Developing the Entrepreneurial System – Here and There

ecosystem

A professor from the University of Michigan’s Ross School of Business is writing from his home state’s perspective, but sharing insights regarding Midwest entrepreneurial ecosystems and how they might differ from international efforts. He notes four key elements, including the always popular capital and worker skill aspects:

  1. The most important step is connecting with your customer

While understanding the basic fundamentals of cash flow and knowing how to manage a staff is important, businesses everywhere must put finding the customer first if they want to be successful. For Midwestern businesses, that might be a challenge for marketing. For startups in some developing economies, the search can be less abstract: Infrastructure challenges can make connecting with customers more difficult. For example, in Vietnam, the single biggest platform for ecommerce is Facebook — but in rural Morocco, a lack of infrastructure makes ecommerce virtually impossible. Interpersonal connections and marketplaces remain indispensable.

  1. Success begets success

In the United States, the story of every successful startup cluster begins with capital — and one of the best sources of capital is another company’s exit. We’ve also seen that for every $1 a Michigan startup receives from a Michigan VC firm, it attracts $4.61 of investment from outside of Michigan. Cash is the fertilizer, and the more of it in the environment, then the more likely the economy will grow.

This logic doesn’t always hold in developing economies, one of the hallmarks of which is no middle class and a huge income disparity. When wealth is created in these environments, there are many places that the money can be reinvested in besides another startup: to fund education, for example, or to buy more land. That being said, more wealth generated by new venture activity has the potential to lift the income threshold and lead to a more stable, flourishing economy. 

  1. Give your talent the fulfillment they need

A major challenge for small communities is talent, no matter where they are located. But talent isn’t just about having smart people — it’s about having people with the skills needed to build a business, and a community that can support them. In the Midwest, that talent gap often takes the form of local workers who are educated, well-trained, and experienced in running a business, but who might not choose to stay and work in their communities if there aren’t opportunities that appeal to them.

Robust entrepreneurial ecosystems with more activity have the potential to attract top talent away from more metropolitan areas. It can become a self-sustaining cycle once it gets going, but may take a significant event or local unicorn to get it kicked into action. In developing countries, that more often looks like workers who have limited skills, who need the determination and resources to invest in themselves — and who need an ecosystem that can provide them with that base.

  1. Take local differences into account

What works in Silicon Valley doesn’t always work in Chicago — and what works in Kosovo might not work in Vietnam. When it comes to translating what has worked in one place to another, the details become local, and critical. Some business climates trust banks and credit lines; others operate solely in cash. In some places, the local language is widely spoken; in others, that local language could be six different dialects. Just as the National Venture Capital Association has local chapters to better understand and focus on the small ecosystems being built all over the United States, context is everything for entrepreneurs looking to get off the ground no matter where they are.

While languages, customs, and currency differ from country to country, one thing doesn’t: When entrepreneurs and innovation win, it can lift the outlook of an entire economy. With the right resources and support, the Midwest has stepped up to create the jobs and standing it needs to survive in the modern economy — and developing ecosystems around the world are doing the same.

Trying to Attract the Tourists

Unique tourism campaigns are nothing new. Governing magazine recently highlighted several:

As the saying goes, if you can’t beat ’em, join ’em. That’s exactly what South Dakota did with a new tourism approach a few years ago.

After hearing from focus groups across the country that the Dakotas were nothing more than a “barren wasteland,” the state tourism agency came up with a unique campaign angle: At least we’re not Mars, an actual barren wasteland.

The voiceover in a TV ad says: “Mars. The air: not breathable. The surface: cold and barren. … South Dakota. Progressive. Productive. And abundant in oxygen. Why die on Mars when you can live in South Dakota?”

Their efforts may have paid off: The state has had a record number of tourists in the past two years. 

Instagram on the Road

Last year, Minnesota decided to tackle the perception that the state is just a cold, snowy place by bringing its attractions to you. Really.

Explore Minnesota Tourism, the state’s tourism committee, created traveling photo booths featuring two of the state’s main attractions: the First Avenue music club, which was featured in the 1984 Prince movie Purple Rain, and scenes of the Minnesota outdoors.

The state set up the booths in cities across the country, ranging from Denver to Chicago to Kansas City, and modeled them after Instagram to encourage people to share their photos on social media.

The Prince booth came complete with a fog machine, purple lighting and a drum kit, while the other booth featured a canoe and a machine that generated morning mist and bird calls.

Come Get an Operation

San Diego doesn’t need to do much to convince people to visit: It has legendary beaches, a world-famous zoo and plenty of sunshine. Even so, the city is now betting it can convince tourists to get that elective surgery they’ve always wanted in between getting a tan or frolicking on the beach.

In 2017, city leaders launched DestinationCare San Diego, a public-private partnership to get more tourists to think of San Diego as a place to get medical care — and recover afterwards. The city hopes to compete with world-renowned medical destinations like the Mayo Clinic in Minnesota or the Cleveland Clinic in Ohio.

The city does have a strong medical sector. It’s home to the University of California health systems and Rady Children’s Hospital, which is ranked one of the best children’s hospitals in the country.

Toll Road Tales: Good News for Taxpayers, Motorists

TReactions were varied recently when the company operating the Indiana Toll Road filed for bankruptcy. A researcher at the Harvard Kennedy School emphasizes the positive aspects of how that deal was structured and focuses on the continually evolving role of each party in such an agreement. Governing reports:

n 2005, two companies came together to form the Indiana Toll Road Concession Co. (ITRCC), which won the right to operate the toll road in exchange for a $3.8 billion up-front payment. The deal limited how much tolls could rise and included a trigger requiring the consortium to expand the roadway if certain congestion benchmarks were reached. The $3.8 billion threw off about $250 million that was used to fund other state transportation priorities.

Like so many other enterprises, ITRCC was done in by the Great Recession. Its financing structure called for large debt payments at the end of the first decade, which proved overwhelming in the face of revenues that didn’t meet projections when the downturn hit and traffic volume fell.

But what’s reassuring is that motorists will see no interruption in service or toll increases as a result of the bankruptcy. The roadway is still subject to the same performance metrics, and there will be no taxpayer bailout. State officials will first try to find a new operator to take on the remainder of the concession deal. If that doesn’t work out, the ITRCC will likely be recapitalized with an altered debt schedule.

In either case, customers will retain the benefits from the $458 million ITRCC has invested since 2006 in road, bridge and pavement improvements and a new electronic tolling system.

While it appears that the Indiana Toll Road deal has succeeded at protecting taxpayers and motorists, that doesn’t mean there aren’t lessons to be learned from the bankruptcy. To maintain a true public-private partnership, governments might want to avoid taking the entire concession payment up front.

Chicago completed a similar deal just before the Indiana Toll Road agreement and couldn’t resist the temptation to use the upfront windfall to plug other holes in the city budget instead of using interest from the concession payment to maintain transportation infrastructure. More recently, public-private partnerships for Virginia’s Pocahontas 895 parkway and Colorado’s Northwest Parkway featured smaller upfront payments but give taxpayers a cut of the ongoing toll revenue.

VIDEO: A Discussion About Northwest Indiana

NWIndianaLife.com recently spoke to our president, Kevin Brinegar, about the key issues facing the northwest Indiana business community. We appreciate the opportunity, and here is their synopsis of the 21-minute interview.

In this interview, Kevin Brinegar of the Indiana Chamber of Commerce discusses the Chamber's relationship with Northwest Indiana. He talks about how important the Region is to Indiana as a whole, given the proximity to Chicago and the variety of infrastructure in place for transportation and industry. He goes on to discuss some of the recent developments coming out of the Region, including the Illiana Expressway and how it will improve traffic flow in and out of the area, as well as the expansion of the Gary Airport, lakefront developments, and how the RDA is helping with improvements on a regional level. Next, he covers some of the positive opportunities coming out of Gary in the future, and how the revitalization efforts are helping the future of this strategically located city. Kevin then talks about the business climate in Indianapolis, and how visionary leaders across industries have helped foster a thriving area of economic growth. He attributes this growth to Indiana having one of the best, most stable climates for business growth, and how well the state has been ranked overall. He sees Indiana's economic future in the hands of the Chamber of Commerce, helping to grow the economy over long periods and directing long-term planning for the years ahead. He goes on to discuss how the Indiana Chamber of Commerce distributes information to the people of Indiana, through emails, newsletters, magazines, blogs, twitter, and more. Some plans the Chamber of Commerce have been implementing include the Indiana Vision 2025 plan and covering the cost of preschool for families to help prepare the next generation. He sees the Porter County Career and Tech Center as a model for engagement with employers as student are learning trades in school.

Agents Rank Top Airports for Business Travel

Nearly everyone likes lists. Most people (we're making a bit of an assumption here) enjoy some aspect of flying — the convenience, the free peanuts when you get them, having an empty seat next to you.

Seriosusly, flying and business are a reality for many. A nationwide survey of agents representing Travel Leaders Group identified the bests and worsts among U.S. airports for business travel. A few of the findings:

Atlanta ranks as the top preferred domestic airport if clients have a connecting flight, while Chicago O’Hare ranks as the top domestic airport to avoid if making a connection. Atlanta's Hartsfield–Jackson also was identified as the top airport for amenities, dining and providing the best services for business travelers; Minneapolis/St. Paul ranked second in amenities, dining, and for helping to keep kids entertained and occupied.

Best U.S. Airports for Connecting Flights:
Travel Leaders Group owners, managers and agents were asked, “If your clients are flying and need to connect through a hub airport, which hub do they prefer?” Respondents were allowed to choose up to three airports.
1 Atlanta 40.5%
2 Charlotte 25.2%
3 Dallas/Ft. Worth 24.3%
4 Houston Intercontinental 18.2%
5 Detroit 17.5%
6 Minneapolis/St. Paul 16.7%
7 Chicago O’Hare 14.1%
8 Phoenix 10.1%
9 Denver 8.0%
10 (tie) New York (JFK) 7.9%
10 (tie) Salt Lake City 7.9%

Worst U.S. Airports for Connecting Flights:
When asked, “If your clients are flying and need to connect through a hub airport, which hub do they try to avoid?” the top responses were as follows.  (Again, those polled were able to choose up to three different airports.)
1 Chicago O’Hare 56.3%
2 New York (JFK) 39.4%
3 Atlanta 33.0%
4 New York (LGA) 13.7%
5 Newark 12.2%
6 Miami 11.5%
7 Denver 10.3%
8 Philadelphia 10.0%
9 Dallas/Ft. Worth 9.4%
10 Los Angeles 9.1%

Top U.S. Airports for Business Travel Services:
When asked, “Which airport(s) would you and your clients say offers the best services for business travelers?” nearly 700 agents responded with the following list of Top 10 airports:
1 Atlanta 42.2%
2 Chicago O’Hare 29.8%
3 Dallas/Ft. Worth 20.5%
4 Minneapolis/St. Paul 18.3%
5 New York (JFK) 15.2%
6 Detroit 12.7%
7 Houston Intercontinental 10.3%
8 Los Angeles 9.0%
9 New York (LGA) 7.5%
10 (tie) Newark 6.3%
10 (tie) San Francisco 6.3%
10 (tie) Washington D.C. (Dulles) 6.3%

Top U.S. Airports for Amenities:
Today, airport amenities can range from spas and yoga rooms to art exhibits and putting greens. When asked, “What do you and your clients consider the top airport for amenities?” agents listed this top five:  Atlanta, Minneapolis/St. Paul, Chicago O’Hare, Dallas/Ft. Worth and Las Vegas.

The top five for dining matched the above question, with the exception of San Francisco subbing for Las Vegas at No. 5.

Finally, for top airports when traveling with kids, the winners were: Orlando,  Minneapolis/St. Paul, Atlanta, Chicago O’Hare and Dallas/Ft. Worth.
 

Business to Customers: “We Messed Up, Please Help!” (And It Worked)

This is a very encouraging article from Ragan.com about an Illinois pizza place, some mistakes, and some very devoted customers.

In general, begging is a tactic that PR folks tend to frown upon.

But when Nick Sarillo, CEO of Nick’s Pizza & Pub, sent an email pleading for customers to help keep the doors open at his two Chicagoland restaurants, customers didn’t just respond. They rallied.

"We doubled our sales in each restaurant for the first week and stayed at a 75 percent increase for a couple of weeks," Sarillo told Crain’s Chicago Business.

So what gives? If begging, or at least pleading, isn’t a worthwhile PR tactic—Sarillo’s publicity staff and his bank tried to talk him out of sending the email—why did this work? Gerald Baron, a blogger and principal at Agincourt Strategies, says it comes down to one word: authenticity.

"It was real," he says. "It was not a ‘strategy’ as we tend to understand it."

A genuine plea

Last fall, Nick’s was in deep trouble. In Sarillo’s email, he says, "we overbuilt and overspent," and he blames himself for "the bad decisions that got us into this mess." He gives percentages for sales drops at his Elgin, Ill., restaurant and states, "We are going to run out of cash to pay our vendors and team members over the next couple of weeks and will have to close."

Tripp Frohlichstein of MediaMasters Training says Sarillo’s direct, honest approach was "classy and smart."

"As a media trainer, it is amazing to see so many clients who realize that being honest about a situation is easier than evasion or deception," he says. "The realization that you can’t always please everyone is very important in sticking to this approach."

Drew Mendelson of Mendelson Communications says being straight with customers is vital to having a profitable business, but he notes that Sarillo’s approach won’t work for everyone.

"What Sarillo did probably works better for a privately held business that doesn’t have to answer to stockholders who might panic at the news and drive stock prices down," he says. "It also would probably have worked better if he made his announcement earlier, before things got so dire."

Mendelson says a message like Sarillo’s has to come from a CEO or, if the CEO isn’t the most personable executive, someone else in upper management. "The message has to be personal," he says.

Likewise, Mendelson says he doesn’t view Sarillo’s approach as begging.

"Sarillo wasn’t asking for charity. He was being honest. His business was beset by today’s mediocre economy and by the unforeseen problems of road construction."

Going for Gold: Chamber Staffer Reflects on Running Experiences

On Saturday, November 5, I’ll toe the line at the Indianapolis Monumental Marathon for the second time, and compete in my 10th marathon overall.  Early on, we all have ambitions and set goals to accomplish in our lives. However, I assure you running 10 marathons wasn’t one of mine. So, how did my fondness of running 26.2 miles come about?  Going back to the spring of 2007, I was training to run my third Indianapolis Mini-Marathon. 

My wife, Andrea, and close friend, Jerod, encouraged me to attempt the “big one” – the marathon distance.  At the time, I was happy with running Indianapolis and some other Midwest half marathons. Yet, the allure of accomplishing the marathon and pushing myself to limits never previously reached was too good to resist.  So, in December of that year, I ran my first full marathon, and no better place than Las Vegas. 

Having been to Las Vegas a number of times before 2007 (OK, and a few times since then), the adrenaline of running on the famed Strip was very enticing. Thus, when I began my 26.2-mile journey, I had to make sure my energy levels weren’t spent after exiting the Strip as approximately 20 miles still remained. I was happy to finish the race in under four hours (3:56), telling myself repeatedly during those last five to six miles, “Hey, Brett, just a little further and you never have to do another marathon.” 

Well, those thoughts lasted only a short while, as I was hooked and already focused on my second one. In the nearly four years that have passed, destination-type races have been my focus: Las Vegas (two times); Chicago (four times); San Francisco (once) and even a couple local races with last year’s Indianapolis Monumental and this spring’s inaugural Carmel Marathon. Furthermore, I’ve seen the results of increased training and experience with the marathon distance, as a personal best was set this spring – 3 hours, 19 minutes, 24 seconds. My eyes are focused on other destination races, especially New York City and hopefully soon landing a qualifying spot in Boston.

For the vast majority of us, running any race will never be about finishing first or picking up the prize money.  Running marathons to me has always been about competition. That is, competition first and foremost with yourself, then the course and, finally, with other runners. No matter what goals you have, seeing progress is very rewarding. I’ve always thought of running and business as having many parallels. Set goals, pick the right strategy, discipline yourself and don’t cut corners and you will come out ahead. Most importantly, at the end of a hard day in the office or on the running course, you’ll come out a winner.

The November 5 Indianapolis Monumental event will include a marathon, half marathon and 5K. An estimated 12,000 participants are expected to take part.

Gary Airport Getting New Look

Our friends at Inside INdiana Business recently spoke with Gary Mayor Rudy Clay about the status of the Gary/Chicago Airport, which is undertaking some improvements. Here is audio of the conversation, in which Clay explains the positive working relationship the city has with Chicago officials.

Clay says the goal of the rennovation at Gary/Chicago International Airport is not to compete with Chicago’s two airports, but to work along side of them. Clay says those airports have heavy traffic and need more gates to handle the load. The $153 million project includes a major runway expansion and new railroad bridges, routes and demolition lines. Groundbreaking comes this afternoon.

 

And the Top Manufacturing City is …

No matter the math, Indiana still generally ranks as the most manufacturing intensive state in the nation. That means we have more manufacturing jobs based on our population/workforce. Wisconsin and North Carolina are typically in the same neighborhood.

Manufacturers News Inc. changed the scope recently and put out a top 50 list of most manufacturing jobs by city. Certainly population is a bigger factor here, but there are still some interesting numbers.

The top 10 (list below), lost more than 95,000 jobs between August 2008 and the end of 2010. Big movers included Detroit (falling from 29th to 45th) and Seattle (moving up to 34th from 46th). Five from California (L.A., San Diego, San Jose, Irvine and Santa Clara) made the top 50.

Top 10 Manufacturing Cities

  1. Houston: 228,226
  2. New York: 139,127
  3. Chicago: 108,692
  4. Los Angeles: 83,719
  5. St. Louis: 83,123
  6. Dallas: 81,626
  7. Cincinnati: 81,364
  8. Indianapolis: 79,566
  9. Phoenix: 77,322
  10. San Diego: 70,709

Choose the Proper Course on Carp

Asian carp are a serious threat to the waterways of the Great Lakes, but the solution to their potential invasion must not create additional economic harm. 

The carp, which can weigh up to 100 pounds, are predators. They would threaten numerous fish species native to the area, the broader environmental balance and even boaters and tourists striving to enjoy recreational opportunities. Once positive contributors to helping remove algae from Southern fish ponds, they are now regarded as among the most dangerous of invasive species. 

One misguided attempt to deal with the risk is to close the navigational locks in the Chicago area. This would disrupt hundreds of millions of dollars’ worth of shipping and essentially sever Northwest Indiana’s crucial water-based commerce with the rest of the world. 

Federal investment, in the form of additional electric barriers, would prove more effective in keeping the carp out of the Great Lakes while still allowing Indiana and the other states in the region to maintain the shipping prowess that benefits so many companies and their employees.

Washington is paying attention – as it should. The barrier plan emerged from a White House-led summit. Indiana and its neighbors must now work together to support this prudent alternative. The threat is real; a radical closure of shipping lanes and economic opportunity, however, is not the answer.

A new organization called Unlock Our Jobs has formed to tackle this issue, offering alternative options while keeping our waterways open for business. Its web site can also help you quantify the economic impact of river traffic and lock closures on your state.