Bornholm and government as an enabler

I’m sitting in Dubai airport in the middle of the night waiting for a connecting flight to Beijing and forcing myself to avoid the procrastination of shipping my last blog of the week.  1am in the morning seems like no better time so here it is.

Bornholm – Bright Green Island

Friday was the last day in Bornholm, where I met with Laila, the Chief Municipal Officer of the Regional Municipality of Bornholm.  They have had a focus the last few years on more sustainable energy sources in their aspiration to be a Bright Green Island.  Here’s one of many windmills now dotted around the island.

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Bornholm, like most non-urban places in the world is facing the future challenge of aging and declining population.  Bornholm is being proactive in looking after existing industry and it appears to be arresting the forecast decline in population.  Aging population pops up time and time again and there has to be ways to leverage – knowledge transfer, volunteer work, and some more ideas that will emerge as the trend becomes a reality.  Laila’s message is very much one of government as an enabler for growth through its own actions and gathering people together.

Smart Cities…and regions for that matter

Her message of enabling growth was very timely as I came across a copy of Focus Denmark in Copenhagen and there was an excellent article on smart cities using technology (data, sensors, social media, etc).  A simple example – the City of Aarhus is releasing information collected by wifi, imagine what insights arise from that?  Regional locations are going to have to step up to the plate on this very quickly and use their small size and connectedness to get things done quicker or get left behind.  Take the foreign property ownership debate raging in Auckland…how hard would it be for smaller Councils to release summarised information on where owners are located?  The problem is that as people shift to receiving communication online rather than by mail another way of identifying location is needed!

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Quality of life

Most people mention quality of life as an advantage when I have asked about the advantages of places outside cities.  Whilst that is obvious, I wonder if the answer to getting more people to make the move (asides from job creation) is a mix of understanding why people live in smaller locations now and what is holding city people  back from making the move.  There might be a research gap there like Otago University did with their “Get over it” campaign.  What is holding people back from a better quality of life and is it actually better?

Tourism and niche food – a powerful intersection to build on

After a full day travelling I arrived on the island of Bornholm and cranked into another packed day of meetings all over the island and yet again more productive discussions and outstanding people.  Bornholm and Taupo share a lot of similarities, including population sizes and dominant industries.  Bornholm is the same size as Lake Taupo.

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Destination Bornholm and the Business Center Bornholm

First cab off the rank was tourism with Peter and economic development with Jørn.  Bornholm has encouraged people to purchase vacation homes out of the main centres, perhaps a solution for the Auckland housing “crisis”.  Bornholm is trying to extend stay to shoulder season and leverage off the growing outdoor tourism market.  There’s one main visitor centre open all year round with others only seasonally.  Economically there is a big focus on proactively working with existing businesses and providing a one stop shop.

There were both differences and similarities to NZ and the topic of collaboration surfaced consistently.  How easy is collaboration in tourism compared to other industries?   Do more accommodation or activities grow or hinder industry?  Does necessity drive people together or apart?

Bornholms Middelaldercenter

Next stop was Niller from the medieval centre and a great example of what happens when you mix passion with authenticity.  The centre blends historical and cultural tourism delivered in way where all ages can actively engage.

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Gaarden

Then onto meet Mikkel at a food and culture house.  The food industry here is a outstanding showcase of adding value to primary product having developed from almost nothing 15 years ago to the place to be in Denmark for niche food.  Gaarden is a great intersection of regional food and historical heritage and an example of very collaborative industry in action where activities are as close to producers as possible…aka localism.  Like Oregon, there’s a lot of potential for transfer to NZ, and one that the Food Innovation Network is tapping into but I believe has considerably more scope in rural locations, especially to get away from price-taking commodity trading.  Here’s one bit of the Gaarden store selling local products, not bad for an island 588km²!

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Go Bornholm and East Winds

Finally I spent time with Jonas, a local entrepreneur who simply gets on and does stuff.  In addition to the East Wind activity business he has recently launched Go Bornholm, and online booking plaftorm, I lost count of how many bookings flowed through during our discussion…the digital age is now the norm.  If destinations don’t offer bookings direct from their website, where is the call to action?  It’s like not being able to book a room on a hotels website.

So what?

Whilst tourism is “lower value” as pointed out by Sir Paul Callaghan, it’s still the starting point for many communities rather than simply trying to parachute into something new.  Combining tourism with adding value to primary produce, locations can move up the value chain, and then overlay technology to step up again – it just takes market focus, capital, time, persistence…

Infrastructure – why it matters, how it is changing and disruption

I’m travelling all day today by trains and ferry so I’ll wind back the clock to Sunday where I spent the day with Johan and his family with some incredible hospitality in rural Sweden which gave me a wonderful insight into Swedish life.  I meet Johan in the US – one of those chance travel encounters.  Here’s a lake we visited, it’s hard to believe that it ices over in winter so people can skate to work across the lake or drive a tractor on it.

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Sweden and NZ have a lot in common as smaller counties who value quality of life  There’s some differences in how that is achieved – like much of EU there are subsidies to farmers (tech geeks check out open data), restrictions on alcohol (can only by 3.5% alcohol in supermarkets and use a state owned monopoly for other alcohol) and higher taxes.  On the flipside there is free tertiary education, efficient public transport and cycling/walking and a diversified export economy.

Kommuninvest

Johan works at Kommunivest, which finances infrastructure development and investments of the Swedish local authorities and regions (very similar to NZ Local Government Funding Authority, which was based off Scandinavian models).

Kommuninvest was started by nine authorities in the mid-1980’s and now has a Aaa credit rating and the ability to source lower funding from all over the world.  Interesting times here with it costing you to keep money in the bank.  As I’ve mentioned previously, NZ simply doesn’t have the history in certain activities that other countries do – which is a limitation and opportunity.

So how is all this relevant to economic development and locations of any size?

Infrastructure

Infrastructure is often perceived as a boring subject but in many ways it is the most important because it sets the platform for everything else in society.  As Joe from the World Bank would say “Infrastructure is now the price of entry” for economies, and underinvestment either exits you from the game or makes you irrelevant.  What will the Asian Infrastructure Investment Bank (AIIB) do to further unleash economics in Asia?  The worst thing will be to sit still, which will be hard for some people as NZ continues to bridge the infrastructure deficit and keep up with the new pace of first world infrastructure.

What is infrastructure anyway? 

The nature of infrastructure is changing – Wifi has come from nowhere and is now an absolute necessity with people consuming and transacting online…how often do we see locations through the eyes of tourists?   Digital and data infrastructure is probably one of the least recognised but critical going forward.

What would disruption look like?

Taking this a step further, how long until we see disruption in more traditional sectors?  Will infrastructure be funded differently – crowdsourcing?  How long until the banking sector undergoes a disruption Uber or Skype style?  What will self driving cars to do insurance companies revenues from premiums and will peer to peer insurance become mainstream?

The Paper Province and the future of primary industries

Another full day of immersion in Karlstad, this time on economic development at a very local level focused on wood processing.  Here’s a view from on top of the water tower by Karlstad University looking out over the University, town, Lake Vanern and toward one of the paper manufacturing plants in the Varmland region.

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Clusters

First up it was an overview of clusters in action which was great to follow on from Harvard/MIT meeting last week.  There are hundreds of industry/regional clusters in the EU, with a Cluster Observatory and there’s also research focused internationally.

The Paper Province

Mats built up The Paper Province for 10 years and now works all over EU.  Initially the data didn’t identify wood processing as a cluster in this region, so early on they spent time proving it was.  Tetra Pak is one company you may know.  As mentioned yesterday there was significant consolidation in the industry.   It’s quite a story, the cluster started with 7 companies who had a burning platform around getting people to work in an industry which wasn’t seen by future employees as desirable.  This was at a time near the late 1990’s tech peak where the talk was about moving to “new economy” and how the ‘old economy” would disappear.

What I really enjoyed about today was seeing the results of pragmatism and determination of people working together over 15 years.

Applicable learnings for industry development were a lot around the people:

  • Industry involvement is the bottom line, so long as there’s not too much “our industry is different”
  • Being collaborator is like the metaphor – “bridging the gaps and then managing traffic on the bridges”.
  • Trust is key

Cluster actions are grouped into 3 activities:

  1. Cluster identity and attractiveness.  Doing this for an “old industry” like paper manufacturing involved opened changing perceptions through marketing, educating and empowering teachers, integrating University and research and developing their own school.
  2. Innovation and R&D.
  3. Business development, e.g. Companies leveraging off each others export contacts, sharing space at tradeshows.

The results?

Over 100 companies are now in the cluster and as a group they have outperformed other benchmark clusters in most other performance measures (like financial results).  It only takes a decade or so…

The future of primary industries?

Building on yesterday’s post about increased competitiveness – what is the future of industries, particularly primary manufacturing?

As an example, Sweden takes a different to wood processing.  The ownership mixture of forests is half small lots (200,000 owners!), and the other half split between large companies and government, which means very little vertical integration (ownership of forest and processing/manufacturing).  Despite this, almost all the wood is processed in Sweden into a range of products and then exported meaning very few raw log exports (they can import some wood).  Depending on the tree it takes 75-100 years for a tree to mature in Sweden compared to NZ’s 25-35 years…check out a comparison.  You’ll know of Ikea, which started in Sweden and look what it is today…nearly EU $30b in revenue per annum.

What would happen if companies and regions did nothing more than try and increase the value of their current products/services?  Especially when they are primary based (aka provincial NZ).   This might employ less people, but they will be higher skilled and higher paid.  What could then be leveraged off?

Sweden – European Union and regional development

I spent the weekend in Stockholm, recovering from the third of five overnight flights on the trip.  Stockholm is an amazing city to explore on bike or foot, with the whole city geared around cycling – dedicated cycle lanes with their own traffic lights.

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Sunday I spent with some contacts I’d made in the US, which I’ll blog about on Wednesday when I’m travelling all day.

Without a car in Scandinavia and China, the trip has transitioned from the huge miles in the car and dashing from one meeting and location to another (I covered over 6500km in 4 weeks).  This means shifting to purely public transport and also a deliberate focus to understand several locations more in depth.  This week the smaller size of the likes of Sweden (9.5 million people) makes it a little easier to navigate compared to the scale of US with 320 million people.

Karlstad

The whole day was spent with Mats, who has worked at all levels from international to local so has been hugely helpful at giving an overview of economic development.  His present and past involvement includes the Center for Strategy and Competitiveness, the Karlstad Innovation Park, and the Paper Province…test your Swedish out on the links.

Karlstad is very similar to Taupo, with Sweden’s largest lake and is several hours from two major cities (Oslo in Norway 220km and Stockholm 314km).  Being closer to Norway’s major city brings it own dynamics as people don’t follow boundaries.  A smaller place like Karlstad enables it to be a pilot (they already have a Tesla charging station) and like many smaller locations there’s a culture of being able to easily connect with people.

Themes emerging from today:

  • Decentralisation – the importance of having money spent closer to where people are balancing “best practice” mixed with local context and innovation.  A lot of money comes from the European Union (EU).
  • Importance of Universities (heard this before?).  Karlstad University is young, having achieved University status in 1999, with 25% of courses delivered online…is there hope for Universities in smaller locations?
  • Smart Specialisation is a major focus for jobs and growth in the EU.  As I understand, it enables regions to understand changes in world economy and create more value.  BTW – Here’s a marketing video of the European economy.
  • Collaboration at a country level in the EU is common.  While Greece dominates the headlines…many of the programs operate EU wide with learnings shared between countries.  If you’re a nation like NZ (and regions within NZ) that needs to export, building relationships and trade is vital not just for income but collaboration and learning.  Note US is largely a domestic focused ecnomy with 12% of GDP as exports, NZ is 30% and Sweden is 44%.
  • Cluster development requires buy in of industry but all stakeholders including politicians and universities (plus I’d change politicians to government and add MIT’s suggestions from last week of entrepreneurs and risk capital).

Specific issues for smaller locations

  • Emerging issues here = broadband, clusters, more business establishment/starts, entrepreneurial spirit, smart specialisation.  All but the last one emerged in the US.
  • We will cover this tomorrow but the pulp and paper industry has gone from over 50 manufacturers in the region down to four.  So as industry competitiveness increases this often leads to less jobs.  This is hard for locations with job losses in the short term but what would you prefer – job losses now with a resilient industry or job losses with no industry?  This really brings to light the need to act now to develop economies, even if it does mean short term pain.

And finally…here’s who pays and receives what for all the countries in the EU…what would this look like in NZ?

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Source: The Telegraph

Harvard clusters and MIT entrepreneurship

Today was northward through the maze of highways from New York up to Boston. I’m writing this with a sense of relief having made it through a month in US with only a few less possessions than I started.  Tonight is an overnight flight to Sweden via Iceland.  I’ve been blown away by the friendliness and hospitality of the people here – from the people I’ve met (I haven’t had one cancelled meeting) through to all the people I’ve bumped into as a tourist along the way.

Dezan Shira & Associates

Richard, the Director of North America Operations for Dezan Shira gave me a great summary of his experience of living and working in China for 10 years.  I’ll cover this off in my China section in a couple of weeks, but it was a brilliant overview that will significantly aid my time there.

Harvard and MIT

From there it was on to meet with Sarah Jane who is with both Harvard Business School as part of The Institute for Strategy and Competitiveness running the Cluster Mapping project and MIT Regional Entrepreneurship Acceleration Program.  Here’s Harvard Business School.

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The Institute of Strategy and Competitiveness was founded by Michael Porter of Five Forces fame.

The visit wrapped a lot of structure around all the ideas I’ve come across so far, including putting into context a lot of traditional activities around industry attraction and trying to pick future industry winners.  In summary:

  • Cluster mapping methodology involves an upfront focus on data, with industries classified as either local or traded depending on where they sell to (locally or outside the region).  The key here is that while both industries provide jobs, the traded industries create higher wage growth, more productivity, and the list goes on.
    • A very smart algorithm is then applied to identify industry clusters.  There is a lot of data, which is split into three categories: Performance, Business Environment and Performance & Geography.  Tech geeks, they are using APIs.
  • Sarah Jane talked about stakeholder ecosystems to develop industries, including representatives from each sector – Entrepreneur, Risk Capital, Corporate, Government and University.  This is a great systems approach and what is very relevant for smaller locations is that Universities will often be absent and getting the mix of the other four can also be problematic.

The relationship between rural locations and cities is an interesting one…rural communities often benefit from cities growing, but if your location is declining – then what?  There’s some good rural research here too.

I’m doing cluster mapping a great disservice with this very brief summary of my take-outs, so check out the website for more info.

OK, flight is about to board so one last technology plug…here’s an almost hologram at Boston Logan airport giving people information before they pass through security.

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An economic view – when are places no longer relevant?

On the final stretch here in the US before two different journeys begin into Sweden and Denmark and then onto China.

Today was the ‘big apple’ New York.  A google search brings up 2,390,000,000 results, so I won’t try and compete with everything that has been written.  My main observation from my day in the city was that there is so much vibrancy it is easy to see why many people are attracted to visit and live.  In the global village  every other location in the world is competing against cities like New York and so have to choose to either try and better it or carve out their own niche.

There’s two sides to big cities like New York.

Great urban features like the New York High Line, an old train track several stories high that runs for over 2km and is maintained by a non-profit.

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On the other hand…random adults please stay away from kids warnings

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Oxford Economics

Todays meeting was with Dan from Oxford Economics, who are a global advisory firm.  Dan’s background is in the private and public sectors, so has seen both sides of economic development.

He confirmed my thoughts about the use of incentives, which are widespread throughout the US.  Check out his paper on incentives.

Talent was raised again as an issue, particularly in reference to how often end up in cities and the challenge that smaller locations have to either keep students from secondary school onwards or make it attractive to return.

The most insightful discussion today was Dan’s comment that one of the hardest challenges in economic development is when a locations reason for being no longer exists, often heard by the comment “but we used to be…”.   This links back to the ‘Zombie town’ comments made in NZ last year about closing down some towns (it’s also a worldwide challenge).  This is the first time I’ve heard this view while offshore (probably because the places I’ve visited have been doing great stuff or have developed themselves out of tough times by reinvention)…and it’s hard to disagree.

So it begs the question – should locations that are no longer viable close down?