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Strengthening the business ecosystem
By Jessica David / January 14, 2016 /   Loading Disqus...

This is the first in an occasional Economic Security Strategy Series.

The vision that guides our economic security initiative is a strong economic environment that allows all Rhode Islanders to prosper. We believe that the foundation of a strong Rhode Island economy will be quality jobs that allow our residents to support themselves and their families, and these quality jobs require robust enterprise and a skilled workforce.

We focus our investments in this sector on three strategies:
1. Helping businesses start and grow by strengthening the business ecosystem.
2. Meeting the needs of the workforce and industry by pursuing improvements to the workforce development system.
3. Improving statewide self-esteem by promoting assets and enlisting advocates.

In this post, I’d like to discuss our thinking behind the first strategy: strengthening the business ecosystem.

What is the business ecosystem, anyway?

The Foundation’s role, as I see it, is to invest in a strong and supportive environment that helps enterprising Rhode Islanders start and grow businesses. This is what we mean by business ecosystem, the shared space where pieces of the economy come together.

A strong business ecosystem provides fertile ground for businesses to start, grow, and collaborate. It attracts investment and talent. The synergies that result from clusters of activity, investment, and talent within the ecosystem have exponential results for the businesses involved and the broader economy. The ecosystem is shaped by the factors beyond what any individual entity controls, and we believe that strong, healthy networks between and among businesses, service providers and intermediaries, government agencies, and funding entities are vital to a healthy economy.

Within the business ecosystem, an entrepreneur or enterprise can access resources and support services. Key ingredients of the ecosystem are talent, technical assistance, capital, and space. Policy, regulations, and taxes – and perceptions thereof – help shape the ecosystem. The ecosystem can be viewed as a network of networks (industry, geography, affinity) and is dynamic; relationships and interactions matter.

Why do we care about it?

While we are pleased to see an individual business succeed, true economic resilience requires an environment that nurtures growth at meaningful scale. Success begets success. Innovation nurtures innovation. In a state the size of Rhode Island, with limited resources, we cannot afford to be haphazard or uncoordinated. We must think of ourselves as actors in a network, not independent agents.

In Rhode Island, the “Independent Man” is not just a statue on top of the State House, but a powerful symbol for the way we think of ourselves: We are not traditionalists. To undertake a large-scale transformation of our economy requires us to capitalize on our history of innovation. Historically, we have not been well-served by models of traditional economic development that focus only on one silver bullet. We recognize that small businesses have always been the backbone of the Rhode Island economy. What’s become increasingly important is the ways in which Rhode Island companies – large and small – interact with each other and build upon one another. As our major industries change, so do their needs.

Did you make this up?

No! The ecosystem approach is not new, of course. Much has been written about local economies, clusters, networks, etc.

I recently read, for example, The Rainforest by Victor W. Hwang and Greg Horowitt. Hwang and Horowitt compare Silicon Valley, a highly successful innovation ecosystem, to other places around the globe. They describe successful ecosystems as Rainforests. “What is most important,” they claim, “are not the ingredients of economic production, but the recipe – how the ingredients are combined together. Human systems become more productive the faster that the key ingredients of innovation — talent, ideas, and capital — are allowed to flow throughout the system.”

Of course, Rhode Island is not Silicon Valley (and I don’t think we need to be). Still, there is value to thinking about how we create a fertile, generative space for enterprise. Here are the three takeaways from The Rainforest that I believe are relevant to Rhode Island:

• It’s all about people. Innovation, the authors point out, is “really about the right relationships among the right people at the right time, so that innovation takes whatever outward form it needs to take, whether it is a large company, a fast-growing startup, a joint venture...”

• It’s about connections. Hwang and Horowitt identify “keystones” – individuals or institutions who serve as human bridges that connect people across social barriers, making “the whole so much greater than the sum of its parts.”

• It’s about a more inclusive definition of success. They describe a new ROI sought by actors within the Rainforest: return on involvement that comes “from participating in and contributing to the success of innovative ventures.” The reward, in other words, is not only financial benefit; it is being part of a greater progress.

"It's about people, connections, and a more inclusive definition of success."

What does Rhode Island’s business ecosystem look like?

Our starting observation was that Rhode Island’s business ecosystem is somewhat fragmented, with limited financial capital, gaps in support services, and a perceived unfriendly regulatory and tax climate.

In order to test this hypothesis, we invited several partners to help us create a “map” of the business ecosystem. We do this because we wish to paint a complete picture of the ecosystem: what’s available here? How do the pieces connect? How easy is it for an entrepreneur or enterprise to navigate this system?

Our first attempt to map the ecosystem was challenging. The needs of businesses in different industries at different stages were too diverse to plot on one map, and it was difficult to control for quality or customer specificity. We then shifted to industry-specific maps and experimented with three industry clusters. This allowed us to focus in more precisely.

Along the way, we asked our mappers to think about one key question: what is the next thing that would move this industry forward exponentially? This is where things got very interesting, because the answers so far are very different for each industry. Over the next several months, we hope to continue this process and share our results more broadly. (If you’re interested in the mapping project, please contact me.)

What are we looking for?

Our goal is to help create a strong, cohesive business ecosystem. We do this by:
• Advocating for a network of services that is easy for entrepreneurs and enterprises to access and navigate.
• Identifying and addressing barriers to starting and growing businesses.
• Supporting intermediaries that fill important gaps in providing supports and resources to new and emerging businesses, particularly in under served communities.
• Supporting networks that have demonstrated clear understanding of industry-specific needs/opportunities and developed strategies to address them.
We expect that working in these ways will result in:
• Increased accessibility of resources – capital, talent, technical supports – to those companies who are seeking it.
• Stronger networks between and among industry, business, and civic leaders, and the entities they represent.
• More efficient start-up, development, and growth of new businesses.

Along the way, we seek partners who take a “systems” lens to linking industry needs with available resources along the entire supply chain. We have mutual accountability and a role to play, contributing to a larger mission.

Of course, our strategies evolve over time, as we are constantly learning from our community. I hope you’ll be in touch with feedback or ideas. I look forward to sharing with you the thinking behind our workforce development strategy sometime soon.

 

 

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