is the backbone of the Australian economy”. It cannot be underestimated as a driver of growth in any regional economy. Don’t forget: around 30 per cent of Australia’s economic activity is generated by small business. And finally: there are now more than 1.8 million small businesses in Australia. |
Jane Robinson is the Economic Development Manager for Shellharbour City Council.
John Grace is Executive Officer of Illawarra Area Consultative Committee.
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URL: http://www.austlii.edu.au/au/journals/MonashBusRw/2008/5.html