Reaching for the Pie

Louisiana thought long and hard before taking a cluster-based approach to stimulating its economy.

by / April 16, 2002 0
Don Hutchinson is far from bored.

As secretary of Louisiana's Department of Economic Development, he's in the midst of a radical reorganization of his department's approach to energizing the state's economy. The state is dropping its old way of pursuing businesses, moving to the clustering method successfully employed by states such as North Carolina and regions such as Silicon Valley.

The crux of Louisiana's strategy is its "Vision 2020" plan -- a plan that took nearly three years and countless meetings to craft. The state's goals under the plan are aggressive: To transform Louisiana into a "Learning Enterprise" where all businesses, institutions and citizens are actively engaged in the pursuit of knowledge; to create a diverse and thriving economy driven by technology-intensive industries that work with the state's colleges and universities as sources for technology and potential employees; and, by 2020, to make Louisiana one of the top 10 states in the nation in standard of living indicators while preserving and developing the state's natural and cultural assets.

Government Technology: Given the recent economic downturn, has the term "economic development" become an oxymoron?

Hutchinson: No. In fact, it's more accurate than ever. It's like the stock market; it's a perfect time for where we are as a state to re-position ourselves to be ready for [when] the upswing comes. It's an advantage for us, with our new strategy in the Department of Economic Development -- especially in light of our long-term plan, "Louisiana Vision 2020."

We focused on three areas. One is the Learning Enterprise, and that's strictly about education in the classroom as well as continuously learning on the job site. The second goal is what we call the "culture of innovation," which is really making sure we focus on technology-intensive opportunities; making sure that our current economy focuses on that as well and on diversifying and doing some things that we're not doing too much of right now, such as bio-tech, environmental technology and food technology.

The third goal is that Louisiana becomes a top 10 state; that's about celebrating, highlighting and emphasizing our diversity -- emphasizing the good things that we have in Louisiana, the great parks and the great waterways.

Companies want to locate where they can make money and have a great workforce, but they also want to go to a place where they can have fun and experience quality of life.

Our plan is the driver, and this time is a great opportunity for us.

GT: How long did it take for the department to decide to make the move to the cluster approach?

Hutchinson: It actually started about three and a half years ago when we were looking at the development of the Vision 2020 plan itself. We went around the state talking to businessmen; talking to chambers of commerce; talking to economic development organizations; and meeting with education leaders both at the postsecondary level and at the K-12 level.

What we found out after going around the state crafting Vision 2020 was that there were a lot of commonalities that were being presented to us from the different geographic regions of the state. In one part of the state, their driver was shipbuilding; another part was oil and gas; another part was IT.

We realized that we, as a state, were trying to do everything. Any company that moved, we wanted to attract it to Louisiana. Our new strategy, which is a paradigm shift from what we were doing, is focusing on sectors of our economy that are indigenous to Louisiana, that are natural strengths for us because we already have them here now, or that we see potential to grow into new technology areas, such as the life sciences, biotech or biomedical, food technologies and environmental technologies.

Those are the things we weren't doing a lot of on the technology side. We've always done oil and gas well. We've always done shipbuilding well. What we weren't doing well was anything to link all of these companies, suppliers, service organizations and training opportunities. We weren't doing anything to focus on the needs of what we currently have in the state.

We started to wonder, "What should our portfolio look like?" We immediately identified the things that have helped our state's economy for years. We knew that those that are driven by natural resources -- oil and gas, for example -- [are] someday going to dry up. If we don't start to diversify our portfolio, we're not doing our people in the state a favor because we're not looking at the long term.

We looked at it like a stock portfolio, and we included the traditional clusters and the seed clusters -- those emerging areas.

GT: You mentioned Louisiana had been going after every business that indicated an interest in the state, and probably all states are guilty of taking that approach. How are you changing the way your target your efforts?

Hutchinson: That switch has caused the entire state's efforts, not only at the state government level but also at the local level, to now focus on what makes our community what it is. Shouldn't we go after those things that we already have a good stake in the ground? Let's continue to make sure that we nurture them, focus on the businesses that are already here, focus on those businesses that are outside Louisiana that would be successful in coming here and working with our traditional industries.

We also knew we had to look ahead, and the look ahead was, "In community X, what are your areas for growth in the future? What could you be strong in?"

We at the state have set the pace, and the local economic development organizations want to know how they fit in. This is catching on really well.

In the New Orleans area, in the nine parishes surrounding Orleans Parish, an organization called Metrovision has identified -- because of the efforts that we at the state took the lead in -- the clusters that are indigenous and should be in the New Orleans region, most of which mirror the state's ideas but a couple of which are unique to New Orleans.

If you move up further north to Baton Rouge, the city contracted out for an assessment for a nine-parish region to find out what it is about that region that they should focus their attention on from an economic development perspective.

Economic development groups, business leaders and chambers of commerce are all buying into this new concept because they now see where they fit into what the state is trying to do.

What we, as the state, have to do is make sure we continually communicate with these different communities -- especially the business leadership in the community. They can tell us what the state needs to do from a cluster-based economic development perspective.

That could mean looking at laws we have on the books that cause those communities impediments, or putting some laws on the books or policies in place that we didn't have before to make it easier for them to do what they're supposed to do

For example, Louisiana has about 125 shipbuilding related manufacturers. They're competing against each other, but they all have common needs. There are two examples of common needs that would be beneficial to all of them and where the state and government in general come in and help.

Because they all need workforce training, the state can use its infrastructure, its technical colleges and community colleges, and let the business communities say, "This is the type of curriculum we need to make us successful and profitable and make sure we're going to be around five years from now. This is the type of workforce that we need."

That's where the state can come in and say, "We're now going to shift our curriculum specifically to address the needs of the ship-building industry." Whether that be for those who work in the shipyards, or the engineers in the back office, the specialized legal services -- we want to identify the niches in the state that can provide what those businesses need.

It sounds like common sense, and you might wonder why they aren't doing that. They're already doing it on a one-on-one basis, not in a cluster where they all have the same needs. We can build that economy and really make the state very competitive in shipbuilding compared to the rest of the world.

You can transfer that example to biotech, to entertainment, etc. It's identifying the major players, the major businesses, and then linking to those major businesses the network of government infrastructure that can be provided and the supplier networks that are specifically related to cluster X of our economy.

GT: You mentioned the state's role in relation to local governments and regions. Was it every government for itself before?

Hutchinson: Yes and no. Because of the history of Louisiana, a lot of the local governments tend to look to Baton Rouge as the state capitol because that's where the decisions are made and there are a lot of resources that come into the state that are then divvied out to the local areas.

It's a yes-and-no situation. "Yes" because we have the mindset where you follow the lead of the state and "no" in the sense that one of the challenges of this new approach is that it's a cultural change.

Prior to this process, the desire to work on a regional level was not there. It was every community for itself, and, under this new approach, it forces regionalism. The concept, to work, has to be regional. What we've done to spur that process is hired, as part of our staff, contract employees that are assigned to eight regions.

Those staff aren't in our office; they live in the community. Their job is to work in the community and find out the needs of the business community; to find out what role the university, community or technical college play in that particular region and start bringing these together.

Their job is to nurture that regionalism, that cooperative approach. This is totally different, because, before, it was everybody for themselves. Now, we're saying that one way we can be more successful as a state is by us working together, collaborating.

GT: In the Vision 2020 document, the word "co-opetition" is used to describe that new relationship. Is this something that you push down from the state to local governments and businesses?

Hutchinson: Businesses are going to compete against each other, because it's all about the bottom line. That's the competition side of it. The cooperative side is when they come together and say, for example, "Why do we have five different welding courses within a 50-mile radius, and we have each of these schools going about teaching it in a totally different manner? Why are we doing that when all of us can really take advantage of doing this as one big pool, and then the dollars that we save that we were spending on training, we can take to give employees a raise, or invest the money in technology, or we can grow our bottom line." natural strengths for us because we already have them here now, or that we see potential to grow into new technology areas, such as the life sciences, biotech or biomedical, food technologies and environmental technologies.

Those are the things we weren't doing a lot of on the technology side. We've always done oil and gas well. We've always done shipbuilding well. What we weren't doing well was anything to link all of these companies, suppliers, service organizations and training opportunities. We weren't doing anything to focus on the needs of what we currently have in the state.

We started to wonder, "What should our portfolio look like?" We immediately identified the things that have helped our state's economy for years. We knew that those that are driven by natural resources -- oil and gas, for example -- [are] someday going to dry up. If we don't start to diversify our portfolio, we're not doing our people in the state a favor because we're not looking at the long term.

We looked at it like a stock portfolio, and we included the traditional clusters and the seed clusters -- those emerging areas.

GT: You mentioned Louisiana had been going after every business that indicated an interest in the state, and probably all states are guilty of taking that approach. How are you changing the way your target your efforts?

Hutchinson: That switch has caused the entire state's efforts, not only at the state government level but also at the local level, to now focus on what makes our community what it is. Shouldn't we go after those things that we already have a good stake in the ground? Let's continue to make sure that we nurture them, focus on the businesses that are already here, focus on those businesses that are outside Louisiana that would be successful in coming here and working with our traditional industries.

We also knew we had to look ahead, and the look ahead was, "In community X, what are your areas for growth in the future? What could you be strong in?"

We at the state have set the pace, and the local economic development organizations want to know how they fit in. This is catching on really well.

In the New Orleans area, in the nine parishes surrounding Orleans Parish, an organization called Metrovision has identified -- because of the efforts that we at the state took the lead in -- the clusters that are indigenous and should be in the New Orleans region, most of which mirror the state's ideas but a couple of which are unique to New Orleans.

If you move up further north to Baton Rouge, the city contracted out for an assessment for a nine-parish region to find out what it is about that region that they should focus their attention on from an economic development perspective.

Economic development groups, business leaders and chambers of commerce are all buying into this new concept because they now see where they fit into what the state is trying to do.

What we, as the state, have to do is make sure we continually communicate with these different communities -- especially the business leadership in the community. They can tell us what the state needs to do from a cluster-based economic development perspective.

That could mean looking at laws we have on the books that cause those communities impediments, or putting some laws on the books or policies in place that we didn't have before to make it easier for them to do what they're supposed to do

For example, Louisiana has about 125 shipbuilding related manufacturers. They're competing against each other, but they all have common needs. There are two examples of common needs that would be beneficial to all of them and where the state and government in general come in and help.

Because they all need workforce training, the state can use its infrastructure, its technical colleges and community colleges, and let the business communities say, "This is the type of curriculum we need to make us successful and profitable and make sure we're going to be around five years from now. This is the type of workforce that we need."

That's where the state can come in and say, "We're now going to shift our curriculum specifically to address the needs of the ship-building industry." Whether that be for those who work in the shipyards, or the engineers in the back office, the specialized legal services -- we want to identify the niches in the state that can provide what those businesses need.

It sounds like common sense, and you might wonder why they aren't doing that. They're already doing it on a one-on-one basis, not in a cluster where they all have the same needs. We can build that economy and really make the state very competitive in shipbuilding compared to the rest of the world.

You can transfer that example to biotech, to entertainment, etc. It's identifying the major players, the major businesses, and then linking to those major businesses the network of government infrastructure that can be provided and the supplier networks that are specifically related to cluster X of our economy.

GT: You mentioned the state's role in relation to local governments and regions. Was it every government for itself before?

Hutchinson: Yes and no. Because of the history of Louisiana, a lot of the local governments tend to look to Baton Rouge as the state capitol because that's where the decisions are made and there are a lot of resources that come into the state that are then divvied out to the local areas.

It's a yes-and-no situation. "Yes" because we have the mindset where you follow the lead of the state and "no" in the sense that one of the challenges of this new approach is that it's a cultural change.

Prior to this process, the desire to work on a regional level was not there. It was every community for itself, and, under this new approach, it forces regionalism. The concept, to work, has to be regional. What we've done to spur that process is hired, as part of our staff, contract employees that are assigned to eight regions.

Those staff aren't in our office; they live in the community. Their job is to work in the community and find out the needs of the business community; to find out what role the university, community or technical college play in that particular region and start bringing these together.

Their job is to nurture that regionalism, that cooperative approach. This is totally different, because, before, it was everybody for themselves. Now, we're saying that one way we can be more successful as a state is by us working together, collaborating.

GT: In the Vision 2020 document, the word "co-opetition" is used to describe that new relationship. Is this something that you push down from the state to local governments and businesses?

Hutchinson: Businesses are going to compete against each other, because it's all about the bottom line. That's the competition side of it. The cooperative side is when they come together and say, for example, "Why do we have five different welding courses within a 50-mile radius, and we have each of these schools going about teaching it in a totally different manner? Why are we doing that when all of us can really take advantage of doing this as one big pool, and then the dollars that we save that we were spending on training, we can take to give employees a raise, or invest the money in technology, or we can grow our bottom line."

That's where the cooperation can come in.

GT: Given that reorganizing a major department around this different set of core values is very complicated, where do you put yourself on a scale of one to 10?

Hutchinson: We've only being doing this for four months, and we're already seeing some of the potential and the opportunities that are out there and the change in conversation that's taking place among organizations throughout the state.

The comments from the business community are along the lines of: You have somebody in your department who understands our needs. You have somebody in your department who's coming out and asking us, "What do you want?" You have somebody in your department who's visiting us just to say, "Hello."

Businesses are now saying, "Where have you guys been all this time?" The dialogue is opening up between us and the business community, and the next leg of that is to get the government, the business community and the universities plugged in. When we get all three of those working together like we envision, we're going to make some progress.

Are we going to stub our toes? Yes. But are we going to have more successes than we did before? Yes.

GT: What have been the biggest challenges you've faced in reorganizing?

Hutchinson: We started by getting a lot of buy-in before we actually started the restructuring of the department. The whole concept of cluster-based economic development is that it has to be led by industry, and government and education have to be partners.

Before we even got into the restructuring of the department, the governor created a 29-person task force; we had representatives from the business community, the government, higher education and local economic development organizations.

We got that buy-in, and that was a challenge. But we recognized that early, and we realized that if we were going to get this through the legislative process and get the buy in of the people out in the field, we had to have them at the table when we started.

The next challenge was getting the authorizing legislation through the legislative process. It wasn't something we could do without changing laws. We used to have seven units in the department; now we have three. That was a challenge to convince the Legislature that this is something that we needed to do.

With the streamlining, we were sending a message of downsizing government, which was really hot and heavy during that time, and still is. That helped us a lot in getting the legislation through. We weren't really asking for more; we were actually eliminating some things, but, at the same time, we were bringing in some new components.

The next challenge was - we had to go out and hire people to make it happen. Unlike a typical government organization, we went to our civil-service department and convinced them to give us the authority to hire 15 individuals outside of the normal civil-service process.

We were able to hire with almost total flexibility in how we wanted to go about doing it. We got the authority from them, and those 15 people came with the industry background and expertise that we were looking for to move our economic development strategy forward.

Then, we were at the point of, "Now that we have the authority, how are we going to get these people on board?" When we advertised for these 15 positions, we had almost 2,000 applicants. The challenge then was going through the process and keeping the integrity; sending the message that this wasn't politics as usual, that the hiring was going to be based on objective criteria and objective processes.

We went back to the business and education community, and, in each of these 15 categories, we created a three-person screening committee to send me the top three to five candidates per category.

We put that process in place, and it worked well. It was heavily weighted toward the business community, because the business community knows what type of person would be an advocate for them. I had another, smaller team that went through the interview process, and then we made the decision.

The biggest challenge was getting that done in a timely manner. The Legislature was constantly telling us, "Ok, we gave you the approval, when are those people coming on board?" By October, we had 14 of the 15 positions filled, and, in December, we had the 15th person come on board.

Now, since we've brought in 15 people from outside of government, coming from a corporate environment into a government environment, the challenge we're living right now is getting everybody on the same page. We're working on a playbook to make that happen so that everybody will know what each person's responsibility is.

GT: Will the clustering approach help Louisiana overtake the image problem that Southern states have with respect to high-tech economic development?

Hutchinson: We're already seeing that, and it's a good feeling. When I'm telling people outside of Louisiana what we're doing, they tell me that we're really looking forward. One of the other things is that we have made some investments to back up all of this.

We've made tremendous investments in our University of New Orleans for a world-class naval maritime center. We've invested more than $100 million in infrastructure, and we have thousands of jobs associated with that activity. We're going into year three on an activity here in Baton Rouge in a technology park.

We made an investment in our university community this past legislative session. The dollars were approved for the fiscal year that began on July 1, 2001, and that was a five-year, $25 million injection into four of our universities with a specific focus on IT, information sciences and informatics. Those dollars are targeted to those universities, and that's all they can use that money for.

What we're trying to do is identify our state as best of class in these IT-related areas. This upcoming session, we're going to do the same thing with financial commitments for the next five years in the biotech and biosciences areas.

It's not that we're just talking this; we're actually doing it.

GT: It also appears that you've got to work with the Legislature and assure them that this isn't going to happen overnight.

Hutchinson: There are two challenges associated with that; one is short term and the other is long term.

The short-term challenge is that with this approach, what we're doing here, we didn't get into the quagmire we're in overnight, and we're not going to get out of it overnight.

We've got to show the Legislature some quick results, and we've got a few things on the drawing board when they start their next session. We're going to have a special session on economic development beginning in March.

The second challenge is that this initiative, Vision 2020, is an initiative of Gov. [Mike] Foster. His last day in office will be in early January 2004 when the new governor takes over. The challenge is keeping the Vision 2020 strategy sustained and alive and moving forward.

Our strategy is two-fold: One, we engage the business community. They want it. They're constituents of legislators, and they can influence them.

Second, we want to constantly inform the Legislature that this is not a short-term process. We have to embrace it as a long-term process. Every time I get a chance to talk to them, I give them specific examples of how economies in the country have changed because states have stuck to their guns.

Twenty-three, 25 years ago, North Carolina was really viewed as a tobacco state. The governor and the Legislature back then realized they wanted to put a major emphasis on research and development in the life sciences, medicine and technology. The Research Triangle Park resulted in the roles that the universities played in that emphasis.

A little to the West, the same dynamic has taken place in Austin, Texas. Twenty-plus years ago, Austin decided it wanted to be a world leader in the computer industry. They stuck to their plan, and, 20 years later, they're recognized as such.

It's the same with the Silicon Valley and Stanford University.

These are the example we use to tell the Legislature that this stuff is not pie in the sky, but you've got to stick to your plan.