Urban Entrepreneurship
Al Bogdan
Importance of Entrepreneurship
Major industries or businesses are located in a specific area because their founders started there.• Ford in Detroit - This is Where Henry Converted his Bike
Shop into the Modern Auto Assembly Plant. • Stryker is in Kalamazoo, • Amway and Steelcase are in Grand Rapids; • Hewlett Packard in Silicon Valley• Starbucks is in Seattle, and • Compuware is in Detroit
The Future of Our Cities Depends on the Urban Entrepreneur• Entrepreneurs Who Mine the Richness of the City
Importance of the Urban Environs
The City provides a Network• Creative Energy,
• Resources,
• Finances and
• People
to start and grow a business.
Entrepreneurism overwhelms the normal business site location criteria - this is where the entrepreneur’s personal support network is located
Characteristics of the Entrepreneur
March to Own DrummerNeeds to be In ChargeNever Fail
• Every Failure is Only a Learning Experience
Hard WorkingSocial Creature
• Knows How to Listen
• Knows How to Network
Focus on the Vision
Urban Entrepreneurism By Michael E. PorterPast Models Have FailedBased on Meeting Needs of Individual
• Income Assistance• Housing Subsidies• Food Stamps
Economic Development Based on• Subsidies• Preference programs• Expensive Models
• Housing• Real Estate• Neighborhood Development
Urban Entrepreneurism By Michael E. Porter
AnswerPrivate, For-profit Initiatives based on
Economic Self Interest & Genuine Competitive Advantage
Inner City Businesses Must be Profitable, Positioned to Compete • Regionally• Nationally, • Internationally
Translate Competitive Advantageous to Profitable Business
Urban Entrepreneurism By Michael E. Porter
Competitive Advantage Look at Clusters• Customer Relationships• Supplier Relationships• Critical Mass of Skills, Information, Relationships,
and InfrastructureCompetitive Companies Push Each other to
Improve Products & Processes• Grow New Suppliers or Find Existing• Create Firms in Related Fields• Form Training Programs• Form Technology Centers of Excellence
Inner City AdvantageousStrategic LocationCompetitive Edge
• Communication Nodes
• Logistical Infrastructure• Food Processing Operations
• Printing industry
• Warehousing & Distribution
• Entertainment - Tourist Center• Museums
• Galleries
• Ball Parks
• Convention Centers
• Gaming
Inner City Advantageous
• Dense Population• Medical Facilities• Universities
• Ethnic Market• Greentown• Mexicantown• Chinatown
Inner City Advantageous
Overcoming Myths Inner City Residents Do Not Want to Work
• Industrious & Eager for Jobs Requiring Little Education
Only Entrepreneurs Are Drug Dealers• Thousands Trained in Social Service Industry
Skilled Minorities Have Abandoned Their Roots• African Americans & Hispanics Get 4,200 MBAs/Year
• Thousands Highly Trained People in Major Companies
Inner City Development
New Model Old Model
Economic Create Wealth Social Redistribute Wealth
Private Sector Government & SS Agencies
Profitable Businesses Subsidized Business
Integration W Regional Eco. Isolation from Larger Eco.
Export Orientated Only Serve Local Comm.
Minorities Building Businesses Minorities in SS Sector
Mainstream Special Institutions Created
Address Disadvantages Directly Counter Balance w Subsidies
Government Improves Environ. Government Services
Real Disadvantages
Land• Abundant• Small Lots• Expensive to Assemble• Expensive Demolition• Environmental Clean Up• Title Conflicts
Obstacles Create Opportunity
Real Disadvantages
Building Costs• Negotiation w Community Groups• Extensive Permit Process• Government Required Minority Set Asides• Requirement to Pay Union Wages• Livable Wage Requirements• Regulatory Process Creates Uncertainty
Obstacles Create Opportunity
Real Disadvantages
Other Costs• Permitting & Other Fees• Insurance • OSHA Compliance• Real Estate & Other Taxes • Entrenched Bureaucracy – Work Rules• Restrictive Licensing, Permitting, Safety & Health
Regulations• Stunts Entrepreneurship
Obstacles Create Opportunity
Real Disadvantages
Security• Perceived & Real Creates Obstacle
• Full time Security Guards
• More Lighting
• Continuous Graffiti Cleaning
• Impedes Employee Recruitment
• City Police Focus On Residential Areas
• Stunts Entrepreneurship Obstacles Create Opportunity
Real Disadvantages
Employee Skills• Average Education Low• Unskilled Workers
Obstacles Create Opportunity
Criteria 1970 1990
% Jobs Held W/o HS Diploma 29% 7%
% Jobs Held by College Grads 18% 44%
Unemployment Rate AA Men 19% 37%
Real DisadvantagesManagement Skills
• Managers Lack Formal Training• Predictable Problems
• Strategy Development
• Market Segmentation
• Information Technology
• Securing Financing
• Interaction w Lenders & Regulatory Agencies
• Crafting Business Plans
• & Employee Training
Obstacles Create Opportunity
Real DisadvantagesCapital
• Barrier to Debt & Equity Capital• Small Business Lending Only Marginally Profitable
• In Business to Attract Deposits & Sell Other Products
Community Reinvestment Act WorksDirect Government Financing Ineffective
• Duplicates Overhead
• Undermines High Quality Private Sector Expertise
Obstacles Create Opportunity
Real DisadvantagesAnti-business Attitudes
• Businesses Perceived as Exploitive - Legacy• Poor Treatment of Workers• Departure of Companies• Damage to Environment
• Unreal Expectation of Firms Meeting Social Needs• Demand Scholarships• Cede Control of Hiring to Community Organization• Link Payments & Contributions
• Drive Businesses Away Obstacles Create Opportunity
Changing Role & ResponsibilitiesCreate & Expand Business Activity
• Simply Do Business Seize Opportunities• Tailor Goods & Services to Local Market
• i.e., Sell Winter Coats in the Winter• Hire Locally
• Build Loyalty
• Organize to Reduce Security Cost• Special Assessment Districts• Create Large Campus Environment• Clean Up Transportation Entrances
Changing Role & Responsibilities
Establish Business Relationships• Joint Ventures
• i.e., Bing Industries
• Not Charity – Based on Mutual Self Respect
Changing Role & Responsibilities
Redirect Philanthropy to Business to Business Efforts• Build Around Industry Clusters• Training Should be Employer Certified to be
Relevant• Help with School to Work Transition• Provide Management Assistance
Changing Role & Responsibilities
Adopt Right Model for Equity Capital• Attract Angel & Venture Capital• Not Technology Model – More Mundane
• Supermarkets
• Laundries
• Franchises
• Follow Principal of Competitive Advantage• Will Generate Appropriate
New Role of Government
• Shift Focus From Direct Intervention to Providing Infrastructure
• Focus on 4 Goals
New Role of Government
Goal 1 – Direct Resources to Areas of Greatest Need
Shift Funds to Area of Greatest Need• Crime• Superfund• Infrastructure
Programs Support Business on Race Ethnicity, or Gender – Change to Economic Need
New Role of Government
• Goal 2 - Increase Economic Value of Inner City• Change Regulations To Streamline Permitting
Process, i.e., Indianapolis
• Single Government Entity to Produce Building Ready Sites – Streamline
• Permitting
• Zoning
• Inspections, etc
• Develop Transportation Infrastructure to Move Goods, Employees, and Supplies
New Role of Government
• Goal 3 – Deliver Economic Development Services Through Mainstream Private Sector Institutions
• Biased Against Quasi Public Institutions
New Role of Government
Goal 4 Align Incentives Into True Economic Performance• No Direct Subsidies• Phase Out Set Aside Over Time• Government Funds
• Site Assembly
• Extra Security
• Environmental Clean Up
• Investments to Improve Business Environment
New Role for Community-based OrganizationsGoal 1 - Identify & Build on Strengths,
Based on• Unique Competitive Advantages• Realistic Assessment Capabilities, Resources &
Limitations• In Conflict with Community Based Mission
• Needs to Seek Outside Entrepreneur• Need to Permit Dismissing Poorly Performing
Workers• Assign Prime Sites to Businesses instead of SS Needs
New Role for Community-based Organizations
Goal 2 – Change Work Force & Community Attitudes• Use Advantage to Change Community Attitudes• Help Create Hospitable Environment
New Role for Community-based Organizations
Goal 3 – Create Work-readiness & Job Referral System• Play Active role in Preparing, Screening, and
Referring Employees to Local Businesses• Urban League, Churches
New Role for Community-based Organizations
Goal 4 – Facilitate Commercial Site Improvement• Help Form Merchant’s Association to Identify
Business Needs & Barrier’s to Meeting Them• Pushed for Increased patrols• Pushed to Board up or Demolish Abandoned
Buildings• Remove Trash & Abandoned Cars•
Overcoming Impediments
Issue Is Complex• Requires changing Attitudes by All Sectors• Rethink Inner city in Economic Terms• Redirect Resources to Economic Terms• Foster Wealth creation• Fostering Cooperation Between Business &
residents•