Urban Entrepreneurship Al Bogdan. Importance of Entrepreneurship Major industries or businesses are...

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


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


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


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


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


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


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


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


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


• 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


• Goal 3 – Deliver Economic Development Services Through Mainstream Private Sector Institutions

• Biased Against Quasi Public Institutions


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


Goal 3 – Create Work-readiness & Job Referral System• Play Active role in Preparing, Screening, and

Referring Employees to Local Businesses• Urban League, Churches


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•

Urban Entrepreneurship Al Bogdan. Importance of Entrepreneurship Major industries or businesses are...

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