Business Retention and Expansion

PractitionersTrainers

Management ConsultantsTechnology Vendors

6,500 Users in North America

Over 250,000 BR&E Visits Conducted

“ Today, unlearning outmoded and

ineffective ideas and ways of doing things is

just as important as learning new ones.”

Source: Leslie Parks

Where We’ve Been

Government

The American Recovery and Reinvestment Act was passed into law in 2009.

The Act provides $840 billion in funds.

Tax benefits account for $300 billion.

Contracts, grants and loans for $222 billion.

Entitlements for $218 billion. Source: Recovery.gov

Globalization

Foxconn (the Chinese factory where most iPhones are made) employs 230,000 workers. Over 60,000 of these workers live in company dorms.

The same company employs roughly 8,700 industrial engineers.

Average wage for production workers is $17 per day and they work 6 days a week/12 hours a day.

Green Movement

“Cleantech” segments of the economy produced explosive growth during the recession.

The clean economy is both manufacturing (26% vs. 10%) and export ($20K vs. $10K) intensive.

Green and clean is largely urban. Clusters are the norm cleantech.

Wages are 13% higher than median US wages.

Source: Brookings Institute

Where We Are

The Earth Shifted Over Five Years

Ago…

2013 Recovery!

“Our economy is bigger than it was before the start of the Great Recession. Corporate profits are back. Business investment in hardware and software is back--higher than it's ever been. What's not back is the jobs.”

Andrew McAfee, MITSource: CBS 60 Minutes Interview 1-13-13

The percentage of Americans with jobs is at a 20-year low. Just a few years ago if you traveled by air you would have interacted with a human ticket agent. Today, those jobs are being replaced by robotic kiosks. Bank tellers have given way to ATMs, sales clerks are surrendering to e-commerce and switchboard operators and secretaries to voice recognition technology. Source: CBS 60 Minutes 1-13-13

Circa 1950-1970 Circa 1960-1980

Circa 1970-1990 Circa 1980-Present

Music Yesterday

Music Today

Retail Yesterday

Retail Today

Travel YesterdayCirca 1850-2005

Travel Today

Movies YesterdayCirca 1900-Present

Circa 1975-2008

Movies Today

Common Denominators

Rapidly changing markets

Assimilation of new technologies

Change in workforce composition

New delivery methods

Fundamental change in customer behavior

“We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come – namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.”

John Maynard KeynesEconomic Possibilities for Our Grandchildren 1930

“…this is not unique to this recession, it’s actually been a trend we’ve been seeing over the last several business cycles—it’s businesses, once they lay off, they’re actually learning to be so efficient and increase their productivity so much that they can make the same number of goods without as many people.” Source: USA Today Interview with President Obama

US Change in Employment

1950s 1960s 1970s 1980s 1990s 2000s

24%

31%

27%

20% 20%

0.8%

Source: US Commerce Department: Labor Department

Source: Amerisclerosis-The Puzzle of Rising US Unemployment Persistence 9-9-2013

A Jobless RecoveryThe persistence of U.S. unemployment has risen with each of the last three recessions, raising the specter that future U.S. recessions might look more like the Eurosclerosis experience of the 1980s than traditional V-shaped recoveries of the past.

Sobering Facts

Sobering Facts

Where We’re Going

Creating New Jobs…

Source: Economic Policy Institute

These companies created millions of new jobs in the past

few of years.

In Growing Markets

China’s Explosive Growth

Source: National Bureau of Statistics-China

Dateline: Detroit, Michigan

GM said Monday that it sold 2.35 million vehicles in fast-growing China, about 136,000 more than it sold in the U.S., with China sales surging 29% as an expanding middle class gained wealth. Sales in the U.S., including

heavy-duty vehicles, rose 6.3% as GM continued to rebound from its 2009 stay in bankruptcy protection.

Source: USA Today , 1-25-2011

This is a very exciting development, because China is growing tremendously. It's the largest automobile market in the world. If you look at the projections this last year, in 2010, we had 74 million vehicles sold. Our projection is in 2020, that'll move to 112 million vehicles. In China alone, it'll go from 18 million, which is about 25% of the entire market in 2010, to 32 million in 2020, which would be 28% of the market. Solid markets in the Americas, very solid markets in Europe, and then tremendous growth in Brazil, in Russia, in China. Ford's strategy is to serve all these markets and also to utilize our resources worldwide so we have more global platforms.

Source: USA Today-7-18-2011Interview with Ford CEO, Alan Mulally

Source: Visual-ly 2012 Global Car Stats

Senior General Motors officials forecast that sales in China could top 35 million annually by 2022. That’s more than double the peak of the American market nearly a decade ago.

“No market is more critical than the China market for us,” Tim Lee, president of General Motors’ International Operations, told reporters. You may hear the same thing from other manufacturers, whether Volkswagen, Toyota or Ford.

Source: The Detroit Bureau April 2013 Car Sales Defy Weak Economy

What is important about this debate is that if most of what's holding back a faster improvement in the unemployment rate is structural in nature — i.e., a skills mismatch that will only be corrected via retraining of the workforce and/or the gradual improvement in the housing market—then the Fed is ill-equipped to deal with this problem," RBC Capital Markets said. "No amount of quantitative easing will make the gargantuan amount of unskilled labor supply more employable."

US Hiring Dilemma

Source: NBC News 3-14-13

US Growth Trends2002 to 2012 - Growth in Employment

12,566,352

Stage 1 (2-9)

Source: YourEconomy

825,290

Stage 2 (10-99)

2,246,741

Stage 3 (100-499)

-4,666,501

Stage 4 (100-499)

US Skills Gap

“The problem of the looming retirement of highly experienced workers has been aggravated by the fact that new recruits tend to be far less technically skilled than entry-level workers were decades ago. ”

Source: Rick Stevens, Senior VP of Boeing

Bigger Is Not Better

“It get you bragging rights…but that’s about it. Being biggest in the world is not necessarily an advantage to anyone. GM was number one for something like 75 years and then went into bankruptcy. What’s far more important is sustainable profitability.”

Source: Aaron Bragman, IHS Automotive

30%

25%

33%

12%

Baby Boomers

Youth

Other Age Groups

Retired

Population Realities

In the Driver’s Seat

Labor demand greatly outpaces supp

Skilled, educated workers dictate term

Bigger firms ‘win’ over smaller ones

Urban metros ‘win’ over rural areas

Entrepreneurial DevelopmentBusiness Recruitment

Business Retention/Expansion

Three Ways to Grow Your Economy

“When it comes to generating new jobs, it's existing companies - not new

startups - that have the leading role. New startups are often billed as the stars of economic growth. Yet it's

actually existing, expanding companies that contribute most to U.S. job

creation. In fact, from 1990 to 2008, existing companies generated 71

percent more new jobs than startups.” Source: 2012 Donald W. Walls, PhD. Walls & Associates

Over 15,000 ED organizations chase fewer than 200 major business

relocations or expansions annually. This causes ED Inflation…

Mark O’Connell—OCO Global

He (Bill Taylor) said the recruitment of new industry is going to be more targeted based on those industries the state needs. He said a key part of the work needs to focus on helping existing companies expand because 75 percent of job growth in Alabama comes from those companies and, in some counties, the figure is 100 percent.

Source: AL.com Rotary Club of Birmingham Speech 2-22-12

Business Retention Yesterday

Business Retention Today

Three Parties

Three Perspectives

Old CompanyPerspective

New Company Perspective

Old CommunityPerspective

New Community Perspective

Old SponsorPerspective

New SponsorPerspective

“...Very simply, two things: communication and action. If a community takes the time to talk with a business, to understand its concerns, risks, opportunities and challenges, it will understand exactly what it takes to improve business. Then it needs to act on what is has heard. The company also has the responsibility and opportunity to engage stakeholders in a proactive dialogue.”

Source: Area Development-Aug 2012Interview with David Trebing,GM-State/Local Relations, Daimler AG

“...The best economic development tool is very simple: volume. That happens when all stakeholders focus on building a globally competitive product in a globally competitive location by a globally competitive workforce.”

Source: Area Development-Aug 2012Interview with David Trebing,GM-State/Local Relations, Daimler AG

VALUE

The “S” Word

Survey-based BR&E is not agile enough for globally competitive markets and

companies today.

A Static Approach…

TrendsToday…

Retention in 2013…

Everyone is “rediscovering” BR&E.

Bigger is Better…

Regional, State and Provincial programs are now the norm.

Branding is In…

The best programs use a common brand name.

Retention is now being viewed as a team sport.

Collaboration is Key…

Most programs are being driven by

workforce development needs.

It’s About Workforce…

BR&E is now the “X-Factor” in business

recruitment and entrepreneurial work.

Leveraging Retention…

WhyRetention?

It generates 70-85% of all jobs and investment impact in your trading area—regardless of your success

with recruitment and entrepreneurial development

It allows you to interact with, and get feedback from, your actualcustomers—those businesses

with an intimate understanding of your market area

It is up to 10 times cheaper to keep and grow resident firms

than to attract or start new ones

It provides leverage—facilitating smart recruitment and

entrepreneurial development

It is a “team sport” that facilitates a cohesive and collaborative

approach to economic development

It drives creation of relevant policies, strategies and

programs—all with impact beyond existing industry

It takes the focus away from highly publicized recruitment activities that hurt local business in any

trading area

It raises the bar for a market area by helping companies become

globally competitive.

250 Jobs @ $62,000 each$15.5 million annual payroll$825,000 state /provincial tax revenues$725,000 city/county tax revenues

Jonathan Sangster—CBRE—Area Development/Feb-Mar 2010

ROI—From a Single Company

Jonathan Sangster—CBRE—Area Development/Feb-Mar 2010

ROI—The Multiplier EffectSubjectCompany

Total Impact

Jobs 250 893Payroll $15.5M $40MState Tax $825,000 $2.3MLocal Taxes $725,000 $2.6M

Indirect Jobs

Induced Jobs

Direct Jobs

“A job retained is just as good as a job gained.”

Jonathan Sangster—CBRE—Area Development

“Communities and states that recognize the value of retention

incentives during challenging times may have an advantage in the

competitive to retain their operations.

Objective, Outcomes &

Benefits

Objective

Strategically assist high valuecompanies to become agile,

adaptive and globally competitive

OutcomesThank the CEO (show the love)

Learn about the company and match needs to available

programsUse CEO views and opinions to create a better business

climate

BenefitsDirects ED resources to your ‘best’ firms

Assists firms in becoming globally competitive

Creates a more accountable ED ‘system’

Galvanizes the ED Community

Stretches limited ED resources

Elements

Sales/Marketing

Social MediaBusiness WalksFocus GroupsHigh Value Content Traditional Outreach

1

100+

A Dynamic Approach…

Customer Service

The dynamic network of local, regional and provincial/state

resources who provide cohesive and seamless

service to the BR&E program.

Management

The convener, point of control and driver of the

entire process.

Client Data Repository

The customer relationship management (CRM) systemthat holds data, provides for

client care and analytics.

One-To-One

101

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Customer RelationshipManagement (CRM)

Not a technologyor set of technologies

Source: Peppers and Rogers

Customer RelationshipManagement (CRM)

A continually evolving process which requires a

shift away from the traditional business model of

focusing internally. Source: Peppers and Rogers

Customer RelationshipManagement (CRM)An approach that takes you

toward customers--backed up by a thoughtful investment in

people, technology and business processes.

Source: Peppers and Rogers

"If the only tool you have is a hammer, you will see every problem

as a nail."

Source: Abraham Maslow, Motivational Theorist

“The only true competitive advantage comes from the

understanding you have of your customer that your competitors don’t…this information has to

come from the customer.”

Competitive Advantage

Source: Peppers and Rogers

“The more effort the customer invests, the greater their stake in the

product or service. Now the customer finds it more convenient to remain loyal, rather than re-teach a

competitor.”

Source: Peppers and Rogers

Customer Equity Equation

The Learning RelationshipIdentify Differentiate

InteractCustomize

MVC MGC

Source: Peppers and Rogers

DETROIT - General Motors Corp.’s auditors have raised “substantial

doubt” about the troubled automaker’s ability to continue

operations, and the company said it may have to seek bankruptcy

protection if it can’t execute a huge restructuring plan.

Source: MSNBC.com News Services/ March 5, 2009

Managing Expectations

$20K $60K

Malibu CTS

“A car for every purse and purpose.”

Source: Alfred P. Sloan

Sloan’s Mantra

Ladder of SuccessCadillac

Buick

Oldsmobile

Pontiac

Chevrolet

Making it Easy

A3, A4, A5, A6, A8

Making it Difficult

Aveo, Cobalt, Malibu, Impala, Vibe, G6, Grand Prix, G8, LeCrosse, Lucerne, CTS,

DTS, STS…

Effort = Reward (ROI)

“Old” Marketing Model

The “old model” treats all customers the same.

The endgame is increased market share.

“New” Marketing Model

The “new model” treats all customers differently.

The endgame is increased share of the

customer.

“We want to keep the good, grow the badand the ugly we want nothing to do with.”

The Good, The Badand The Ugly

Source: Business Week

Reward Zone customers account for only 30% of transactions at Best Buy but

spend more than twice as much as regular customers.

($850 versus $400 per year)

“It is controversial to redline customers. But done correctly, it really is saying I

have a limited pool of money and I need as a business person to spend that

money where I can get the most return.” Kelly Hlavinka--Marketing Consultant for Best Buy

The Learning Relationship

The customer tells you what they want and when they want it.

You tailor a solution for them that is seamless.

The Learning Relationship

Operate on a “need to know” basis.

KNOW EVERYTHINGABOUT YOUR CUSTOMERS.

All Firms

59% have a formal customerretention program in place.

Grizzard Performance Group

58% have a formal customerretention program in place.

B-2-BGrizzard Performance Group

71% have a formal customerretention program in place.

B-2-CGrizzard Performance Group

90% surveyed track, analyzeand report defection levels.

BanksBank Marketing International

Who’s the Customer?

Drucker onCustomers and

Resources“In an economic cause, one asks: Is this the best application of ourscarce resources? There is so much work to be done. Let’s put our resources where the results are.”

Peter DruckerManaging the Non-Profit (1992)

“Good” Money

Money that flows into a local economy from

competitive companies that sell outside the local economy.

David Morgenthaler-Morgenthaler Ventures

“Neutral” Money

Money that circulates within the local economy.

(Sometimes referred to as the multiplier effect.)

David Morgenthaler-Morgenthaler Ventures

“Bad” Money

Money that leaks out of the local economy in the form of people or

purchases.

David Morgenthaler-Morgenthaler Ventures

Tennessee Trends2002 to 2012 - Growth in Establishments

148,76855.6%

3,025-1.4%

Resident Firms Non-Resident FirmsSource: YourEconomy

Tennessee Trends2002 to 2012 - Growth in Employment

163,9171%

-90,445-1%

Resident Firms Non-Resident Firms Source:

YourEconomy

Tennessee Trends2002 to 2012 - Growth in Establishments

106,1366.0%

Stage 1 (2-9)

Source: YourEconomy

332.1%

Stage 2 (10-99)

-130.3%

Stage 3 (100-499)

-104-1.8%

Stage 4 (100-499)

Tennessee Trends2002 to 2012 - Growth in Employment

234,9573.8%

Stage 1 (2-9)

Source: YourEconomy

21,916.2%

Stage 2 (10-99)

4,562.1%

Stage 3 (100-499)

-134,708-1.9%

Stage 4 (100-499)

Think Vertically

Technology/Innovation Quotient

Job

Quo

tient

??

“Best” Customers

Façade/Building Improvement Quotient

Sale

s Q

uotie

nt

??

“Best” Customers

Public Investment Quotient

“Gre

en”

Quo

tient

??

“Best” Customers

Cluster/Sector Quotient

Expo

rt Q

uotie

nt

??

“Best” Customers

Your Best Bet CustomersCreate wealth by exporting goods/services (good money)

Provide quality jobs and high wages

Generate capital investment in the community

Incorporate technology into products and processes

Want our help to stay and grow

Grown locally

Are eligible for ED programs and resources

Avoid the “comfort level syndrome”

Seek out firms that have “fallen through the

cracks”

“If you can’t measure it, you can’t manage it.”

Peter Drucker

What You Can Measure

Number of customer visits (wk/mo/yr)

Number of referrals madeNumber of referrals (closed vs.

open)Percent of repeat businessPercent of market coverage

Number of program partnersAverage response time by partners

Recognition rating of program nameBuy-in among key stakeholders

Number of tangible success storiesLongevity of program

What You Can Measure

Quality job creation/retentionInvestment in technology/innovation

Market diversificationCost mitigation

Increased profitabilityIncreased productivity

More Measurements

Measuring Results

See all of your customers at least once

ee all of your good customers regularUncover and meet/exceed their needs,

wants and expectationsPut into place policies and programs th

anticipate their needs