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Incivility destroys a community’s capacity to generate wealth. 

Here’s why. 

In a networked, knowledge-driven economy, collaboration drives wealth creation. And collaboration can only thrive in a stable environment of trust. The corrosion of our civil society –– the alarming growth of incivility and pervasive lying –– undercuts our economy’s productivity and our capacity to innovate.

Incivility — fraudulent concealment (“hiding the ball”), lying, manipulation, and associated behaviors — can work well to redistribute wealth. We see almost endless examples from MF Global to the subprime mess. Yet, these behaviors do not generate wealth. Indeed, they erode capitalism’s capacity to generate wealth. That’s why corruption slows economic growth and why trust is associated with higher rates of economic growth

We have moved into a new economic era with new rules for prosperity. Increasingly, knowledge embedded in products and services creates the value leading to wealth. This knowledge is generated and managed through collaborative, loosely joined networks. 

Our capacity to prosper depends on our capacity to collaborate and innovate in these open networks. To innovate, we must learn how to design and manage complex projects without relying on “command and control” dictates, which don’t work. Trust becomes a key element in the effectiveness of these networks. Ethical habits are crucial to innovation and the generation of wealth in open networks. (For those interested in diving deeper into this topic, you might read Francis Fukuyama’s Trust: The Social Virtues and the Creation of Prosperity.) 

This all sounds abstract. Let’s get practical. 

Bringing innovation to inner city Shreveport

How do you transform the economy at a neighborhood level? That’s the challenge that a colleague of mine, Kim Mitchell and his firm, took on with a HUD Choice Neighborhood grant in Shreveport, LA. Kim is a member of our Strategic Doing Design Team that meets twice a year to advance the disciplines of agile strategy with Strategic Doing. 

In this Choice Neighborhood grant, Kim and his team proposed a new approach to rebuilding the economies of devastated inner-city neighborhoods. The Purdue Center for Regional Development has been assisting the team. 

We know this much: billions of dollars of federal money over the past four decades have not changed the dynamics within these neighborhoods. Each of these well intended federal programs has been designed to fix a specific problem. They do not change the underlying dynamics within the neighborhood. As a result, they fail. In the case of HUD, the agency’s categorical programs have done little to change the dynamics of neighborhoods like Ledbetter and Allendale in Shreveport.

A promising strategy developed in Shreveport offers hope of a new approach. Community Renewal International views neighborhoods as a series of interconnected,  complex networks. As a shorthand, they refer to the “village structure” of the neighborhood. For a number of years Kim and I have been working with Mac McCarter and his team at CRI  to explore how we might integrate the CRI  strategy framework with  the new discipline of Strategic Doing, incubated at the Purdue Center for Regional Development.  

This video introduces CRI: 

Strategic Doing represents a fast way to design and manage complex collaborations by following simple rules. (For more background, see the article in the most recent issue of Michigan State’s Engaged Scholar magazine, p. 33) This video introduces Strategic Doing with work we have been doing on the Space Coast in the wake of the NASA Shuttle shutdown: 

The CRI approach promises dramatic improvements in the productivity of federal investments in these devastated neighborhoods. So, for example, in Allendale, CRI has shown dramatic improvements by focusing on what matters: the core, intentional relationships that build the neighborhood.

Strategic Doing focuses on building these strategic relationships quickly. 

Our partners at Michigan State are now using this discipline to address opportunities and challenges in neighborhoods in mid-Michigan through the “Power of We”. With Michigan State, Purdue is launching a national network of colleges and universities to teach this new discipline in order to accelerate our nation’s civic innovation.  Arizona State, Indiana University, the University of Akron, the University of Alaska, and Northern Illinois University are just some of the campuses joining this effort. 

Accelerating civic innovation is vital to our economy’s economic transformation. We have shown that with Strategic Doing, we can dramatically boost the productivity of federal investments by “linking and leveraging” these investments across organizational and political boundaries.

With the Choice Neighborhood grant, Kim and his team proposed to use the Ledbetter/Allendale neighborhoods as a testbed for new approaches to revitalizing inner-city neighborhoods by combining the insights of Community Renewal International and Strategic Doing.

This work is difficult, complex and exciting. Open innovation pushes us in new directions. At its base, however, it requires a commitment to civility among the members of the team. By “civility” I mean the capacity to treat each other with mutual respect and honesty. Civility means not withholding relevant information from one another, not lying to one another, and not personally attacking one another.

The Shreveport Choice Neighborhood innovation implodes

Unfortunately, the City of Shreveport and the local council of governments could not uphold their end of the bargain. A week ago, they issued a letter demanding that Kim and our team cease working on this project. 

This letter came from an attorney after local government officials undercut the project with a pattern of unacceptable civic behavior. Rather than confront any disagreements with our team openly, the City and the council of governments elected to first attack our work behind the scenes and then run to a lawyer. 

I’m disappointed, but not surprised. 

Civic innovations like the ones we were designing in Shreveport disrupt bureaucratic organizations. These innovations propose a new way of doing business that can be threatening to the established order. 

The incivility we encountered fits a pattern long established in Shreveport, where I have been working since 1984. When I first arrived in the city to work on an economic development strategy, I encountered a public debate touched off by a Methodist minister. He accused the city’s leadership of being unable to collaborate to lift the city’s sights. Rev. Hull called this civic pathology “Shreveportitis”. Amplifying Rev. Hull’s comments the same year, I wrote about the political challenges facing Shreveport in a strategy report that the American Economic Council awarded the first Arthur D. Little Award for Excellence in Economic Development. 

I pointed out in that report that Shreveport’s evolution politically would ultimately define its economic horizon.  

Almost a decade later, on November 3, 1993, I gave a speech to the Shreveport Rotary, “The Politics of Personality: The Biggest Economic Challenge Facing Shreveport and What To Do About It.” In the speech, I diagnosed Shreveport’s problem bluntly: “The political dynamics of Shreveport…are mired in a ditch.” I pointed out that as economies slow down, the focus of politics inevitably narrows. The game turns into zero sum, and local “leaders” focus too much on personalities and not enough on issues of common concern. They lose a sense of direction. Politics becomes a soap opera, an endless loop of shallow intrigue and innuendo. 

In my 1993 remarks, I set out some simple rules to guide Shreveport toward a more healthy and productive civic process: Shreveport’s leaders “must be willing to to exclude from the process those people who insist on promoting their own hidden agendas to the detriment of others. Those who insist on manipulating and withholding information to their own advantage. Those who refuse to respect others and the spirit of collaborative discussion.”

Twenty-seven years after Rev. Hull and I pointed out the challenge of civic leadership in Shreveport, and 18 years after my speech to the Rotary, Shreveport’s leadership has been unable to develop more healthy civic habits. Shreveportitis still infects the body politic. 

The challenge for HUD: Move beyond project management

Sadly, the agency staff at HUD has proven itself not much help to get the Choice Neighborhood project underway. One of the challenges in moving HUD toward new models of sustainable development involves training staff new ways of thinking and behaving, new approaches that foster collaboration. The HUD staff is well-versed in project-based management. Yet, these approaches are too rigid, too linear, too bureaucratic to support the agile, integrated and open strategies that provide the foundation for sustainable development. Sustainable development invites us to cross boundaries, not defend them. 

I am finding with my conversations with other development professionals across the country that the HUD staff has a very difficult time understanding how to manage promising new pathways to sustainable development. These approaches are inherently more agile and flexible. As HUD moves forward, they will need to examine how to retrain their field staff to promote more collaborative approaches to sustainable development. (The same is true for the staffs of the Employment and Training Administration, as well as the Economic Development Administration.)

Where we go from here? We will continue to develop and deploy new approaches to agile strategy and sustainable neighborhood development. We will also explore how these models can be embedded, replicated and scaled across regions through our emerging university network.

In our last Strategic Doing Design Team meeting, we discussed the fact that not all communities or regions have the civic maturity to undertake these more sophisticated approaches to building wealth in a networked world. We will be writing up the case of Shreveport to gain some insight into the civic behaviors that must be in place to transform an economy through open innovation in loosely joined networks.

Shreveport’s Choice Neighborhood initiative has provided us a valuable lesson in what to avoid. 

Where does Shrevport go from here? My guidance to my friends and colleagues in Shreveport was passed on to me by one of my mentors, Dick Pogue, former managing director of the Jones Day law firm.

In guiding me, Dick told me he was passing on advice he received years earlier from his mentor, the legendary Erwin Griswold, former Solicitor General of the United States.

When I confronted opposition to deploying these new approaches in Cleveland, Dick told me, “Press on, regardless.”

Sage advice.

The following information was received from Kermit J. Lind and draws attention to an important communication released yesterday from the Federal Office of the Comptroller of the Currency.

___________________________

Dear Public Officials and Code Enforcement Advocates,

The attached statement just released by the OCC to Chief Executive Officers of All National Banks and Federal Savings Associations, Department and Division Heads, and All Examining Personnel should be of special interest to those agencies who are spending millions in public funds to deal with the harmful condition of residential properties in foreclosure…  See full post:  OCC communication to Banks

___________________________

Link to the full OCC communications released on 12/14/2011: OCC 2011-49

One of the more interesting points of the Comptroller’s guidance is the mention of releasing liens in lieu of foreclosure actions where properties are deep underwater –

Releasing a Lien Rather Than Foreclosing

At times, lenders may release a lien securing a defaulted loan rather than foreclose on the residential property. This decision is often based on financial considerations when the bank or servicer/investor determines that the costs to foreclose, rehabilitate, and sell a property exceed its current fair-market value. When this decision is made after a bank or servicer has initiated foreclosure, the borrower may have already abandoned the property or discontinued the care and maintenance of the property, increasing the chance of a blighted property in the community. Because the decision to release a lien is typically a financial decision, banks and servicers should ensure that their valuation of the property provides the best information practicable, while complying with investor requirements, before initiating foreclosure and subsequently deciding to release the lien. While the financial risk must be considered, banks and servicers should also consider the potential for reputation and litigation risk arising from their position as a prior mortgagee or servicer of a now-abandoned property. [emphasis added]

[Read more here.]

Inside_an_ecosystem_for_an_inn

On the Space Coast this week, working on new development strategies for regional innovation clusters. Clusters that accelerate regional innovation are not simply agglomerations of like-situated firms. Instead, regional innovation clusters form around an ethic of open innovation. 

With open innovation, the presumptions on information sharing are reversed. In the old world of our grandfather’s economy, regional actors presumed that information was confidential unless they took steps to release it (hence, the “press release”). In a world of open networks, we presume to share information unless we take affirmative steps to protect it (hence the proliferation of passwords). 

Shifting this presumption is important. It leads to collaborations that form more quickly, as well as collaborations that can evolve to higher levels of sophistication. At it’s core, the shift involves changing patterns of behavior that are often deeply engrained in a region. In places where the old industrial mindset is still dominant — Detroit, Cleveland and Shreveport, LA come to mind — information is not widely shared. Trust levels among civic leaders are relatively low, and the adaptation process slows. 

In contrast, some older industrial cities are  moving along a new path. Milwaukee, WI; Rockford, IL; and Holland, MI come to mind. These are places where regional innovation clusters can more quickly form: the water cluster in Milwaukee; the aerospace cluster in Rockford; the electric battery cluster in Holland. 

To illustrate the complexity that can quickly arise in a regional innovation cluster, I developed this drawing. The challenge, of course, comes in moving a regional economy in this direction. We have found that old strategy constructs — strategic planning — do not work well in these open networks for a variety of reasons. That’s why we have designed new strategy disciplines expressly for meeting the challenges of designing and managing open, loosely joined networks. 

Outlook for Buffalo’s future is now $100 million brighter

Here is the plan that Western New York submitted:


Western New York Regional Plan 2011


Old manufacturing in Allentown. Photo by Flickr user Don Campolongo

Rethinking manufacturing options for the Great Lakes Nation: Can Hip Urban Crafts Help Revitalize Rust Belt Manufacturing?

Stem_slide

With the publication of the National Academy’s Rising Above the Gathering Storm report, our attention has been increasingly focused on the connection of STEM education (Science, Technology, Engineering, and Math) and our national competitiveness. 

Knowledge provides the new basis of wealth creation, and the STEM disciplines form that core of an economy’s capacity to generate and apply new knowledge. U.S. leadership in these disciplines has begun to erode. The National Academy’s report called for a “comprehensive and coordinated” federal effort to restore U.S. pre-eminence in these areas. 

As mandated under the America Competes Act, last week the Federal government released a report that provides an inventory of all federal STEM initiatives.  It is the most comprehensive inventory of federal STEM initiatives. 

  • The federal government invests about $3.4 billion in STEM initiatives. 
  • $1.1 billion of the total to focus on the needs of demographic groups that are under-represented in the STEM disciplines. 
  • $312 million goes directly to improve teacher effectiveness. (Other initiatives have a secondary goal of improving teacher effectiveness.
You can read more here. You can download the report here

To learn more about STEM disciplines and why they matter, visit the Change the Equation web site. 

A federal effort can only go so far. The real challenge of transforming STEM education lies elsewhere. 

Innovation in the STEM disciplines is grounded in regional economies. At the regional level, we have the concentration of assets — K-12 education, higher education, business clusters, philanthropy — needed to innovate and transform how teachers teach and students learn these disciplines. 

This innovation will be driven by “open source” disciplines, like Strategic Doing, to create new, innovating networks. These regional networks take time and discipline to form. The regions that focus their efforts on developing these new, innovating networks will be more competitive. They will learn faster, spot opportunities to innovate faster, and act faster. They will build the collaborations capable of tackling the complex challenges of education transformation. 

Innovatingnetwork

In our rapidly evolving global economy, wealth will concentrate in these new hubs of open innovation. (Tom Friedman has an interesting commentary that touches on the topic.) 

At Purdue, we are part of a broad STEM initiative in Indiana. Five years ago, we set out to increase the concentration of Project Lead the Way high high schools in our region. We now have the highest concentration of these high schools in the country. Our commitment was part of the decision to move the PLTW headquarters from New York to Indianapolis. A week-long series of events starts this coming week. 

PLTW is part of a broader network of innovation taking place in the STEM disciplines in Indiana. The I-STEM Network in Indiana represented an unprecedented collaboration to accelerate Indiana to national leadership in STEM innovation. The network is anchored by  regional lead institutions.

Istem

In the past year, I have been working on the Space Coast and Central Florida. We have been deploying “open source” models to accelerate regional collaboration and cluster activation. Florida has been also moving on statewide STEM initiatives. Here are two reports that are guiding their efforts. The challenge in Florida — as in other states — will be driving the statewide initiatives to a regional level. Modeling the Indiana network approach is a good place to start. 

Florida STEM Strategic Plan 2011.pdf Download this file

State of STEM in Florida.pdf Download this file

Years ago, when we started working on the transformation of Oklahoma City, I would come into town and stay at the one downtown hotel, The Medallion. There was one one Mexican restaurant that was open at night a couple of blocks away. When I would walk to it, I’d pass no one on the street.

Walking to Bricktown, to the one restaurant there, The Spaghetti Warehouse, was a bit dicier. You had to be willing to walk a bit farther and pass through an unlit tunnel under the railroad tracks.

Worse still, I suppose, when I would come down for breakfast in the morning, I would often be the only person there. Think of that for a minute: the only person in the only downtown hotel in the capital of Oklahoma.

We started the transformation of Oklahoma City with about 8 people, a few years before the bombing. When that tragedy struck, we shelved our plans for a number of months. But soon, we returned to the task of transformation.

Evidence of our work began appearing a few years later. By 2000, I had left Oklahoma City behind, but the job of transformation continues. I just came across this video through my Twitter feed. The story of Oklahoma City is inspiring a new generation of leaders.

Charles Van Rysselberge, the chamber president who spurred Oklahoma City’s business community and I are now in the process of writing the story of the transformation. It’s a story with plenty of lessons for leaders in cities and regions facing the challenge of a rapidly shifting global economy.

New York has been running a regional competition for state funds. Today, the governor made the announcement of where the funds end up. This article provides some background. 

Here’s a booklet that explores the funding at a project level. 

NY Regional Awards.pdf Download this file

Heldrich

A new report form the Heldrich Center at Rutgers paints a stark picture of the impact of the recession. Using a national survey, the authors construct a typology of the unemployed. The categories are based on several dimensions: 

  • Impact of the recession on lifestyle
  • Their current financial condition
  • Their sense of whether the impact on their lifestyle is permanent or temporary

Heldrich | Categorizing Impact Recessin December 2011.pdf Download this file

The Wisconsin Technology Council has issued a report urging accelerated broadband development in rural WIsconsin.
The report lays out a compelling case for why broadband access is critical to the future development of rural counties: improved access to health care; more higher education options; stronger support for “traded” businesses that penetrate national and international markets; improved public safety; and a stronger infrastructure to support tourism development.
Tech Council broadband report.pdf Download this file