Description
Economic Development America is a quarterly production brought to you as a benefit of a partnership among the Economic Development Administration (EDA).
COMPETI NG GLOBALLY ? GROWI NG REGI ONAL ECONOMI ES ? CREATI NG J OBS WI NTER 2006
I N T H I S I S S U E
Rural Entrepreneurship
and Innovative Leadership
Rural Entrepreneurship
and Innovative Leadership
Features:
? Supporting Rural
Entrepreneurship:
What Can States Do?
? The HomeTown
Competitiveness Initiative
? Innovation
Commercialization
in a Rural Region
Features:
? Supporting Rural
Entrepreneurship:
What Can States Do?
? The HomeTown
Competitiveness Initiative
? Innovation
Commercialization
in a Rural Region
U.S. DEPARTMENT OF COMMERCE
Economic Development Administration
Carlos M. Gutierrez
Secretary of Commerce
Sandy K. Baruah
Assistant Secretary of Commerce
for Economic Development
Matt Crow
Director of Communications
Bryan Borlik
Lead Public Affairs Specialist
Louise Anderson
International Economic Development Council
Editor
Economic Development America is a quarterly
production brought to you as a benefit of a
partnership among the Economic Development
Administration (EDA), the International
Economic Development Council (IEDC) and
the National Association of Regional Councils
(NARC). The partnership is designed to
provide information about economic develop-
ment practices and programs to economic
development practitioners who serve distressed
communities throughout the United States. It
also provides six telecasts and a monthly e-
newsletter, EDA Update. For more information,
visit the EDA Web site at www.eda.gov.
Story ideas are invited and should be addressed
to editor Louise Anderson, telephone (828)
350-8855, email [email protected].
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2 Economic Development America W I N T E R 2 0 0 6
Table of Contents
A Framework for Developing Rural Entrepreneurship
By Deborah M. Markley, Ph.D.; Co-Director, RUPRI Center for Rural Entrepreneurship
Supporting Rural Entrepreneurship: What Can States Do?
What Should They Do?
By Erik R. Pages, EntreWorks Consulting
Jack Schultz: A Man with 7
1
/2 Keys to Small Town Success
By Louise Anderson, International Economic Development Council;
Editor, Economic Development America
The HomeTown Competitiveness Initiative
By Don Macke, Co-Director, RUPRI Center for Rural Entrepreneurship
Incorporating Entrepreneurship into North Carolina’s
Economic Development Infrastructure
By Leslie Scott, Director, Institute for Rural Entrepreneurship, N.C. Rural Center
Entrepreneurship on Tribal Lands
By Elsie Meeks, Executive Director, First Nations Oweesta Corporation
Innovation Commercialization in a Rural Region:
The Case of Greater Johnstown, Pennsylvania
By Thomas S. Lyons, Ph.D. and Gregg A. Lichtenstein, Ph.D.
Kentucky Leadership Program Coaches Entrepreneurs
By Ronald J. Hustedde, Director, Kentucky Entrepreneurial Coaches
Institute; Professor of Community and Leadership Development, University of Kentucky
Wyoming Business Camp Encourages Youth
to Make Their Own Jobs
By Linda Wolfe, Education and Outreach Manager, Converse Area
New Development Organization
19
President Bush is confident that distressed rural communities
can achieve competitiveness and participate fully in the
nation’s growing economy, and the Economic Development
Administration (EDA) will help these communities do so.
Historically, EDA has invested over 50 percent of its resources
in rural communities, and is committed to retaining this
focus. I am pleased that President Bush’s budget request for
EDA in 2007 will bolster EDA support for rural communities
by helping them tap into resources that will strengthen their
capacity for innovation and entrepreneurship.
What is needed is a collaborative approach that leverages
the private sector, agriculture, education, nonprofits and
political institutions of the broader region in which a rural
community resides. EDA’s 2007 program will better ensure
that small jurisdictions and rural areas have a “seat at the
table” within the larger regional economic development
framework. In 2007, EDA’s investment approach:
• Maintains and strengthens EDA’s long-standing com-
mitment to rural America;
• Reduces the administrative burden on rural communi-
ties by allowing multiple activities in a single EDA
grant; and
• Increases the focus on regional approaches, allowing
rural areas to better build on shared strengths and link
up with regional economic hubs.
This investment will ensure that rural and distressed areas
integrate into the larger economic region and participate in
the growing national economy.
EDA’s new Regional Development Account (RDA) will
support the development of economic regions and help move
communities from the current fragmented approach to eco-
nomic development toward a regional, collaborative approach
by providing:
• Capacity-building efforts targeted at state and local offi-
cials and economic development professionals to
advance the capabilities of practitioners of economic
development policy and advance the knowledge of the
“hows”, “whats” and “whys” of regional development
strategies;
• Planning, strategy development and technical assistance
services for communities and regions that have already
recognized the need to work in a collaborative and inte-
grated fashion, but have not yet developed the formal-
ized links to each other and key regional institutions.
Program services will help regions move from concep-
tual acceptance of the advantages of regional develop-
ment strategies to the development of functioning eco-
nomic regions, as well as strategies to foster innovation
and encourage entrepreneurship;
• Support of established economic regions in America
through an array of services spanning strategic planning
to infrastructure development, focused on enhancing
regional partnerships and addressing lagging areas with-
in economic regions.
As you will see in this issue of Economic Development
America, rural communities win when they successfully
engage in regional competitiveness strategies focused on
entrepreneurship and innovation. President Bush is commit-
ted to helping to create an environment that fosters this tran-
sition. I am excited about the President’s budget request for
EDA in 2007, which I see as a nexus of EDA’s strengths and
focus, and I look forward to working with you to strengthen
rural economies as the new program is implemented.
Sincerely,
Sandy K. Baruah
Assistant Secretary of Commerce for Economic Development
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Rural America is home to nearly a quarter of the nation’s
people and more than half of its commercial banks. Yet,
with its wide-ranging geography, the ebb and flow of its
industries, and its ever-changing technological and
global challenges, America’s rural economy often
performs differently than the rest of the U.S. economy.
President Bush’s 2007
Budget Request for EDA:
Good News for Rural America
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4 Economic Development America W I N T E R 2 0 0 6
Why the recent heightened interest in rural entrepreneur-
ship? Several factors come into play. Traditional economic
activities – routine manufacturing, agriculture, and natural
resource-based activities – have struggled to remain competi-
tive in the face of increased global competition. As a conse-
quence, the traditional economic development strategies of
industrial recruitment and retention/expansion have yielded
fewer favorable outcomes in rural places.
Rural economic developers and the communities they
serve are struggling to find new sources of competitive
advantage. Many of these development practitioners are will-
ing to think outside the box in the face of old tools and
strategies that are simply not working. At the same time,
models of successful entrepreneurship development now
exist, so rural entrepreneurship practitioners are not alone
on the innovation frontier. A growing body of research
describes the outcomes of entrepreneurship development
initiatives and tools that can be used to create a new, sustain-
able economic future for rural places.
1
Getting to the heart of entrepreneurship development
Entrepreneurship development is about more than building
a support system for entrepreneurs; it is a strategy of trans-
formation. It is about creating entrepreneurial communities,
about changing the culture of rural places and people so that
they embrace the potential of entrepreneurship. It also
includes fostering public policy that invests in entrepreneur-
ship development and is embraced by public and civic
organizations and leaders.
Embracing entrepreneurship requires looking at econom-
ic development in a new way, one that holds the community
responsible for creating development from within. In search-
ing for new sources of competitive advantage, communities
and regions must identify and build on their unique local
assets and take a proactive approach to determining their
futures.
This approach suggests that there is no “best” model for
entrepreneurship development. In some ways, local commu-
nities and regions are akin to entrepreneurial startup enter-
prises, discovering and testing the products and approaches
to entrepreneurship development that fit well with local real-
ities. While there may be a tendency to want to wait until the
models have been tested and proven, Karl Stauber, President
of the Northwest Area Foundation, argues against this
approach:
America is in the middle of a transformation of its
rural areas. It does not have time to find perfect or
guaranteed solutions. It must take the best ideas where
it can find them and begin to adapt and adopt those
ideas.
2
Drawing on observation and study of entrepreneurship
development practices across rural America by the RUPRI
Center for Rural Entrepreneurship, the Kellogg Foundation,
CFED and others, we have developed a framework for eco-
nomic development practitioners who are trying to adapt the
best ideas about entrepreneurship for their rural places.
3
The past 10 years have seen increasingly wider
acceptance of entrepreneurship as a core rural
economic development strategy. While some pioneering organizations
have been encouraging enterprise creation as a means of revitalizing
rural places for 20 years or more, broader interest in the potential of
entrepreneurship in rural communities and regions is relatively new.
By Deborah M. Markley, Ph.D.
Co-Director,
RUPRI Center
for Rural
Entrepreneurship
A Framework for Developing
Rural Entrepreneurship
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A five-part framework
1. Understanding Entrepreneurial Talent.
Entrepreneurship development is a human develop-
ment strategy even more than a business develop-
ment strategy. The entrepreneur and his or her
dreams need to be at the center of any strategy.
The first step in creating an entrepreneur-focused
strategy is to identify and understand the entrepre-
neurial talent in a rural place. Every rural community
or region has a range of entrepreneurial talent, from
those who have the potential to become entrepre-
neurs – young people, displaced workers, people re-
entering the workforce – to existing business owners
who aspire to create new business models and reach
into new markets, to those high-tech, high-growth
entrepreneurs who have the potential to generate a
large and significant impact on a local economy.
The mix of entrepreneurial talent may include microen-
terprises employing fewer than five people, larger enterprises
with more than 50 employees, people with limited skill sets
and those who are creating their third or fourth ventures.
And, there may be special populations – e.g., youth, artisans,
or new immigrants – whose entrepreneurial aspirations need
to be nurtured.
To create a strategy focused on the needs of entrepre-
neurs, communities and regions must develop an under-
standing of and appreciation for the full range of existing
and potential entrepreneurs.
2. Making the Case.
Because entrepreneurship development is a new approach to
economic development for most rural regions, local leaders
may require convincing in order to embrace this new
approach.
Making the case for entrepreneurship requires a two-fold
strategy. First, the plethora of national and international
research that describes the positive relationship between
entrepreneurial activity and economic growth should be
shared with policy makers and leaders at the state and local
levels.
4
At the same time, a powerful tool for making the case
exists in the stories of local entrepreneurs, who all too often
are less visible to local leaders and economic developers.
Stories of their struggles and their victories can often help to
make the case in a way that data cannot. Rural areas that are
successfully implementing entrepreneurship development
strategies have found ways to actively engage entrepreneurs
as advisors and leaders in this process.
3. Laying the Groundwork for Entrepreneurship
Development.
Leaders and advocates of entrepreneurship must lay the
groundwork for strategy development. Otherwise, they risk
the temptation to reach for the development strategy du jour
instead of building a customized strategy appropriate to the
region’s unique features.
There are three steps to laying this groundwork. One is
determining readiness for entrepreneurship, which includes
the Understanding Entrepreneurial Talent and Making the
Case elements outlined above. It also includes determining
whether there are organizations or individuals who already
embrace entrepreneurship and can lead the way, and whether
capacity exists within the community to undertake entrepre-
neurship development.
Once a community has determined that it is ready for
entrepreneurship, the next step is to identify the develop-
ment assets in the region on which the strategy can be built.
Who is already working to support entrepreneurs? What
service providers and capital providers exist within the com-
munity and the broader region? What youth programs exist
to encourage entrepreneurship, or that could encourage
entrepreneurship? What unique assets exist in the region that
could become a source of new competitive advantage, e.g.,
local artisans, community colleges, heritage tourism destina-
tions, natural resources, and niche farmers?
Finally, the community needs to understand its capacity
to undertake any type of economic development effort.
Entrepreneurship development requires innovative thinking
and leadership. Who will become the leaders of entrepre-
neurship development? How can you actively engage entre-
preneurs in leadership and strategy development? What new
leaders and capacity can be tapped within the community
and wider region to support entrepreneurship development?
4. Creating a Strategy — Building an Entrepreneurship
Development System.
Based on observation of successful entrepreneurship devel-
opment efforts throughout rural America, a consensus has
emerged – an entrepreneurship development system (EDS) is
necessary to transform a rural region. Our thinking about
entrepreneurship development systems has evolved over the
past several years. In “Mapping Rural Entrepreneurship,” a
2003 publication by the W. K. Kellogg Foundation and
CFED, an EDS is defined as “a coordinated infrastructure of
public and private supports that facilitate entrepreneurship.”
5
This definition has evolved, through the work of the
Kellogg/CFED team, the RUPRI Center and others, to
W I N T E R 2 0 0 6 Economic Development America 5
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6 Economic Development America W I N T E R 2 0 0 6
include a set of guiding principles for the creation of an EDS.
An EDS should be:
• Entrepreneur-focused and asset based – as described
above.
• Collaborative – Leadership for the EDS should be
drawn from public, private and non-profit sectors and
should engage service providers from all those sectors
in building a system of support for entrepreneurs.
• Comprehensive and integrated – The system should
focus on meeting the full range of entrepreneurial
needs (i.e., technical and capital assistance, entrepre-
neurship education, networking opportunities) as well
as on building an environment that supports invest-
ment in entrepreneurship development (i.e., communi-
ty engagement, policy development). Entrepreneurship
should be integrated into other aspects of the regional
economy (e.g., workforce development, education, the
health care system).
• Linked to policy – By demonstrating the implementa-
tion and success of entrepreneurship development in
communities and regions, an EDS can inform econom-
ic development policy at the local and state levels.
• Community-based but regionally focused – A systems
approach should be rooted in communities but tap
into the resources of the broader region to achieve scale
of impact.
• Sustainable over time – Entrepreneurship develop-
ment is a long-term strategy.
5. Measuring Outcomes.
Establishing outcome measures that truly reflect the goals of
an EDS is a necessary part of the framework. In the early
stages of implementation, these measures will primarily cap-
ture the process of building an entrepreneurship develop-
ment system – the capacity that is built, the collaborative
leadership team that is developed, the cross-learning oppor-
tunities that are institutionalized. As implementation contin-
ues, the measures will reflect the expected outcomes of the
system – new enterprises created, entrepreneurship educa-
tion capacity built in the schools, youth engaged in entrepre-
neurial ventures, and cultural changes that reflect greater
support for entrepreneurship.
These outcome measures provide a way to build and
maintain momentum for entrepreneurship development,
and are critical to informing the policy-making process. In
addition, measuring outcomes can support a commitment to
continuous improvement. Progress toward achieving these
outcomes can be used to fine-tune, redirect, retool and
rethink as entrepreneurship development moves forward in a
region.
Still more to learn
Entrepreneurship is not a new concept in America. In some
ways, the recent excitement and embrace of entrepreneurship
reflects the old adage that “what is old is new again.”
Entrepreneurial aspirations guided the opening of the Western
frontier and the cyber frontier. Communities across the coun-
try are rediscovering their entrepreneurial roots as they seek
new ways to generate economic growth from within.
Though we are still in the innovation phase, there has
been an explosion in the laboratories of entrepreneurship
development across rural America in the past few years.
Some of the key innovations in the field of rural entrepre-
neurship are described in the pages of this publication.
The results of these innovative models will provide contin-
ued guidance to economic development practitioners and
community leaders as they embrace entrepreneurship as a
way to transform the economic futures of rural places across
the country. ? ? ?
1
The Appalachian Regional Commission launched its Entrepreneurship
Initiative in 1997. The Rural Entrepreneurship Initiative, a partnership
among the Kauffman Foundation, the Rural Policy Research Institute
(RUPRI), the National Rural Development Partnership, the Nebraska
Community Foundation and Partners for Rural America, began in 1999 as a
way of advancing our understanding of rural entrepreneurship as a develop-
ment strategy. In 2001, the RUPRI Center for Rural Entrepreneurship was
created and we have traveled throughout rural America, learning from entre-
preneurship practitioners and developing a framework for energizing entre-
preneurs. In 2003, the Kellogg Foundation and CFED collaborated on
“Mapping Rural Entrepreneurship,” a project that ultimately led to Kellogg’s
investment in regional collaboratives that are creating innovative entrepre-
neurship development systems in six unique landscapes across rural
America.
2
Karl N. Stauber, “Creating New Rural Development Strategies: The Role of
Nonprofits,” in New Governance for a New Rural Economy: Reinventing Public
and Private Institutions, Proceedings of a conference sponsored by the Center
for the Study of Rural America, Federal Reserve Bank of Kansas City, May
2004.
3
A more complete discussion of this framework can be found in Deborah
Markley, Don Macke and Vicki Luther, Energizing Entrepreneurs: Charting a
Course for Rural Communities, Nebraska: Heartland Center for Leadership
Development, 2005
4
Resources on the link between entrepreneurship and economic growth
include the Global Entrepreneurship Monitor project, a cross-national,
ongoing annual research project (www.gemconsortium.org); Advanced
Research Technologies report for the U.S. Small Business Administration
Office of Advocacy and the Edward Lowe Foundation, The Innovation-
Entrepreneurship Nexus: A National Assessment of Entrepreneurship and
Regional Economic Growth and Development, April 2005; work in progress by
staff at the Center for the Study of Rural America, Federal Reserve Bank of
Kansas City.
5
Brian Dabson, Jennifer Malkin, Amy Matthews, Kimberly Pate and Sean
Stickle, Mapping Rural Entrepreneurship, W. K. Kellogg Foundation and
CFED, August 2003.
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Supporting Rural
Entrepreneurship:
What Can States Do? What Should They Do?
Many rural residents pride themselves on their rugged inde-
pendence and ability to persevere in tough times. Rural com-
munities and their leaders are no different. Instead of simply
bemoaning their fate, rural leaders are seeking to transform
their regions through the embrace of new economic develop-
ment strategies, including entrepreneurial development.
Fortunately, they’re not on their own. State governments
can and should play a critical role in supporting rural entre-
preneurs and communities that are trying to support and
nurture such activities. This essay takes a look at the field.
State governments are relative newcomers in their support of
rural entrepreneurship, but they are now engaging in a big
way. What are they doing right? What’s not working? By
reviewing the work of several “early adopters,” we can gain a
better understanding of where the field is going and where it
ought to go in the future.
Defining the issue
As other essays in this volume attest, it’s pretty hard to devel-
op a single monolithic definition of “rural America.” After
all, Jackson Hole, Wyoming, the Pine Ridge Indian
Reservation, the Mississippi Delta, and the Iowa cornfields
are all rural, yet they face widely differing economic, political
and cultural circumstances.
But acknowledging differences doesn’t mean that there
are no similarities. At the broadest level, these regions face
similar economic challenges. Their traditional economic
anchor – agriculture – can no longer support a large portion
of the population. Economic anchor number two – manu-
facturing – is also under fire. Rural America’s competitive
advantage of low cost offers fewer advantages when the com-
petition is global and firms can easily move production over-
seas. Various other anchors, such as tourism, still persist, but
they may not be able to provide the number and quality of
jobs needed to keep a community economically viable.
Faced with these daunting circumstances, rural leaders
have opted to look within. If they can’t count on a new
branch plant coming to town, new tools for economic devel-
opment are required. As a result, entrepreneurial develop-
ment has taken hold as an alternative approach and it has
reached critical mass quite rapidly. As recently as the year
2000, few rural communities and even fewer states had an
entrepreneurship strategy. Today, such programs are com-
W I N T E R 2 0 0 6 Economic Development America 7
It’s a commonplace observation that the twin processes
of globalization and technological change create winners
and losers. While this statement is true, it is no consolation to the
“losers,” those regions that have been hard hit by economic change.
While lots of places - such as Pennsylvania’s steel towns or Detroit’s
auto plants - have been hard-hit, rural America arguably has faced the
most wrenching economic trans-
formation over the past few
decades. Small towns across the
U.S. face depopulation, declining
industries and significant econom-
ic development challenges.
By Erik R. Pages
EntreWorks Consulting
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monplace. In fact, researchers at the Center for Rural
Entrepreneurship note that there are now 600,000 places you
can go on the Internet to explore rural entrepreneurship.
What should states do?
As in urban areas, rural entrepreneurship is a local or region-
al affair. Most activity and most new program ideas will be
generated at the local level. This issue of Economic
Development America highlights numerous examples of such
grassroots innovation – but they can’t do it alone. Many
rural communities lack the size and resources to develop
scalable programs. State governments and agencies should
consider stepping in to assist when necessary.
While the state’s basic role – the enabler and supporter of
locally-led innovation – is clear, things cloud up when we dig
into the details. Here are some other guidelines for what
states can and should be doing:
• Get Out of the Way: Eliminate red tape and
bureaucracy
• Show Them the Money: Invest in rural enterprise
• Be Entrepreneurial: Test new ideas
• Start at Beginning: Embrace youth entrepreneurship
Let’s look at each of these categories in turn.
Get Out of the Way.
Job number one for state government is to avoid screwing
things up. It’s hard to be successful as an entrepreneur. It’s
even harder in a rural community where one is far from
potential markets, and support resources may be far away as
well. In these instances, every little bit matters. If local or
state regulations create serious burdens for local business
owners, their potential success will be jeopardized. For exam-
ple, some communities use zoning laws to prevent the estab-
lishment of “incidental businesses” on farmland. This well-
intentioned farmland preservation strategy has the effect of
blocking farmers from creating new businesses on their own
farms.
Thus, a critical role for state governments involves a
detailed review of existing rules and regulations to ensure
that they are “entrepreneur-friendly.” Fortunately, many gov-
ernors have heard this message. Dozens of states have com-
pleted or are presently engaged in major regulatory stream-
lining initiatives. Typical initiatives include the following:
• Appointment of a Small Business Ombudsman or
Advocate (Georgia, California, Louisiana)
• Requiring a “Small Business Impact Statement” prior to
the adoption of new rules and regulations (Michigan,
New Jersey, North Dakota, Washington)
• Creation of “one-stop centers” for business licensing
and registration (Michigan, Wisconsin, Rhode Island)
Regulatory reform has been quite popular, and it is likely
to remain so. Many governors are now adopting a version of
model regulatory reform legislation developed by the Small
Business Administration’s Office of Advocacy in 2002.
Fourteen states and one territory have adopted some version
of the model rules, and others are in the process of doing so.
Show Them the Money.
If state governments want to nurture rural entrepreneurship,
they need to invest in the process. It’s not enough to use the
bully pulpit and proclaim support for rural entrepreneurs;
governors need to put real resources on the table. The great
interest generated by regulatory reform is partially attributa-
ble to the fact that such activities are relatively low-cost.
Meanwhile, few governors or state governments have gone
ahead and made major investments to support rural entre-
preneurship.
Two exceptions can be found in Kansas and Wisconsin. In
Kansas, the Legislature enacted the Kansas Economic Growth
Act of 2004. This bill created the Kansas Center for
Entrepreneurship, a statewide coordinating body for entre-
preneurship support providers, and calls for more than $500
million in new investments to support entrepreneurship
(both urban and rural) across the state. More recently, the
8 Economic Development America W I N T E R 2 0 0 6
A critical role for state
governments involves a detailed
review of existing rules and
regulations to ensure that they
are “entrepreneur-friendly.”
??? W I N T E R 2 0 0 6 Economic Development America 9
state has created a new venture capital fund (focused on
biotech) and has revised its angel investor tax credits to
expand their use and availability.
In Wisconsin, the “Grow Wisconsin” program has gener-
ated a host of activities to support entrepreneurship. The
Wisconsin Entrepreneur’s Network offers peer networking
and support services to new business owners across the state.
The state also is committed to expanding existing programs
for venture and angel capital, and has increased bonding
authority for the construction of new incubators across the
state.
Showing them the money is not just about investing in
new programs. It can also entail support for initiatives – both
public and private – that help generate investment pools that
can be tapped by rural entrepreneurs. The creation and sup-
port of angel investor networks should be a top priority for
all state governments. Here again, the news is promising. A
2004 study by the Community Development Venture Capital
Association found that 19 states offered state tax credits to
accredited angel investors. Since that study’s completion,
several others states have followed suit.
Be Entrepreneurial.
If states want to support entrepreneurship, they should act in
an entrepreneurial manner. This means being willing to take
risks and test out new ideas. State support of rural entrepre-
neurship is a relatively new concept, and there is no clear
template or menu for moving ahead. Thus, states may have
to resort to learning by doing.
The benefits of such experimentation can be profound,
as the following examples should indicate. In Kansas, the
Kansas Department of Commerce and Housing has been
investing for four years in five rural development projects
employing the Enterprise Facilitation model pioneered by
the Sirolli Institute. Since its inception, the program has
created hundreds of jobs in some of Kansas’ most isolated
rural communities.
In North Carolina, the Department of Commerce and the
North Carolina Rural Development Center have provided
grants to 11 pilot projects supporting entrepreneurs in sec-
tors such as eco-tourism and handicrafts, and providing
mentors and coaching for minority entrepreneurs. Another
project – New Opportunities for Workers – offers entrepre-
neurship training to displaced textile workers.
In Georgia, the state has created a popular “Entrepreneur-
Friendly Communities” program. Interested communities
receive extensive training from leading experts in effective
practices for supporting entrepreneurs. To date, 11 commu-
nities have received the certification.
Start at the Beginning.
Effective rural entrepreneurship programs involve transform-
ing local business cultures and convincing residents that
entrepreneurship is both a viable and desirable career choice.
Such transformation does not occur via government pro-
grams alone. These concepts must become embedded in the
schools, and rural youth should be exposed to entrepreneur-
ship education at an early age.
Lots of effective youth entrepreneurship programs, such
as REAL (Rural Entrepreneurship through Action Learning)
Enterprises are in place, but they face major challenges to
their expanded use. For a variety of reasons, school systems
and state education departments have been unwilling to
embrace entrepreneurship education. In fact, only two states
– West Virginia and Nebraska – have appointed state-level
officials to help promote entrepreneurship education. If state
governments are truly serious about getting rural
youth to embrace entrepreneurship, they must make
entrepreneurship a regular offering in rural schools.
Final thoughts
States can play an important role in supporting rural
entrepreneurship, but they can’t – and shouldn’t –
lead this effort. The real leadership must come from
rural entrepreneurs themselves, with the backing of
committed and dedicated community leaders who
want to transform their regions. By supporting their
experiments with prudent investments and a positive
attitude, state governments can make important
contributions to promoting entrepreneurship
throughout the heartland. ? ? ?
???
Boomtown clearly has struck a nerve. The book is going into
its fourth printing, and Schultz has been asked to do more
than 200 talks since it published. Boomtown is part toolbox
and part pep talk, a kind of self-help tome for towns. With
great enthusiasm, Schultz cites example after example of suc-
cessful strategies from small towns across the country and
provides a framework for understanding why those strategies
have worked.
It’s a book that will change the mind of even the most
hardened cynic about the future of small town America. It
advocates looking inward for the keys to success – nurturing
vision and optimism, building on existing assets and leverag-
ing leadership.
In this interview with Economic Development America,
Schultz talks about some of Boomtown’s keys to success,
some surprises he encountered in his research, and shares his
recent thinking on the role of entrepreneurship in small
town properity.
Leadership and the Effingham experience
Schultz has first-hand experience with the turnaround of a
small town in economic crisis – that of his own town of
Effingham, Illinois (pop. 12,384 in 2000), located almost
smack in the middle of the state.
“In our town in the late 1980s, within about six months,
we lost two major manufacturers, we had a third that was
looking at moving its production to South Carolina, and a
fourth was looking at consolidating one of its three plants.
So, out of 4,000 higher-paying manufacturing jobs, we sud-
denly had 3,000 that were somewhat up in the air,” says
Schultz. “The whole economy just dried up. Banks couldn’t
make loans; dealers couldn’t sell cars.
“A small group of us got together and decided that we
had to do some things. We could no longer be ‘held hostage’
by one of these big companies,” he says.
Effingham undertook a number of initiatives to change
its fortunes, including a community planning process and
marketing and image-building campaigns. “No companies
came to town as a direct result of any of this,” Schultz writes
in Boomtown, “but through these efforts the community
began to recover its spirit, enthusiasm and optimism.”
After five years, the town attracted what would be the first
of several new mid-sized manufacturers, and during the
1990s, Effingham realized a 70 percent increase in new
Jack Schultz:
A Man with 7
1
/2 Keys to Small Town Success
Jack Schultz is the CEO of Agracel, Inc., a firm that
specializes in industrial development in small towns.
His work led him to wonder about the roots of small-
town health and prosperity. That curiosity, coupled with some
research, resulted in 2004 in a
popular book, Boomtown USA:
The 7
1
/2 Keys to Big Success in Small
Towns. In it, Schultz attempts to
answer a perennial question: What
separates the thriving towns from
the struggling ones?
By Louise Anderson
10 Economic Development America W I N T E R 2 0 0 6
International Economic
Development Council; Editor,
Economic Development America
Boomtown USA has garnered much interest among peo-
ple concerned about small town vitality. Author Jack
Schultz, above left, has become a popular speaker
since the book's publication in 2004.
??? W I N T E R 2 0 0 6 Economic Development America 11
“What many people and towns don’t realize is that
staying with the status quo brings its own risks,”
says Schultz in Boomtown.
manufacturing jobs. The story doesn’t mean to imply that
attracting small manufacturers is the key to success; that’s
simply what worked for that town at that time. Success came
because community members came together and acted
strategically to change the town’s fortunes.
Not what you’d expect
When it comes to figuring out what makes one town prosper
while another nearby is withering on the vine, Schultz says
he was surprised by what he found.
“As I was doing research, I started out with a bias of what
‘good’ towns were going to look like, of what resources were
really going to be critical. The really good towns were going
be near a major metro area, were going to lie on an interstate
– probably two – and they were going to have a four-year
college. And in the research, I was shocked to find that those
aren’t necessarily the things that define success or lack of it,”
says Schultz.
“On my list of what I consider to be the top 100 small
communities in America, 70 of these lie over 100 miles away
from a major metro area. Fifty-nine of the top 100 are over
25 miles away from a single interstate, and only 16 had a
four-year college. While those are great resources, they aren’t
necessarily going to determine success or failure. It’s more
about attitude,” he says. “You’ve got to work with what you’ve
got.”
Another surprise for Schultz was a turnaround in his
thinking about the importance of downtowns. “I have con-
fessed in my talks that when I first got started in economic
development, I viewed downtown revitalization as throwing
good money after bad,” says Schultz. “I’ve really had a 180-
degree turn from that. What I’ve seen is, the really good
communities have figured out a way to leverage their down-
towns and to create a unique sense of place, which I think
people and companies are looking for.
“You don’t create a sense of place in the lobby of a big
box store. You create it in your downtowns, in your schools,
in your parks. Anyone who is looking at where they want to
live isn’t just looking for a house or school; they are looking
for a community. That sense of place is becoming more
important in my mind as people look at where they want to
live and raise their families.”
He sees downtowns as important for other reasons as
well. Pride of place fosters a sense of ownership and inspires
leadership and involvement. In addition, many of the busi-
nesses in a downtown area are small and entrepreneurial in
nature. Finally, there’s the curb appeal factor. Boarded up
and vacant buildings don’t communicate success; they create
a bad impression for both residents and outsiders.
The importance of branding
Schultz believes that the concept of branding is not well
understood; it’s more than a marketing ploy. As he writes in
Boomtown, “It’s a personal message about the product, com-
pany or person. It promises something; you expect the same
thing from that product, company or person every time.” He
talks about branding as something that almost arises natural-
ly out of hard work in other areas.
“A lot communities think, ‘Well, we’ll just come up with a
slogan,’ but it really is more than that,” says Schultz. “Some of
the better examples that I’ve seen around the country are
Leavenworth, Washington, which has done a good job at
branding itself as a Bavarian village in the Northwest. On a
national and international basis, probably the best town is
Branson, Missouri, ‘the live music show capital of the world.’
“Another one that has done a great job – a little different
from the other two – is Mooresville, North Carolina, which
in 1989 branded itself as ‘Race City USA,’ even though they
only had one race team located there. But today they have 60
race teams headquartered in Mooresville because of the qual-
ity of life and because they established themselves as the
???
12 Economic Development America W I N T E R 2 0 0 6
place to be. It’s one of those chicken and egg things – did the
drivers locate there, or did the people who take care of them
locate there first? They’ve got 150 entrepreneurial businesses
that have started up to take care of those race teams – to sup-
ply them with decals and computers, tires, rebuilt engines,
trained pit crews and all the things you need if you’re a race
team.
“I think the risk is that if you don’t brand your commu-
nity, other communities can brand you in a way you might
not like,” he says, giving the example of towns that are
known for little more than being the home of the state peni-
tentiary.
Entrepreneurship
As Schultz’s research on small town success continues, he has
come to a greater understanding of the importance of entre-
preneurship.
One of the reasons entrepreneurship is key, he says, is that
only about 200 major projects (those with over 200 employ-
ees) are done on an annual basis in the U.S. Any more, “It’s a
needle in a haystack when you’re going after these big com-
panies,” Schultz says.
The Internet and the ease of communication play big
roles in fostering entrepreneurship in small towns. Schultz
cites a statistic that nearly three-quarters of a million people
make some or all of their living on eBay.
“In virtually every town I go into I’m seeing businesses
being developed on the Internet. It doesn’t matter the size of
the town. Take an Amish town of 2,200 people, where a guy
is selling Amish buggies over the Internet and propane
refrigerators. There are other people who have a need for
that – hunting lodges, that kind of thing. If the Amish are
understanding the importance of the Internet, that’s what I
would call a tipping point,” he says.
Another business that has expanded dramatically over the
Internet, says Schultz, is Dakota Cabin Quilts in Hettinger,
North Dakota. At a population of 1,300 people, Hettinger is
the largest town for 40 miles around. A town of that size
would not be able to support a quilting store, but Dakota
Cabin Quilts sells its products all over the world via the
Internet and now has six employees.
Yet another business he cites started in Effingham: Mid
America Designs began selling Corvette patches, jackets,
shirts, glasses and owners manuals at auto events and
through a simple catalog; the company since expanded its
line and now does $50 million in sales per year.
Schultz sees these businesses as the next generation of
mail order catalogs – many of which started in very small
towns – but with much more accessible markets. Coldwater
Creek, a purveyor of women’s clothes and accessories, was
started as a catalogue business in isolated Sandpoint, Idaho,
by two former New Yorkers who never wanted to find them-
selves caught in the Holland Tunnel again. It now has over
4,000 employees.
The town of Leavenworth, Washington, reinvented itself from a declining
sawmill and lumber town to a Bavarian village that now attracts over 1.5
milion tourists per year. The inset photo shows dancers at one of the
town’s festivals.
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??? W I N T E R 2 0 0 6 Economic Development America 13
1. Adopt a can-do attitude. Schultz writes that it’s ideal when a town’s civic leaders have a can-do atti-
tude that permeates their discussions, agendas and goals.
2. Shape your vision. Vision marks the roadmap to success. It takes into account the destination, the sur-
rounding terrain, and the roadblocks and hazards along the way.
3. Leverage your resources. These include current industries, businesses and institutions; natural
resources such as lakes, beaches, mountains and forests; man-made resources such as lakes, parks and
recreation areas; local celebrities (either living or dead); local flavor; and the local “brain bank” – the
solid core of bright people who are committed to the community’s welfare.
4. Raise up strong leaders. Schultz writes that leaders come in all shapes and sizes and from all walks of
life. In small towns, leaders come from all sectors – government, business, education, healthcare, reli-
gious and service – and have not only the opportunity but the responsibility to play a leadership role
in their area of expertise.
5. Encourage an entrepreneurial approach. What’s in an entrepreneur’s self-interest is also often in the
best interest of a town. “Nurture these people, and give them room to operate,” he writes. “Towns that
recognize that the better their entrepreneurs do, the better the town will do, generally find themselves
on a positive growth curve.”
6. Maintain local control. When government is easily accessible and people feel they can make a differ-
ence, it promotes community involvement and sense of control that contribute to prosperity. A town
with local ownership of institutions such as banks, newspapers, and businesses in the retail, manufac-
turing and service sectors has a greater chance of being strong and vibrant than a town without.
7. Build your brand. Schultz writes that branding sets towns apart by giving the region, state or even the
nation notice of what the town is about and what it offers. He believes that a town shouldn’t focus its
initial efforts on its brand, citing examples of Mackinac Island, Michigan; Tombstone Arizona;
Branson, Missouri; and Leavenworth, Washington, as places that worked to achieve a vision first, then
a brand. “It might surprise you that your town has a message, but it does – whether it has been con-
sciously crafted or not. That message is delivered to outsiders each time they visit your town and to
your townspeople on a daily basis,” he writes.
7.5 Embrace the teeter-totter factor. Schultz says that it only takes a small shift one way or the other to
make a negative or positive impact on a community. “Just as one person can really make a difference in
a small community, any of the keys to small-town success can make a difference – either for good or
for bad. In other words, any key can be the deciding factor in whether a town is headed toward greater
vitality and prosperity or toward troubled times.”
Boomtown, USA:
The 7
1
/2 Keys to Big Success in Small Towns
“As I dug deeper, I found the roots of small-town success
intertwined with the roots of individual success,”
writes Schultz in Boomtown.
???
14 Economic Development America W I N T E R 2 0 0 6
He also sees promise in the trends of telecommuting and
“homesourcing,” in which workers such as JetBlue’s call cen-
ter reps do their work from home.
But what about the potential for sectors with great
growth potential and high wages, such as manufacturing and
technology, in small towns?
Schultz recognizes the limitations to starting technology-
based businesses in areas that don’t have similar businesses
or a technologically advanced workforce, but believes the
playing field is leveling.
“In Tom Friedman’s book, The World Is Flat, he quotes
Bill Gates of 20 years ago, asking whether you would rather
be born average in the U.S. or a genius in some small town in
China?” (The answer then was assumed to be the former.)
“Well, that’s reversed today. The technologies of FedEx, of
telecommunications, of air travel, really allow you to start a
business anywhere and compete very effectively on an inter-
national basis,” says Schultz.
For example, he cites John Larsen, a technology executive
who has moved his latest startup, HomeMovie.com, from
outside of Seattle to the community of Winthrop in rural
eastern Washington. Larsen moved to Winthrop seeking a
higher quality of life for his family, and now wants to help
the town retain its young people.
Schultz also mentions the importance of clustering and
critical mass. He says the small town of Warsaw, Indiana, has
become the orthopedic manufacturing capital of the country
– one entrepreneur developed a device there, and now the
area hosts a number of medical device manufacturers.
Schultz is bullish on manufacturing, believing it’s gotten a
bad rap. “A lot of the media would have us believe that our
manufacturing sector is doomed,” he says. “My take is that
we are on the cusp of greatness in the manufacturing sector.
Just yesterday, in Wisconsin, I was in two small manufactur-
ing businesses that are growing at 20 percent a year.
“If you look at the U.S. economy, manufacturing as a per-
centage of the economy is at a very low level, but we are pro-
ducing more goods today as far as dollar value goes than at
any other times in our history. We’re doing it with fewer peo-
ple because of increased productivity.
“I see the potential for greatness in manufacturing in the
small businesses that are inventing new things – the entre-
preneurial spirit in manufacturing, as opposed to the branch
plant mentality. On a recent trip, the hosts were bemoaning
the fact that 83 percent of their manufacturers have sales of
less than $100 million. I see that as a big plus. The growth
potential is in these small, entrepreneurial manufacturing
businesses, rather than the big Fortune 500 businesses. Those
companies can’t compete because of their cost structure.”
Many of Schultz’s insights about how to foster entrepre-
neurship are echoed in other articles in this edition. They
include providing entrepreneurship education in schools;
expanding the concept of who an entrepreneur is (to include
more women, immigrants, minorities and retirees); thinking
regionally about assets; facilitating the development of the
entrepreneurial spirit into real businesses; and providing
access to capital.
He sees a bright future in the current Millennial genera-
tion, those who are approximately 25 and younger. “The
Millennial generation is going to be the most entrepreneurial
generation in history of U.S.,” he says. “In a recent national
survey, half the kids that are graduating from high school
today dream of starting their own business. I’ve already seen
comparisons of them to the generation of the 1880s that
transformed the U.S. These kids have got it in their DNA to
start new businesses and to be involved in startup operations.”
For more information on Jack Schultz’s research, visit his blog
athttp://boomtownusa.blogspot.com, or the Boomtown USA
Web site athttp://www.boomtownusa.net. ? ? ?
Branson, Missouri, has been very successful both nationally and
internationally in branding itself as “the live music show capital of the world.”
??? W I N T E R 2 0 0 6 Economic Development America 15
Six years ago, the founding partners of what is now known as
HomeTown Competitiveness (HTC) – The Heartland Center
for Leadership Development, Nebraska Community
Foundation, RUPRI Center for Rural Entrepreneurship, and
the Center for Rural Affairs – decided to work collaboratively
to change the landscape of rural Nebraska. They decided that
a developmental initiative was needed that builds on small
towns’ existing resources and assets, many of which go
unrecognized.
HTC’s goal is to assess a community’s current situation
and capacity, then build on four key elements:
• Developing and mobilizing leadership capacity;
• Capturing wealth transfer through charitable giving;
• Energizing entrepreneurship; and
• Attracting and engaging young people.
Together, these four essential elements create a synergy that
can significantly impact the future prospects of rural areas
experiencing out-migration and economic decline. HTC is
drawing significant attention in Nebraska and nationally
because rural leaders and practitioners recognize that even the
most distressed community has, to some degree, each of the
necessary elements to launch the initiative.
The HTC approach
The HTC framework was officially established in 2001, and
pilot work began in Valley County and Ord, Nebraska, in
2002. Other sites for HTC now include the cities and towns
of Stuart, Atkinson, Mullen, David City and O'Neill, and
Chase, Perkins and Knox counties - all in Nebraska - plus
Brookfield, Missouri, and south central Kansas. The four key
elements of the HTC approach, as outlined below, are illus-
trated in examples from these communities.
Mobilizing Local Leaders
For small towns to compete in the 21
st
century, they must tap
into everyone’s potential knowledge, talent and aspirations.
The Heartland Center for Leadership Development rejects
the outdated notion of relying on “the usual suspects” to get
things done. Rural communities must be intentional about
recruiting and nurturing an increasing number of women,
minorities and young people into decision-making roles.
They need continuing leadership training programs because
today’s leadership must constantly reinvent itself to reflect
the challenges of a changing global environment.
The Holt County communities of Stuart, Atkinson and
O’Neill are a great example of neighboring communities
teaming up to build a stronger region as they work together
on several HTC efforts. One of the key outcomes of this rela-
tionship is the HomeTown Leadership Institute, an annual
leadership program in which a class of 30 to 35 individuals,
from high school students to senior citizens, participate in
Rural Nebraska faces many challenges. Youth out-migra-
tion, a daunting transfer-of-wealth scenario, and many
towns’ depleted hopes for surviving – much less thriving
– prompt a desperate plea from
Nebraska’s rural communities for
innovative strategies that will bring
hope and sustainability.
The HomeTown
Competitiveness Initiative
By Don Macke
Co-Director, RUPRI Center
for Rural Entrepreneurship
David City, Neb., its downtown square shown above, is one of
the HTC sites.
???
16 Economic Development America W I N T E R 2 0 0 6
monthly leadership lessons and experiences. Part of the pro-
gram’s impact is that it works to match participants with
leadership opportunities in the community.
With the second year reaching completion and plans
under way for next year’s class, this strategy for building
leadership is showing results: 60 percent of the participants
indicated they plan to increase their volunteer activities as a
result of the Institute, and 57 percent shared that they were
interested in seeking public office in the future.
Capturing Wealth Transfer
The Nebraska Community Foundation has completed wealth
transfer analysis for each of Nebraska’s 93 counties. Rural
residents do not always recognize local wealth because so
much of it is held through land ownership. Most people are
at first shocked, and then highly motivated, once they under-
stand the enormous amount of local wealth that will likely
transfer to heirs who have migrated out of the area. In rural
Nebraska alone, more than $94 billion is at stake over the
next few decades.
Both the power and the will to use these assets will no
longer be tied to the community unless planned gifts are cul-
tivated now. HTC sets a target of converting at least 5 percent
of the local wealth transfer into charitable assets endowed in
community foundations to fund future community and eco-
nomic development efforts.
David City got a jump-start on its HTC work with
aggressive and successful fundraising efforts. The David City
Community Foundation is using endowment proceeds to
fund the following efforts:
• A local HTC Coordinator (also the director of the
David City Area Chamber of Commerce), who concen-
trates significant time on entrepreneur support;
• A countywide leadership program, focused on teaching
the HTC framework and building a pool of leaders to
implement and sustain efforts;
• Entrepreneurship classes at David City public schools;
and
• Computers and software for public and parochial
schools.
Energizing Entrepreneurship
Far too many rural communities continue to invest resources
in economic development for job creation and business
development that exports, rather than builds, local wealth.
The RUPRI Center for Rural Entrepreneurship and its part-
ners encourage communities to become actively involved in
nurturing local enterprise in three specific areas: 1) saving
Main Street and other key businesses through planned own-
ership succession; 2) helping entrepreneurial companies that
have the potential to break through to a broader product line
and/or a larger market; and 3) using local charitable assets to
support entrepreneurship development.
What’s the significance of ownership succession? Small
towns tend to have an aging owner-operator class. In some
towns, 50 percent of their Main Street businesses soon will
face some kind of transition. Most of these business owners
have no succession plan, so HTC tries to encourage a more
optimal outcome than liquidation – which is common – by
repositioning that business or real estate with a new owner.
Local leaders in Mullen (pop. 554), located in the
Nebraska Sandhills, are using the HTC framework to help
local entrepreneurs get established and grow their businesses.
Mullen has seen promising results from its entrepreneurship
agenda. In the just the past year, six new businesses and 12
new jobs have been created. In addition, 25 new jobs cur-
rently are available as a new golf course is constructed, and
an additional 53 permanent and seasonal jobs will be created
when the course opens.
Attracting and Engaging Young People
It is not just the call of the city that impels them; it is also the
perceived lack of opportunity and encouragement to “not
come back” that drives young people away from their home-
towns. HTC has developed a formula that small towns can
use in their efforts to address this trend.
Jana Jensen, right, with the Nebraska Community Foundation, “trains the
trainers” at a HomeTown Competitiveness Academy session.
More than 90 youth participated in a “Thinking Outside
the Box” rally in Knox County.
??? W I N T E R 2 0 0 6 Economic Development America 17
Using existing data on population change, the formula
provides small towns with realistic goals for youth attraction.
In many cases, the attraction of a handful of former high
school students per year, who return with young families, can
stabilize the population. HTC teaches people how to engage
youth in positive ways, create career opportunities through
business transfer and entrepreneurship, and nurture a sense
of ownership and vested interest in the community’s future
leaders.
Knox County joined HTC in 2004 and immediately
tapped into the potential and talent in the youth represented
in its 11 communities. At a youth-led “Thinking Outside the
Box” rally, more than 90 Knox County youth participated in
activities and events that allowed the students to interact
with local resource providers and entrepreneurs, hear from
guest speakers about the opportunities for living and work-
ing in rural Nebraska, and sign up for programs and projects
that would engage them in the community. In addition to
creating excitement around bridging adult and youth agen-
das in the county, the rally resulted in several key youth ini-
tiatives, including:
• A youth chamber of commerce;
• An inventors’ club to support youth interested in
entrepreneurship;
• A proposed youth community foundation;
• Involvement of youth in a leadership program; and
• An 11
th
grade summer entrepreneurship program.
The impact in Valley County
Early results in Valley County, which lost 10 percent of its
population in the 1990s, have been promising. When Valley
County first partnered with HTC, the county had a strategic
plan with 26 diverse priorities and it focused its attention on
industrial attraction. Now the county has prioritized business
succession and growing local entrepreneurs as its two key
strategies for economic transformation.
With the help of the HTC team, Valley County has identi-
fied a number of entrepreneurial enterprises, of which 10 to
15 have growth potential. In addition, succession planning
for several Main Street businesses is bearing fruit. A leader-
ship development program, now in its third year, is drawing
both adults and high school youth. Finally, the goal of cap-
turing 5 percent of the estimated 10-year transfer of wealth
($6.3 million) has been exceeded, in addition to the success-
ful establishment of a Builder’s Club (individuals who con-
tribute to an endowment to perpetuate the HTC work) that
now includes over 50 members.
An article that ran in USA Today may best sum up the
county’s success: “In three years, Valley County, Neb., (popu-
lation 4,647) has graduated 70 from a leadership class; set up
an endowment with $1.2 million willed by a local couple;
and hired a business development coordinator. Ord, the
county seat, has made seven small-business loans from a 1-
cent sales tax fund. The county must attract 27 percent of its
high school’s average graduating class of 67 to stabilize the
population by 2010.”
In addition, the article notes that “A wealthy alum living
in Arizona flies in to teach a class on growing entrepreneurs.
A graduate came home from Lincoln to start an irrigation-
well firm. Another plans a local dental practice.”
The process
Each of the current HTC sites in Nebraska has crafted a
strategic and purposeful game plan around its core assets in
leadership, entrepreneurship, wealth and youth. Engaging in
the HTC process has created observable and impacting
results for these communities, but it wasn’t without commit-
ment and work from the beginning.
HTC isn’t right for all communities, though most com-
munities can go through a series of steps to get them to the
readiness stage. Development success at the community level
is a function of two things. First, communities need a solid
game plan that fits the community’s reality and opportuni-
ties for development. Second, it takes broad-based communi-
ty commitment and engagement in the game plan.
Having the commitment and engagement that’s needed
to get started can be gauged by the presence of:
• Buy-in with the HTC process;
• Participation in an HTC Academy (a week-long train-
ing in which a team of eight to 15 people from the
community learns about the HTC elements and
process);
• Identified and committed local champions;
• Broad-based community engagement;
• Adequate staffing and dollars;
• Willing volunteers; and
• A long-term commitment to the community’s strategic
development.
With this assessment, a community will know if it is
ready to move forward. From there, the community works
with an HTC team in establishing priorities and agendas for
work around the four key areas.
In three years, Valley County, Nebraska, has graduated 70 from a
leadership class; set up an endowment with $1.2 million willed by
a local couple; and hired a business development coordinator.
???
18 Economic Development America W I N T E R 2 0 0 6
A model for success
The hope and renewed sense of vision and purpose that
HTC is bringing to seven communities in Nebraska has been
nationally recognized. CFED’s study, “Mapping Rural
Entrepreneurship,” recognized HTC’s Nebraska communities
as one of two places in rural America with high entrepre-
neurship activity. In addition, HTC has received the
International Community Development Society’s Innovative
Program Award.
By presenting a come back/give back approach to rural
community building, HTC provides a comprehensive strate-
gy for long-term rural community sustainability. This
approach goes beyond the traditional tunnel vision of eco-
nomic development and offers communities a holistic and
realistic framework to guide their development efforts.
Basing each community’s efforts on their unique assets and
capacity creates energy around locally driven change that
happens one heart and one mind at a time. ? ? ? In David City, a crowd gathered for the ribbon-cutting opening of Mama
Moo Cow quilting.
Entrepreneurship Development Systems:
From Theory to Practice By Jennifer Malkin, CFED
Entrepreneurship Development Systems (EDS), sev-
eral of which are described in this publication, are
the new trend in homegrown economic develop-
ment. But what exactly is an EDS, and can it trans-
form a rural region?
In June 2004, on behalf of the W.K. Kellogg
Foundation, CFED and a team of experts launched
the “Entrepreneurship Development System in
Rural America” project to test the EDS concept. In
celebration of its 75th anniversary, the W.K. Kellogg
Foundation invested $12 million to support six
sites, each of which is developing an EDS. CFED is
currently tracking the progress of each collaborative
as they move from theory to practice.
The EDS framework centers around three core
objectives:
• Creating a pipeline of entrepreneurs by nur-
turing entrepreneurial aspirations in youth,
identifying and supporting potential entrepre-
neurs, and fostering an entrepreneur-friendly
environment that attracts entrepreneurs;
• Implementing a system of support for all
entrepreneurs; and
• Fostering a supportive policy and cultural
environment of entrepreneurship within the
public, private and non-profit sectors.
The six grantees represent a range of unique
contexts and approaches, each born from its own
regional reality. These entrepreneurial development
systems bring organizations and institutions togeth-
er in new and challenging ways, introduce unfamil-
iar concepts to rural communities that have little or
no entrepreneurial culture, and test approaches to
delivery in areas where economies of scale are diffi-
cult to achieve and geography is a barrier.
Elements of three of the collaboratives –
HomeTown Competitiveness in Nebraska, North
Carolina’s Rural Outreach Collaborative, and
Oweesta Collaborative – are profiled in this edition
of Economic Development America. The three
remaining collaboratives are Advantage Valley, in
West Virginia, Kentucky and Ohio; Connecting
Oregon’s Rural Entrepreneurs (CORE); and The
Northern New Mexico Empowering Business Spirit
Initiative.
??? W I N T E R 2 0 0 6 Economic Development America 19
Incorporating Entrepreneurship
into North Carolina’s Economic
Development Infrastructure
Rural North Carolina is proud to be one of six U.S.
regions working under W.K. Kellogg Foundation fund-
ing to build a rural Entrepreneurship Development
System (EDS). The team’s intent is to develop an economic develop-
ment system for firm startup and
growth as strong as the innovative
systems that the state built in the
19
th
century for agriculture and in
the 20
th
century for manufacturing.
In the 21
st
century, the new chal-
lenge is to accelerate the flow
of knowledge, ideas and resources
to entrepreneurial people in all
sectors who can reinvigorate their
own local economies.
By Leslie Scott
Director, Institute for Rural
Entrepreneurship, N.C.
Rural Center
In 2003, the North Carolina Rural Economic Development
Center recognized the need to focus more attention on small
business development and growth. The center validated that
businesses with fewer than 50 employees created most of the
net job growth in North Carolina’s rural counties between
1998 and 2002.
North Carolina has had a steady stream of manufacturing
layoffs in recent years – even “leading” the nation in 2002 –
and those job losses were concentrated in rural places. The
state’s major recent new industry recruits (including Federal
Express, Dell and CreditSuisse) are locating in urban areas
where the education levels and other infrastructure are
strongest, while the need for economic renewal becomes
more acute in the rural areas. In October 2003, the Center
created the nation’s first state-level Institute for Rural
Entrepreneurship to support self-employment, small busi-
ness development, and stronger entrepreneurial culture and
policy in rural North Carolina.
One of the first priorities of the Institute was to coordi-
nate the various organizations that educate, counsel and cap-
italize small business owners and entrepreneurs around the
state. By summer 2004, the North Carolina Business
Resource Alliance included 20 organizations representing
higher education, state agencies, nonprofits and lenders.
They were well-positioned to pursue the Kellogg EDS grant,
which required broad-based collaboratives.
The Institute for Rural Entrepreneurship now leads a 21-
organization team focused on building entrepreneurship
infrastructure in the 85 counties of rural North Carolina
over the next two years, with specific attention to three high-
poverty regions in the east and west extremes of the state.
Many of the partner organizations also provide business
development services in the 15 urban counties and will help
ensure a strong rural-urban connection.
The EDS team believes that an entrepreneurship system
can be built to parallel and complement the state’s other eco-
Four rural entrepreneurs from southwestern North Carolina answer
questions from community leaders about their business experiences.
Graham County, N.C., October 2005.
???
20 Economic Development America W I N T E R 2 0 0 6
nomic development assets. For example, North Carolina has
a strong industrial recruitment infrastructure, developed
over the past 30 years, that helps keep the state near the top
in site selection rankings. Key elements of that infrastructure
include:
• Community college-based worker training customized
to industry needs – available at 58 community colleges,
which are within a 30-minute drive of all citizens;
• A program for certifying the quality and “shovel-readi-
ness” of industrial sites and that gives certified sites
marketing priority in a site search database – this
approach was developed by AdvantageWest, a regional
economic development partnership, and later adapted
by the N.C. Department of Commerce for use
statewide;
• Financial incentive programs, including a job develop-
ment investment grant and tax credits for job creation
that favor investment in rural counties;
• A vibrant statewide network for economic developers,
the N.C. Economic Developers Association, as well as
public-private partnerships in each region;
• Professional development programs for economic
developers, including from the School of Government
at the University of North Carolina; and
• Perhaps most importantly, local and state leadership
culture that believes and invests in all those efforts.
North Carolina now requires a complementary system
focused on the education, technical assistance, financing,
networking and policy culture for entrepreneurs to create
“homegrown jobs.”
The Kellogg Foundation and the national think tank
CFED describe five pillars of a comprehensive system for
developing successful entrepreneurs: Entrepreneurship edu-
cation for all ages; technical assistance for business owners at
all stages; access to capital; entrepreneur networks; and sup-
portive culture and policy. These are the same five areas that
rural business owners identified as needing improvement
when they were convened in focus groups in 22 distressed
and minority communities throughout North Carolina in
2003.
The Institute for Rural Entrepreneurship and partners
developed a baseline assessment of those five EDS pillars in
rural North Carolina, which revealed:
• Much of the rural adult workforce has low literacy, so
traditional education formats don’t reach them.
Entrepreneurship education must also be more wide-
spread for K-12 schoolchildren, the next generation of
business owners.
• The current system of technical assistance is better
developed for existing small businesses than for aspir-
ing or survival entrepreneurs, who require more hand-
holding and are less likely to travel to a stranger to seek
help.
• Loan capital providers have ample funds but many
aspiring rural entrepreneurs need improved business
literacy to become qualified candidates, and growth
entrepreneurs need more angel investors and venture
capital.
• Local networks of rural entrepreneurs are rare and the
flow of new ideas to the state’s distressed places is slow.
• Limited understanding of entrepreneurship prevails
among rural elected boards – and the local workers –
who long reaped the benefits of the industrial branch
plant or farm economy and are now unequipped for
the innovation economy.
Based on this assessment and direction from the Kellogg
Foundation, the EDS team developed the following work
plan for addressing the five elements:
1. Demystify, publicize and improve education offerings for
rural entrepreneurs at various stages of business develop-
ment. Educate rural children to understand and practice
entrepreneurial thinking their whole lives. Pilot a program to
graduate urban-educated technology entrepreneurs back to
rural areas.
2. Create a seamless collaborative system of high-quality
technical assistance. Design creative approaches to reach all
of North Carolina’s rural entrepreneurs near where they live
with affordable business problem-solving assistance –
through trained community brokers, regional events, Web-
based tools, and distance learning. Develop confidentiality
agreements for service providers to cross-refer clients, as well
as a common set of performance metrics to measure joint
economic development impact.
3. Increase individual understanding and uptake of avail-
able financial capital. Develop interactive materials, work-
shops and Web tools for rural entrepreneurs and their busi-
ness counselors about available entrepreneurship capital
sources and their requirements. Identify capital gaps and
work jointly to fill them.
4. Use people and information networks to connect rural
entrepreneurs with new ideas. Draw upon proven experts
such as the Council for Entrepreneurial Development to
develop materials and workshops for communities and
entrepreneurs on establishing local entrepreneurs’ clubs,
mentor/apprentice arrangements, and topic-centered forums.
Ensure rural entrepreneurs have access to high-speed
Internet at nearby technology centers, if not at home.
5. Develop cultural change agents and policy to support
them. Develop the capacity of rural leaders to support entre-
preneurship as an economic development strategy. Inform
local, tribal, state and federal leaders about simple steps they
can take to strengthen their entrepreneurial culture and out-
comes. Track the aggregated results of the collaborative,
including in influencing policy and public opinion.
Creating a seamless system for developing entrepreneurs
is ambitious but critical for rural prosperity. With continued
innovation and adaptation of its economic development
infrastructure, North Carolina aspires to be known as a
top place for both corporate relocation and the startup and
growth of new firms, including in the most rural areas.
? ? ?
6
N.C. Employment Security Commission data
???
The Pine Ridge Indian Reservation in southwestern
South Dakota, home to the Oglala Lakota (Sioux), is
one of the most hauntingly beautiful places on earth.
Its varied landscape ranges from rolling grassy hills to deep, forested
canyons, to the castle-like peaks, gullies, buttes and wide prairies of
the Badlands. The reservation covers an area of 3 million acres, rough-
ly the size of Connecticut.
By Elsie Meeks
Executive Director
First Nations Oweesta Corporation
However, it is also one of the poorest places in the United
States. The decimation of the great herds of buffalo in the
late 1800s was followed by confinement to the reservation by
federal policy. Although much of the Lakota culture and
sense of ancestry remains, this effectively ended the Lakota
peoples’ lives as a self-sufficient nation.
As a result, the Oglala Lakota people have one of the low-
est life expectancies of any group of people living in the
United States. Fifty-two percent of Pine Ridge’s 30,000 resi-
dents live below the poverty line, compared with 13 percent
statewide. Of the various government experiments attempted
over the past 100 years to build the economy of the Lakota
people, not one has succeeded.
In 1985, tired of the government’s top-down approach,
Lakota people from across the reservation decided to take
things into their own hands. During an economic develop-
ment planning summit, ideas to address unemployment and
the lack of private businesses on the reservation began to
emerge. Out of this summit, the Lakota Fund, the first Native
community development financial institution (CDFI), was
born with the mission of creating a private-sector economy
through financing and capacity-building for entrepreneur-
ship development. Aided by the First Nations Development
Institute’s Oweesta Program, the Lakota Fund began lending
in 1986.
1
Myriad challenges
The challenge was much greater than anyone expected. After
several years of lending, a study revealed that 85 percent of
the Lakota Fund’s borrowers had never had a checking or
savings account; 75 percent had never had a loan; and 95
percent had never owned a business. Added to this was a
complete lack of business experience. Since there were only a
few private businesses on Pine Ridge when the Lakota Fund
was started (and most were owned by non-tribal people), few
people had even had the chance to work in a business.
The Lakota Fund itself faced organizational challenges as
it undertook difficult programs without local networks of
support and without the ability to hire the experienced,
knowledgeable staff that might be found in an urban setting.
It had to begin with baseline development of not only staff
and board, but also with an introduction of private sector
business principles to the Lakota community. Most of the
people who wanted to start a business were first-generation
entrepreneurs.
Indeed, when the Lakota Fund first started, people found
themselves wondering if being in business meant that they
were forsaking their culture. Business ownership had not
been a part of their history, as Lakota people had been
nomadic hunters and gatherers. There also was a perception
that businesses should be owned by the tribal government,
W I N T E R 2 0 0 6 Economic Development America 21
Entrepreneurship on
Tribal Lands
The Lakota Prairie Ranch Resort, under construction near Kyle,
South Dakota, is the first motel on the Pine Ridge Reservation.
???
22 Economic Development America W I N T E R 2 0 0 6
instead of by individual entrepreneurs. This perception per-
sisted even though all of the tribally-owned businesses at
Pine Ridge had failed.
In addition to the ambivalent perception of business
ownership, there was a need to teach people about credit and
the importance of repaying loans. Because of the grant-wel-
fare mentality and poor performance of Bureau of Indian
Affairs credit programs, people had to adjust to the knowl-
edge that loans must be repaid. Changing mindsets about the
role of private business ownership on an economy, and the
accountability of borrowers, became the Lakota Fund’s first
goal. The second was to teach simple financial literacy.
Despite these enormously challenging circumstances,
during its 20 years of operation the Lakota Fund has
approved approximately 600 loans, mostly in the range of
$1,000 to $75,000, for a total of over $3 million. It also has
provided countless hours of technical assistance, training and
marketing services to more than 1,600 arts and crafts micro-
entrepreneurs.
The June, 2003 South Dakota Business Review noted that
since 1985, real per capita personal income growth in
Shannon County (encompassing the Pine Ridge Reservation)
outpaced that of South Dakota as a whole, with growth rates
of 80 percent and 44 percent, respectively. Growth in real per
capita earnings for Shannon County was 92 percent, com-
pared to 73 percent for the state. Shannon County’s employ-
ment growth of 80 percent during the 1990s was the second
fastest of all South Dakota counties.
These changes came about one small business at a time.
Crazy Horse Construction grew from one part-time subcon-
tractor to a multi-million dollar company. Big Bats
Convenience Store also has over $1 million in revenue. Both
of these businesses have contributed significantly to the
decline in unemployment, but there are numerous other
smaller businesses that together have made a tremendous
impact.
Continuously adapting
Survival and growth for an organization like the Lakota Fund
in an environment such as Pine Ridge is difficult, to say the
least. But it is precisely because of these difficulties that the
Lakota Fund has become a model resource, creating new
programs and marshaling existing institutions to engage in a
systematic approach to entrepreneurial development.
For instance, some of the biggest barriers to business
development are the reservation’s poorly constructed busi-
ness regulations, lack of zoning laws and a dysfunctional
court system. Several years ago, the Lakota Fund was instru-
mental in creating the Pine Ridge Area Chamber of
Commerce by applying for the initial startup grant. The
Chamber has since focused on working with the Oglala
Lakota Tribal government to make changes to its laws and
constitution. The first step in this process was to educate
Tribal Council members about effective economic systems,
since most Council members did not have business experi-
ence. Workforce development is another area of the
Chamber’s focus. Pine Ridge’s multi-generational high
unemployment rate has resulted in a very inexperienced
workforce, prompting a commitment to increasing the busi-
ness skills of the community.
It has taken the Lakota Fund 20 years to understand that
it must move beyond just financing and technical assistance
to have a real impact on Pine Ridge’s business environment.
So recently, the Lakota Fund started the Wawokiye Business
Institute (WBI), a partnership with the Pine Ridge Area
Chamber of Commerce, Oglala Lakota College and the
Lakota Fund.
In addition to providing client-centered capacity-building
for entrepreneurship through training, coaching and a net-
work of specialists, its overall purpose is to build a better
The Foodstop Café in Kyle, S.D., grew with the help of loans and technical
assistance from the Lakota Fund. Carol and Buzzy Ferguson are pictured.
Changing mindsets about
the role of private business
ownership on an economy,
and the accountability of
borrowers, became the
Lakota Fund's first goal.
??? W I N T E R 2 0 0 6 Economic Development America 23
business environment in a culturally sensitive manner. The
goals of the WBI over the next three years are to:
• Provide intensive, long-term service to the 65 active
clients of the Lakota Fund portfolio;
• Provide consultation services to 200 prospective entre-
preneurs per year;
• Start 40 businesses and create 250 jobs;
• Provide refresher training opportunities to 300 business
owners and employees; and
• Establish a network of 25 technical assistance profes-
sionals to support entrepreneurship on the reservation
in the disciplines of accounting, marketing, sales,
fundraising, strategic planning and production man-
agement.
Replicating the model
Pine Ridge’s model of creating a systematic approach to
reservation socio-economic change through entrepreneur-
ship is now being replicated at a number of other reserva-
tions, and Native CDFIs again are the catalysts. Two such
organizations are Wind River Development Fund at the
Wind River Reservation in Wyoming and Four Bands
Community Fund at the Cheyenne River Reservation in
South Dakota.
Wind River Development Fund (WRDF) is a true partner
in helping reservation entrepreneurs take their business ideas
to the next level. WRDF is not just a lending organization; it
is a comprehensive economic resource for the community. It
provides business training, one-on-one business develop-
ment assistance and small business loans for entrepreneurs.
By developing extensive partnerships with tribal, state and
federal organizations, it helps ensure reservation entrepre-
neurs can tap into all the resources available to them. Four
Bands Community Fund is another CDFI that is working to
build and strengthen reservation-based enterprises that can
further the goals of Tribal self-determination and self-suffi-
ciency, and a stronger economy for the Four Bands of the
Lakota Nation.
Oweesta itself in many ways has grown out of the inspira-
tional work of the Lakota Fund by way of initial sponsorship
from the First Nations Development Institute. As the only
U.S. Treasury-certified, national Native CDFI intermediary in
the country, Oweesta assists Native communities with finan-
cial education training, technical assistance, and access to
local and national capital markets. From Maine to
Washington, nearly 70 Native communities have either start-
ed or are in the process of starting CDFIs. Many of them also
are finding that the process of building entrepreneurs is part
of the process of nation-building.
During his tenure as president of the World Bank, Jim
Wolfenson toured the Pine Ridge Reservation and saw its
poverty first-hand. After his tour, he said, “Private ownership
around the world is key to easing poverty…To me, what I'm
seeing here isn’t the poverty, it’s the chance to see new busi-
nesses that are being established and meet entrepreneurs that
are taking their future into their own hands. The difficulties
we’re trying to solve around the world are to be found right
here. The first is ownership. The second is lack of recognition.”
Oweesta believes that Native CDFIs, given their unique
combination of training, technical assistance and lending
services, are the most effective tool that a tribe or Native
community can employ to create the financially sustainable
economies Mr. Wolfenson alludes to. They create local entre-
preneurs, homeowners and tribal businesses. They also devel-
op the infrastructure and knowledge that lead to solid and
culturally appropriate governance, legal systems, business
practices and community-focused financial opportunities.
? ? ?
1
The First Nations Development Institute is a policy, research, grantmaking
and lending institution. Its Oweesta Program, which became the First
Nations Oweesta Corporation in 1999, works with Native financial institu-
tions and financial education providers to provide capital for Native devel-
opment efforts.
???
24 Economic Development America W I N T E R 2 0 0 6
As the economy continues to globalize,
developed countries with higher wage rates,
like those of the United States, increasingly
seek to encourage economic
development that focuses on the
front end of the product lifecycle
– R&D. The goal is to get new
ideas coming out of university
and private laboratories to market
as quickly as possible.
By Thomas S. Lyons, Ph.D. and
Gregg A. Lichtenstein, Ph.D.
Innovation Commercialization
in a Rural Region:
The Case of Greater Johnstown, Pennsylvania
The rationale for this economic development strategy is that
it leverages the U.S.’s strengths, which include knowledge,
expertise and the availability of financial capital, and mini-
mizes its greatest weakness, which is its inability to compete
with developing countries when it comes to cost-saving stan-
dardized production.
This strategy – which goes by several names, including
technology transfer, technology commercialization and
innovation commercialization – has been adopted and sup-
ported at all levels of government. Millions of dollars are
poured into these efforts each year, and yet we are only
beginning to understand what does and does not work in
this arena.
There is a strong tendency to attempt to replicate the suc-
cesses of places like Silicon Valley, the Golden Horseshoe and
the Research Triangle, using essentially the same tools and
approaches. However, the question of whether these regions’
success in implementing innovation commercialization
strategies can and should be replicated in other locations
remains unanswered.
This article examines an innovation commercialization
effort in the Greater Johnstown, Pennsylvania region to
explore the compatibility between traditional approaches to
this strategy and the opportunities and constraints posed by
a rural area.
The Greater Johnstown region’s approach
The Greater Johnstown region is a principally rural area in
the western part of Pennsylvania that comprises two coun-
ties and includes the small cities and towns of Johnstown,
Cresson, Ebensburg, Loretto and Windber. The region has
struggled in recent decades with the decline of the coal and
steel industries and the departure of manufacturing plants to
offshore locations. It also has a declining population and a
median household income that is 28 percent less than that of
the nation.
Despite these challenges, the region is not without its
assets. It is home to four small institutions of higher educa-
tion – Mount Aloysius College, Penn Highlands Community
College, Saint Francis University and the University of
Pittsburgh at Johnstown; six private R&D organizations with
a wide spectrum of activities and several vibrant companies
in diverse industries. The four colleges/universities boast a
total enrollment of about 7,000 students and 650 faculty;
however, none of these institutions grants a graduate degree
in a technology-related field.
The private R&D facilities, however, do engage in post-
doctoral R&D work. In an effort to leverage these assets,
Johnstown Area Regional Industries (JARI), a regional eco-
nomic development organization, and several other partners
applied to the Commonwealth of Pennsylvania’s Keystone
??? W I N T E R 2 0 0 6 Economic Development America 25
Innovation Zone (KIZ) Program for funding to create a
Greater Johnstown KIZ (GJKIZ).
The KIZ Program was developed by the Pennsylvania
Department of Community and Economic Development as
a vehicle for investing in regional collaboratives involving
institutions of higher education, communities and private
businesses. Its goal is to foster the creation of new technolo-
gies and to support the entrepreneurs who take these tech-
nologies to market. The state investment in a KIZ can be
used to support operations, engage in planning and provide
a pool of tax credits.
JARI and its partners were successful in getting the
GJKIZ recognized and supported by the state. GJKIZ’s win-
ning approach was two-fold: to link together the intellectual
capital of the institutions of higher education and the private
R&D organizations, then link that capital with local entre-
preneurs and enterprise development service providers. The
overall goal is to maximize the region’s ability to create new
ideas and commercialize them without creating an addition-
al level of administrative bureaucracy.
The plan
The GJKIZ seeks to develop an entrepreneurial culture in a
region that was once dominated by a single industry – steel –
by targeting four industry sectors that have experienced
rapid growth in the region in recent years: advanced manu-
facturing, environmental/energy technology, information
systems/technology, and life sciences.
The first phase of this effort was to pilot the GJKIZ’s plan
by working with one of the private R&D organizations in the
region, the Center of Excellence for Remote and Medically
Under-Served Areas (CERMUSA), located on the campus of
St. Francis University. The plan was to develop a system to
identify opportunities with commercial potential, profile the
entrepreneurial skills and experience needed to capture these
market opportunities, then recruit entrepreneurs capable of
taking the respective opportunities to market.
CERMUSA was selected as the test bed for the GJKIZ’s
approach to innovation commercialization because of its
international reputation as a high-quality research lab in its
field, the relevance of its work to the region’s industry
sectors of interest, its sizeable inventory of technology inno-
vations that had not yet been successfully taken to market,
and its location on the St. Francis campus and close univer-
sity ties.
The process
The first step was to establish a set of criteria for evaluating
commercialization opportunities (e.g., a clear set of cus-
tomers with the ability to buy the offering, investment
required, potential rate of return and immediacy of revenue
stream, etc.). Once these were established, a team reviewed a
portfolio of CERMUSA’s innovation activities, from which
eight potentially viable market opportunities were identified
for further exploration.
CERMUSA then hired a student intern – an incoming
student to St. Francis University’s MBA program – to con-
duct a market feasibility analysis on each opportunity. The
student produced a two-page summary of each market
opportunity (with additional documentation), which was
reviewed by the participants in several rounds as more
detailed research was done.
After sufficient research, a meeting was convened to eval-
uate and prioritize all eight opportunities and to determine
which ones to pursue. Although all eight looked promising
under different conditions, one market opportunity was
selected to be the primary focus of the project’s commercial-
ization effort.
The next step in the process, which is currently under-
way, is to find a local entrepreneur to lead the commercial-
ization of the selected opportunity. Taking each idea to mar-
ket will involve, among other things, arranging a deal to spin
out the opportunity while maintaining a relationship with
CERMUSA.
Once these arrangements have been made, the entrepre-
neur will prepare a business plan with assistance from the
local Small Business Development Center (SBDC). Ongoing
support in obtaining contracts, seed money, etc. will be pro-
vided by stakeholders in the region. Using the tools of the
Entrepreneurial League System
®
(see box on p. 27), the
The plan was to develop a system to identify opportunities
with commercial potential, profile the entrepreneurial
skills and experience needed to capture these market
opportunities, then recruit entrepreneurs capable of
taking the respective opportunities to market.
???
26 Economic Development America W I N T E R 2 0 0 6
entrepreneur’s skill level will be assessed and initial assis-
tance will be tailored accordingly.
Using this test case, the GJKIZ will develop a plan,
process and capacity for commercializing other technologies
emanating from CERMUSA, St. Francis University and other
R&D organizations in the region.
Lessons learned
The experiences in the Johnstown region have yielded les-
sons regarding the innovation commercialization process –
particularly the business concept recognition and feasibility
testing process – and broader insights regarding innovation
commercialization in a rural region.
• Feasibility assessment of potential market opportuni-
ties is best done in multiple iterations. Commercializ-
able market opportunities do not emerge fully formed
but must be shaped via rounds of feedback before they
can be effectively evaluated.
• It is tremendously helpful to prepare write-ups that
review the feasibility of each prospective market
opportunity, such as those produced in this case by the
MBA intern at CERMUSA. These make it possible for
multiple people to review the same opportunity several
times, provide coherent feedback, and understand and
comment on the observations of others.
• R&D laboratories tend to think in technological terms
in their assessment of market opportunities. This is
only half of the equation. The missing perspective is
often the “commercial” one. MBA students, with the
support of experienced entrepreneurs, can effectively
provide this missing business perspective.
• It is important to engage several successful entrepre-
neurs and experienced businesspeople at various points
in the assessment process. Having enough pairs of com-
petent eyes is essential to a review of sufficient depth
and breadth, and is a way to permit the full review of a
greater number of prospective opportunities.
Participating entrepreneurs must have experience in
a range of different market opportunity types so that
their judgments will be varied. This will insure that
opportunities are not judged as being infeasible simply
because the entrepreneurs involved do not have the
necessary understanding or experience to pursue them,
rather than because they are unworkable in general.
• Greater involvement of business students from partici-
pating universities, especially those with entrepreneur-
ial ambitions, in the assessment process can be very
beneficial. This exposes these students to opportunities
that they may want to pursue, either on a full-time
basis or part-time as they complete their degrees. This
can be facilitated by establishing a “Market
Opportunity Register” consisting of feasibility study
write-ups of the various opportunities assessed.
• Many universities try to put tech commercialization
programs in place whole cloth, before the first oppor-
tunity has even been identified. In other words, they
take a programmatic approach. St. Francis University is
only now building its innovation commercialization
apparatus in response to a process that hopefully will
commercialize a real market opportunity. This puts the
university in the position to build and refine its formal
process and to use the proceeds from the first success-
ful commercialization effort to fund its innovation
commercialization office.
• Another commonly held misperception in the tech
commercialization arena is that the viability of an
opportunity is based solely on its patentability, e.g.,
something that can be managed as intellectual property
(IP). However, in the Johnstown case, eight viable mar-
ket opportunities were identified and assessed, none of
which was likely to be patentable.
Yet it was deemed that all of these opportunities had
potential for revenue generation, with possibly a very
favorable return on investment rates. This suggests that
conventional wisdom may be unnecessarily limiting.
We may be missing countless opportunities for local
and regional economic development by adhering to a
narrow definition of opportunity viability.
This last observation has particular relevance for rural
areas that are attempting to commercialize innovations. A
focus solely on patentable market opportunities may be
effective in regions with a strong technological base and edu-
cational institutions that are actively engaged in research, but
this is not the case in most rural areas.
Rural areas literally cannot afford to overlook non-
patentable business opportunities just because they don’t fit
the traditional model of innovation commercialization. In
Johnstown, the intent is to use early successes with non-
patentable opportunities to leverage activity in the venture
capital-backed IP arena in the future.
The lack of infrastructure for supporting innovation
commercialization in rural areas must be acknowledged and
addressed. Greater Johnstown is fortunate to have assets such
as institutions of higher learning, private R&D facilities, larg-
er companies in industries important to the global economy,
and economic development officials who are thinking and
acting entrepreneurially. To its credit, the community has
worked to identify all of its assets, to link them together and
to focus them on supporting regional innovation commer-
cialization efforts.
Rural communities that do not possess such assets may
be faced with only two choices: to not attempt to undertake
an innovation commercialization strategy, or to partner with
an urban area in the larger region in a way that would per-
mit the rural community to benefit from the spin-off com-
mercialization activity taking place in the city. ? ? ?
??? W I N T E R 2 0 0 6 Economic Development America 27
The critical determinant of a
community’s economic vitality is
the quantity and quality of its entre-
preneurs and how well they are
matched to the market opportuni-
ties they pursue. We methodically
cultivate many other kinds of talent,
why not entrepreneurs?
Modeled after one of the most
successful processes in the world for
systematically developing talent –
the farm system of professional
sports – the mission of the
Entrepreneurial League System
®
(ELS) is to create a supply of highly
skilled entrepreneurs capable of
building successful companies, and
to do so in sufficient numbers to
transform a region’s economy and
create individual as well as commu-
nity wealth.
The ELS establishes a breeding
ground for entrepreneurs and helps
them build the skills necessary for
success as they work their way up
the various league levels, just as ath-
letes do in baseball. Current pro-
grams in enterprise development
only deal with half of the equation
for economic success: They address
the needs firms have for technical
and financial assistance, but do
nothing to build a pipeline of highly
skilled entrepreneurs capable of
using that assistance effectively to
build companies.
The ELS classifies entrepreneurs
into different “league” levels accord-
ing to their skills in starting and
operating a new enterprise.
Entrepreneurs are recruited by
Talent Scouts, who use a variety of
methods to find or encourage indi-
viduals with the potential and drive
to become an entrepreneur. Led by a
Performance Coach, entrepreneurs
at the same skill level are organized
into Success Teams to develop the
skills necessary to be successful
entrepreneurs and to support each
other in the tasks needed to build
their businesses.
With the help of their coaches,
entrepreneurs establish individual-
ized “game plans” that help them
focus their energies on reaching
their goals. Consulting services,
technical and financial assistance are
customized and delivered according
to the entrepreneurs’ level of devel-
opment and their need. Participat-
ing service providers are organized
into a coordinated, disciplined sys-
tem to improve entrepreneurs’ abili-
ty to get the right kind of help at the
right time and the right price. These
processes facilitate the entrepre-
neurs’ progress up the ladder to the
major leagues – not in terms of size,
but in terms of performance and
profitability.
The ELS also includes an inno-
vative market development service
led by individuals known as
Opportunity Scouts, whose function
is to actively identify new market
opportunities and link them to
existing and prospective entrepre-
neurs. The final operational compo-
nents are local stewardship and per-
formance monitoring, which lead to
a system capable of continuous
improvement.
The ELS provides entrepreneurs
with a clear ladder to success and
access to resources, psychological
support and opportunities to devel-
op new skills. These benefits make
the business less costly to start, more
likely to succeed, less time-consum-
ing to achieve success and more
capable of generating a greater
return on investment. For service
providers, the ELS produces more
qualified, prescreened clients who
are willing and eager to capitalize on
the assistance they receive to grow
their businesses.
The Entrepreneurial League
System was created by this article’s
authors, Gregg A. Lichtenstein and
Thomas S. Lyons.
The Entrepreneurial League System
®
???
28 Economic Development America W I N T E R 2 0 0 6
Kentucky Leadership Program
Coaches Entrepreneurs
In Kentucky, building a strong entrepreneurial cul-
ture and economy is more important today than
ever as the state makes the painful transition away from a traditionally
tobacco-dependent economy. To
address this challenge, the
Governor’s Office of Agricultural
Policy and the Kentucky
Agricultural Development Board
have invested more than $1 mil-
lion in tobacco settlement monies
to create the Kentucky
Entrepreneurial Coaches Institute.
By Ronald J. Hustedde
Director,
Kentucky
Entrepreneurial
Coaches
Institute;
Professor of
Community
and Leadership
Development,
University of
Kentucky
This innovative program is creating a regional network of
community leaders who are entrepreneurial advocates and
coaches in 19 tobacco-dependent rural counties in the north-
eastern part of the state. The goals are to facilitate the emer-
gence of a strong entrepreneurial culture and to strengthen
the region’s entrepreneurial infrastructure.
The idea for the Institute germinated during my 20 years
working in rural areas. I observed that many self-taught “nat-
ural” entrepreneurial leaders and coaches felt isolated from
each other and expressed frustration about being ill-
equipped for their roles. In other cases, I saw that rural com-
munities were entrepreneurial-tolerant but not necessarily
entrepreneurial-friendly. My colleagues and I believe that if
we invest in rural lay leaders – providing them with new
skills and knowledge and expanding their network base –
they can significantly influence cultural, political and eco-
nomic changes in the region. This article explains exactly
how the coaching program works.
The KECI Fellows
The process to apply for participation in the program is
highly competitive. Those chosen receive a fellowship valued
at $18,000, which covers the costs of nine seminars, mini-
grant projects, meals and lodging.
The first class of KECI Fellows participated in the pro-
gram from September 2004 through November 2005. The
second class began its training in September 2005 and will
finish the program in November 2006. Both classes were
designed to be occupationally diverse; participants have
backgrounds in agriculture, small business, education, eco-
nomic development, homemaking, professional services and
other fields.
The initiative also is designed for sustainability. After
graduation, each participant donates a minimum number of
hours to entrepreneurial advocacy, coaching and leadership
for the following two years, and participates in four post-
graduation seminars.
The curriculum
Over the 15-month period, the Fellows are exposed to some
of the best and brightest thinkers and activists in rural entre-
preneurship, leadership studies and community develop-
ment. The seminars are intended to teach leadership and
coaching skills, to broaden creativity, and to actively engage
participants in the community.
Although each of the seminars is unique, they tend to
include the following four elements: 1) visits with innovative
entrepreneurs from the region; 2) the arts – dance, story-
telling, poetry and music are used to stimulate fresh perspec-
tives; 3) required “homework” between sessions, to foster
more engaged and effective leaders; and 4) a teaching
methodology that minimizes the lecture format and actively
engages the participants in dialogue.
Fellows of the Kentucky Entrepreneurial Coaches Institute
learn how to help entrepreneurs through a form of
structured facilitation known as “supercoaching.”
??? W I N T E R 2 0 0 6 Economic Development America 29
The first seminar introduces the “big picture” of entrepre-
neurship, leadership and community development from
leading thinkers in the field. Participants expand their cre-
ativity by using the tools of appreciative inquiry and asset
mapping. After the first seminar, the participants interview
citizens, leaders and entrepreneurs in their home counties to
become more engaged leaders and expert listeners.
The second and third seminars provide practical skills
about entrepreneurial coaching. Six aspiring entrepreneurs
from the region are coached during these sessions. The
Fellows learn a methodology known as “Supercoaching,” a
form of structured facilitation in which the coach asks point-
ed questions about the core competencies of the manage-
ment team and the uniqueness of the product or service, as
well as issues of competition, marketing and finance.
As homework, the Fellows then start putting their
networks to work. First, they find their own entrepreneur
(or entrepreneurial team) back home to coach. After six or
seven sessions, they work closely with the entrepreneur or
entrepreneurial team to put together a “dream team” of advi-
sors, investors, suppliers, customers or a potential board of
directors for whom the entrepreneur makes a 15-minute
presentation.
The coach does not provide any technical assistance or
advice but keeps the entrepreneur focused on the tough
questions that any investor might ask. In essence, this presen-
tation engages the entrepreneur with a cross-section of valu-
able contacts in the community or region. Established tech-
nical assistance providers are brought into the process when
needed.
Other seminars cover networking, rural entrepreneurship
policy, marketing, visits with entrepreneur-friendly commu-
nities and business incubators (such as ACEnet in Athens,
Ohio), and youth entrepreneurship.
Mini-grant experiences: Building regional alliances
One of the goals of the Institute is to form a regional identi-
ty, because Kentuckians tend to identify strongly with their
individual counties. The mini-grant experience helps foster
this regional identity by putting Fellows in cross-county
teams to develop mini-grant project proposals that are cri-
tiqued by the class.
Class participants form six teams based on their interests
in building an entrepreneurial culture. Team projects have
included technical college and high school entrepreneurship
initiatives; an entrepreneurial contest for innovative ways to
use wood waste; policy work on starting a regional innova-
tion center; a seven-county agri-tourism project and an
entrepreneurial awareness program. Project funding is equal
to $1,000 per team member (teams have ranged in size from
three to 10), and teams are required to find an outside match
of at least 25 percent.
The mini-grants provide direct experience in projects that
build an entrepreneur-friendly region, but the most impor-
tant aspect of the experience may be the written and verbal
reports that Fellows present about the lessons learned. These
visceral reflections allow participants to internalize insights
about entrepreneurial leadership and advocacy. They also
foster new thinking about regional identity and cooperation
among institutions. For example, elected leaders from seven
counties in the region are moving forward with the agri-
tourism initiative, a tremendous accomplishment in a region
with traditionally county-based mentalities.
Rural Scotland: Understanding global markets
The 2004-2005 class took part in a 10-day tour of rural
Scotland, mostly in the highlands and islands area, and the
2005-2006 class will take a similar tour. This region was cho-
sen for its similarities to Appalachian Kentucky and because
many Kentuckians can trace their ancestry to the British
Isles.
The trip offers multiple learning opportunities: to
observe youth entrepreneurship initiatives, entrepreneurial
coaching in action, and how rural entrepreneurs can link to
global markets; to learn about rural entrepreneurship policy
and to visit an entrepreneurial-friendly community. The par-
ticipants had first-hand experiences of how isolated rural
entrepreneurs can tie into markets in the U.S. and Asia. As
one participant noted, “I thought our county was isolated,
but isolation is relative in a global context. These (Scottish)
people are even more remote. If they can tie into global mar-
kets, so can we.”
While there were many educational benefits from the trip,
the shared experience built an incredibly strong support net-
work among the Fellows. “We’re family now,” was a common
refrain. This is significant thinking in a region that is proud
of its tradition of fierce independence.
Evaluation: So what?
An external evaluation team is collecting quantitative and
qualitative records of the Fellows’ accomplishments and
other lessons learned, and a report about the 2004-2005 class
will be issued in the spring of this year. Not only are those
graduates now coaching business start-ups and expansions,
they are making differences in changing the mindset and cul-
ture of the region through their mini-grant experiences. In
addition, five participants from the 2004-2005 class and one
from the 2005-2006 class are running for elected office on
pro-entrepreneurship platforms.
Fortunately, the project’s funders understand that the
most significant payoff from this initiative probably will not
be seen for at least five years. However, the reputation of the
Institute’s current accomplishments is triggering interest in
expanding the program to other parts of the state. Our team
also has been approached by economic development leaders
from several states who are interested in replicating aspects
of the initiative. Indeed, the Kentucky Entrepreneurial
Coaches Institute may serve as a model that can be integrat-
ed into existing leadership programs throughout the country.
For more information, visit the Kentucky Entrepreneurial
Coaches Institute Web site athttp://www.uky.edu/Ag/KECI/.
? ? ?
???
30 Economic Development America W I N T E R 2 0 0 6
Wyoming Business Camp
Encourages Youth to Make
Their Own Jobs
The Converse Area New Development Organization
(CANDO) in Douglas, Wyoming, is concerned about giv-
ing Wyoming youth a reason to stay in the state. If teens cannot find
the jobs they are look-
ing for after graduating
high school or college,
CANDO is encourag-
ing them to consider
making those jobs by
creating their own
businesses.
By Linda Wolfe
Research shows that youth and young adults ages 14-21
come up with innovative, workable ideas for new businesses.
That’s why CANDO created its Youth Business Camp to give
Wyoming youth the entrepreneurial skills they need to turn
their business ideas into reality. The camp curriculum was
designed by CANDO in partnership with Paul Guinn, a seri-
al entrepreneur who also worked with Michael Dell when
Dell Computers was just starting up.
For the past five years, almost 100 teens ages 14-18 have
participated in the statewide camps. Some already have a
business; others have ideas but no business knowledge. Not
only does the camp increase their chances of being a success-
ful business owner, it also makes them better employees.
Once the camp has ended, they truly appreciate what it takes
to run a business.
The curriculum
Camp begins on a Sunday evening, when introductions are
made and camp rules given over pizza. The camp experience
is based on a team competition for a $250 award contributed
by a successful Wyoming entrepreneur.
Students then perform a personal skills analysis and cre-
ate a skills resume. After dividing into teams, leadership posi-
tions in four areas are posted for elections – executive, finan-
cial, marketing, and production. Students are encouraged to
run for at least one of these positions, using their skills
resume to introduce themselves and to get other members of
the camp to elect them.
Once the teams are formed, they receive a booklet of les-
sons on each step of creating a business plan and building a
business. Teams then begin working on their businesses by
choosing a name and logo.
Monday: Organizing a business
On Monday, students hear from a local entrepreneur about
his experiences. They then learn about business visions, val-
ues and plans; mission statements; performance goals; insur-
ance needs and exit strategies. After dinner, students partici-
pate in fun team-building activities.
Tuesday: Marketing
On Tuesday, participants develop a market survey and ven-
ture out into the community to conduct it. While perform-
ing the survey, teams also select the location for their busi-
ness. Students return to analyze their surveys and learn about
creating a promotion plan; using advertising media, includ-
ing how to create a radio spot; and designing flyers and signs.
Education and
Outreach
Manager,
Converse Area
New
Development
Organization
Every student walks away a winner from the CANDO Youth
Business Camps, but some walk away with more after
winning the $250 best business award.
???
Not only does the camp increase their chances of
being a successful business owner, it also makes them
better employees. Once the camp has ended, they truly
appreciate what it takes to run a business.
Students then go to a local radio station to create their ad,
which will be played the day prior to and the day of sales.
Students also tour a local business and create t-shirts to wear
on sale day.
Tuesday evening is focused on teaching finance princi-
ples, which continues on Wednesday. Topics include inputs,
fixed costs, startup budget and choosing price points.
Wednesday: Finance
On Wednesday, finance instruction continues with lessons
on contribution margin and break-even analysis, leasing ver-
sus purchasing equipment, cash flow projections, balance
sheets, and how to secure a loan. Toward the end of the day,
teams will have filled out actual bank paperwork to apply for
a loan. The teams then go before a bank loan officer who
reviews their applications and talks to them as if the ventures
were true business startups.
Once the teams receive their loans, they learn about stag-
ing equipment, prototyping the product, purchasing sup-
plies, and creating an action and risk plan for sale day.
By now you might think we’ve really worked camp par-
ticipants hard and that would be correct. That’s why on
Wednesday evening we take a hard-earned break and float
for two hours down the North Platte River.
Thursday: Making the sale
Thursday puts the students’ training to the test as they open
their businesses and begin sellng to the community of
Douglas. What, you ask, are they selling? Lemonade!
Think a lemonade stand is not appropriate? Donald
Trump didn’t. On one season of his TV program, “The
Apprentice,” the first task of the contestants who were com-
peting to work as his apprentice for one year was running a
lemonade stand.
The best camp team sales to date have been $298.26.
Students are allowed to divide up the profit as outlined in
the exit strategy and keep it. However, that’s Friday. Until
then, students spend the evening enjoying a movie at the
local theater.
Friday: Wrapping it up
Friday begins with filling out a profit and loss statement, a
goals analysis, and individual performance reviews. Once the
teams determine how much money they’ve made, they pre-
pare a presentation summarizing their week-long experience.
Parents and family members are invited to watch this and
the awards presentation at the end of camp.
Fun in learning
The true power in this camp is the interactive, hands-on
experience participants receive. Students end the camp with
enthusiasm and excitement about what the future might
hold. They have learned to network within the state and may
even have met their future business partner. And perhaps
best of all, they all say they had fun doing it. ? ? ?
This summer, CANDO will hold its fifth Youth Business
Camp from July 23-28. The camp costs $250 per student, but
with the aid of scholarships, the actual cost to each student is
only $50. CANDO is looking both for sponsorships and for
youth ages 14-18 to attend. For more information, contact
CANDO at 307-358-2000, or check out the Web site at
www.candowyoming.com/youthbusinesscamps.
The float trips are done every year after the teams have secured
business loans. The students have worked very hard up to this point.
The Fresh Squeeze open for business.
W I N T E R 2 0 0 6 Economic Development America 31
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Part of the United States Department of Commerce, the mission of
the Economic Development Administration (EDA) is to lead the federal
economic development agenda by promoting innovation and com-
petitiveness, preparing American regions for growth and success in the
worldwide economy.
EDA was established to generate jobs, help retain existing jobs, and stimulate indus-
trial and commercial growth in economically distressed areas of the United States.
EDA assistance is available to rural and urban areas of the nation experiencing high
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(NARC) is the preeminent alliance for foster-
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nomic development, air and water quality, social equity, growth, and other chal-
lenges, through advocacy, training, technical assistance and research. For more infor-
mation, visit www.narc.org.
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For back issues of Economic Development America and to learn more
about EDA's information resources, follow the “Information Clearinghouse”
link at the bottom left of EDA's home page, www.eda.gov.
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Economic Development America is a quarterly production brought to you as a benefit of a partnership among the Economic Development Administration (EDA).
COMPETI NG GLOBALLY ? GROWI NG REGI ONAL ECONOMI ES ? CREATI NG J OBS WI NTER 2006
I N T H I S I S S U E
Rural Entrepreneurship
and Innovative Leadership
Rural Entrepreneurship
and Innovative Leadership
Features:
? Supporting Rural
Entrepreneurship:
What Can States Do?
? The HomeTown
Competitiveness Initiative
? Innovation
Commercialization
in a Rural Region
Features:
? Supporting Rural
Entrepreneurship:
What Can States Do?
? The HomeTown
Competitiveness Initiative
? Innovation
Commercialization
in a Rural Region
U.S. DEPARTMENT OF COMMERCE
Economic Development Administration
Carlos M. Gutierrez
Secretary of Commerce
Sandy K. Baruah
Assistant Secretary of Commerce
for Economic Development
Matt Crow
Director of Communications
Bryan Borlik
Lead Public Affairs Specialist
Louise Anderson
International Economic Development Council
Editor
Economic Development America is a quarterly
production brought to you as a benefit of a
partnership among the Economic Development
Administration (EDA), the International
Economic Development Council (IEDC) and
the National Association of Regional Councils
(NARC). The partnership is designed to
provide information about economic develop-
ment practices and programs to economic
development practitioners who serve distressed
communities throughout the United States. It
also provides six telecasts and a monthly e-
newsletter, EDA Update. For more information,
visit the EDA Web site at www.eda.gov.
Story ideas are invited and should be addressed
to editor Louise Anderson, telephone (828)
350-8855, email [email protected].
???
7
4
10
15
21
24
28
30
2 Economic Development America W I N T E R 2 0 0 6
Table of Contents
A Framework for Developing Rural Entrepreneurship
By Deborah M. Markley, Ph.D.; Co-Director, RUPRI Center for Rural Entrepreneurship
Supporting Rural Entrepreneurship: What Can States Do?
What Should They Do?
By Erik R. Pages, EntreWorks Consulting
Jack Schultz: A Man with 7
1
/2 Keys to Small Town Success
By Louise Anderson, International Economic Development Council;
Editor, Economic Development America
The HomeTown Competitiveness Initiative
By Don Macke, Co-Director, RUPRI Center for Rural Entrepreneurship
Incorporating Entrepreneurship into North Carolina’s
Economic Development Infrastructure
By Leslie Scott, Director, Institute for Rural Entrepreneurship, N.C. Rural Center
Entrepreneurship on Tribal Lands
By Elsie Meeks, Executive Director, First Nations Oweesta Corporation
Innovation Commercialization in a Rural Region:
The Case of Greater Johnstown, Pennsylvania
By Thomas S. Lyons, Ph.D. and Gregg A. Lichtenstein, Ph.D.
Kentucky Leadership Program Coaches Entrepreneurs
By Ronald J. Hustedde, Director, Kentucky Entrepreneurial Coaches
Institute; Professor of Community and Leadership Development, University of Kentucky
Wyoming Business Camp Encourages Youth
to Make Their Own Jobs
By Linda Wolfe, Education and Outreach Manager, Converse Area
New Development Organization
19
President Bush is confident that distressed rural communities
can achieve competitiveness and participate fully in the
nation’s growing economy, and the Economic Development
Administration (EDA) will help these communities do so.
Historically, EDA has invested over 50 percent of its resources
in rural communities, and is committed to retaining this
focus. I am pleased that President Bush’s budget request for
EDA in 2007 will bolster EDA support for rural communities
by helping them tap into resources that will strengthen their
capacity for innovation and entrepreneurship.
What is needed is a collaborative approach that leverages
the private sector, agriculture, education, nonprofits and
political institutions of the broader region in which a rural
community resides. EDA’s 2007 program will better ensure
that small jurisdictions and rural areas have a “seat at the
table” within the larger regional economic development
framework. In 2007, EDA’s investment approach:
• Maintains and strengthens EDA’s long-standing com-
mitment to rural America;
• Reduces the administrative burden on rural communi-
ties by allowing multiple activities in a single EDA
grant; and
• Increases the focus on regional approaches, allowing
rural areas to better build on shared strengths and link
up with regional economic hubs.
This investment will ensure that rural and distressed areas
integrate into the larger economic region and participate in
the growing national economy.
EDA’s new Regional Development Account (RDA) will
support the development of economic regions and help move
communities from the current fragmented approach to eco-
nomic development toward a regional, collaborative approach
by providing:
• Capacity-building efforts targeted at state and local offi-
cials and economic development professionals to
advance the capabilities of practitioners of economic
development policy and advance the knowledge of the
“hows”, “whats” and “whys” of regional development
strategies;
• Planning, strategy development and technical assistance
services for communities and regions that have already
recognized the need to work in a collaborative and inte-
grated fashion, but have not yet developed the formal-
ized links to each other and key regional institutions.
Program services will help regions move from concep-
tual acceptance of the advantages of regional develop-
ment strategies to the development of functioning eco-
nomic regions, as well as strategies to foster innovation
and encourage entrepreneurship;
• Support of established economic regions in America
through an array of services spanning strategic planning
to infrastructure development, focused on enhancing
regional partnerships and addressing lagging areas with-
in economic regions.
As you will see in this issue of Economic Development
America, rural communities win when they successfully
engage in regional competitiveness strategies focused on
entrepreneurship and innovation. President Bush is commit-
ted to helping to create an environment that fosters this tran-
sition. I am excited about the President’s budget request for
EDA in 2007, which I see as a nexus of EDA’s strengths and
focus, and I look forward to working with you to strengthen
rural economies as the new program is implemented.
Sincerely,
Sandy K. Baruah
Assistant Secretary of Commerce for Economic Development
???
Rural America is home to nearly a quarter of the nation’s
people and more than half of its commercial banks. Yet,
with its wide-ranging geography, the ebb and flow of its
industries, and its ever-changing technological and
global challenges, America’s rural economy often
performs differently than the rest of the U.S. economy.
President Bush’s 2007
Budget Request for EDA:
Good News for Rural America
W I N T E R 2 0 0 6 Economic Development America 3
???
4 Economic Development America W I N T E R 2 0 0 6
Why the recent heightened interest in rural entrepreneur-
ship? Several factors come into play. Traditional economic
activities – routine manufacturing, agriculture, and natural
resource-based activities – have struggled to remain competi-
tive in the face of increased global competition. As a conse-
quence, the traditional economic development strategies of
industrial recruitment and retention/expansion have yielded
fewer favorable outcomes in rural places.
Rural economic developers and the communities they
serve are struggling to find new sources of competitive
advantage. Many of these development practitioners are will-
ing to think outside the box in the face of old tools and
strategies that are simply not working. At the same time,
models of successful entrepreneurship development now
exist, so rural entrepreneurship practitioners are not alone
on the innovation frontier. A growing body of research
describes the outcomes of entrepreneurship development
initiatives and tools that can be used to create a new, sustain-
able economic future for rural places.
1
Getting to the heart of entrepreneurship development
Entrepreneurship development is about more than building
a support system for entrepreneurs; it is a strategy of trans-
formation. It is about creating entrepreneurial communities,
about changing the culture of rural places and people so that
they embrace the potential of entrepreneurship. It also
includes fostering public policy that invests in entrepreneur-
ship development and is embraced by public and civic
organizations and leaders.
Embracing entrepreneurship requires looking at econom-
ic development in a new way, one that holds the community
responsible for creating development from within. In search-
ing for new sources of competitive advantage, communities
and regions must identify and build on their unique local
assets and take a proactive approach to determining their
futures.
This approach suggests that there is no “best” model for
entrepreneurship development. In some ways, local commu-
nities and regions are akin to entrepreneurial startup enter-
prises, discovering and testing the products and approaches
to entrepreneurship development that fit well with local real-
ities. While there may be a tendency to want to wait until the
models have been tested and proven, Karl Stauber, President
of the Northwest Area Foundation, argues against this
approach:
America is in the middle of a transformation of its
rural areas. It does not have time to find perfect or
guaranteed solutions. It must take the best ideas where
it can find them and begin to adapt and adopt those
ideas.
2
Drawing on observation and study of entrepreneurship
development practices across rural America by the RUPRI
Center for Rural Entrepreneurship, the Kellogg Foundation,
CFED and others, we have developed a framework for eco-
nomic development practitioners who are trying to adapt the
best ideas about entrepreneurship for their rural places.
3
The past 10 years have seen increasingly wider
acceptance of entrepreneurship as a core rural
economic development strategy. While some pioneering organizations
have been encouraging enterprise creation as a means of revitalizing
rural places for 20 years or more, broader interest in the potential of
entrepreneurship in rural communities and regions is relatively new.
By Deborah M. Markley, Ph.D.
Co-Director,
RUPRI Center
for Rural
Entrepreneurship
A Framework for Developing
Rural Entrepreneurship
???
A five-part framework
1. Understanding Entrepreneurial Talent.
Entrepreneurship development is a human develop-
ment strategy even more than a business develop-
ment strategy. The entrepreneur and his or her
dreams need to be at the center of any strategy.
The first step in creating an entrepreneur-focused
strategy is to identify and understand the entrepre-
neurial talent in a rural place. Every rural community
or region has a range of entrepreneurial talent, from
those who have the potential to become entrepre-
neurs – young people, displaced workers, people re-
entering the workforce – to existing business owners
who aspire to create new business models and reach
into new markets, to those high-tech, high-growth
entrepreneurs who have the potential to generate a
large and significant impact on a local economy.
The mix of entrepreneurial talent may include microen-
terprises employing fewer than five people, larger enterprises
with more than 50 employees, people with limited skill sets
and those who are creating their third or fourth ventures.
And, there may be special populations – e.g., youth, artisans,
or new immigrants – whose entrepreneurial aspirations need
to be nurtured.
To create a strategy focused on the needs of entrepre-
neurs, communities and regions must develop an under-
standing of and appreciation for the full range of existing
and potential entrepreneurs.
2. Making the Case.
Because entrepreneurship development is a new approach to
economic development for most rural regions, local leaders
may require convincing in order to embrace this new
approach.
Making the case for entrepreneurship requires a two-fold
strategy. First, the plethora of national and international
research that describes the positive relationship between
entrepreneurial activity and economic growth should be
shared with policy makers and leaders at the state and local
levels.
4
At the same time, a powerful tool for making the case
exists in the stories of local entrepreneurs, who all too often
are less visible to local leaders and economic developers.
Stories of their struggles and their victories can often help to
make the case in a way that data cannot. Rural areas that are
successfully implementing entrepreneurship development
strategies have found ways to actively engage entrepreneurs
as advisors and leaders in this process.
3. Laying the Groundwork for Entrepreneurship
Development.
Leaders and advocates of entrepreneurship must lay the
groundwork for strategy development. Otherwise, they risk
the temptation to reach for the development strategy du jour
instead of building a customized strategy appropriate to the
region’s unique features.
There are three steps to laying this groundwork. One is
determining readiness for entrepreneurship, which includes
the Understanding Entrepreneurial Talent and Making the
Case elements outlined above. It also includes determining
whether there are organizations or individuals who already
embrace entrepreneurship and can lead the way, and whether
capacity exists within the community to undertake entrepre-
neurship development.
Once a community has determined that it is ready for
entrepreneurship, the next step is to identify the develop-
ment assets in the region on which the strategy can be built.
Who is already working to support entrepreneurs? What
service providers and capital providers exist within the com-
munity and the broader region? What youth programs exist
to encourage entrepreneurship, or that could encourage
entrepreneurship? What unique assets exist in the region that
could become a source of new competitive advantage, e.g.,
local artisans, community colleges, heritage tourism destina-
tions, natural resources, and niche farmers?
Finally, the community needs to understand its capacity
to undertake any type of economic development effort.
Entrepreneurship development requires innovative thinking
and leadership. Who will become the leaders of entrepre-
neurship development? How can you actively engage entre-
preneurs in leadership and strategy development? What new
leaders and capacity can be tapped within the community
and wider region to support entrepreneurship development?
4. Creating a Strategy — Building an Entrepreneurship
Development System.
Based on observation of successful entrepreneurship devel-
opment efforts throughout rural America, a consensus has
emerged – an entrepreneurship development system (EDS) is
necessary to transform a rural region. Our thinking about
entrepreneurship development systems has evolved over the
past several years. In “Mapping Rural Entrepreneurship,” a
2003 publication by the W. K. Kellogg Foundation and
CFED, an EDS is defined as “a coordinated infrastructure of
public and private supports that facilitate entrepreneurship.”
5
This definition has evolved, through the work of the
Kellogg/CFED team, the RUPRI Center and others, to
W I N T E R 2 0 0 6 Economic Development America 5
???
6 Economic Development America W I N T E R 2 0 0 6
include a set of guiding principles for the creation of an EDS.
An EDS should be:
• Entrepreneur-focused and asset based – as described
above.
• Collaborative – Leadership for the EDS should be
drawn from public, private and non-profit sectors and
should engage service providers from all those sectors
in building a system of support for entrepreneurs.
• Comprehensive and integrated – The system should
focus on meeting the full range of entrepreneurial
needs (i.e., technical and capital assistance, entrepre-
neurship education, networking opportunities) as well
as on building an environment that supports invest-
ment in entrepreneurship development (i.e., communi-
ty engagement, policy development). Entrepreneurship
should be integrated into other aspects of the regional
economy (e.g., workforce development, education, the
health care system).
• Linked to policy – By demonstrating the implementa-
tion and success of entrepreneurship development in
communities and regions, an EDS can inform econom-
ic development policy at the local and state levels.
• Community-based but regionally focused – A systems
approach should be rooted in communities but tap
into the resources of the broader region to achieve scale
of impact.
• Sustainable over time – Entrepreneurship develop-
ment is a long-term strategy.
5. Measuring Outcomes.
Establishing outcome measures that truly reflect the goals of
an EDS is a necessary part of the framework. In the early
stages of implementation, these measures will primarily cap-
ture the process of building an entrepreneurship develop-
ment system – the capacity that is built, the collaborative
leadership team that is developed, the cross-learning oppor-
tunities that are institutionalized. As implementation contin-
ues, the measures will reflect the expected outcomes of the
system – new enterprises created, entrepreneurship educa-
tion capacity built in the schools, youth engaged in entrepre-
neurial ventures, and cultural changes that reflect greater
support for entrepreneurship.
These outcome measures provide a way to build and
maintain momentum for entrepreneurship development,
and are critical to informing the policy-making process. In
addition, measuring outcomes can support a commitment to
continuous improvement. Progress toward achieving these
outcomes can be used to fine-tune, redirect, retool and
rethink as entrepreneurship development moves forward in a
region.
Still more to learn
Entrepreneurship is not a new concept in America. In some
ways, the recent excitement and embrace of entrepreneurship
reflects the old adage that “what is old is new again.”
Entrepreneurial aspirations guided the opening of the Western
frontier and the cyber frontier. Communities across the coun-
try are rediscovering their entrepreneurial roots as they seek
new ways to generate economic growth from within.
Though we are still in the innovation phase, there has
been an explosion in the laboratories of entrepreneurship
development across rural America in the past few years.
Some of the key innovations in the field of rural entrepre-
neurship are described in the pages of this publication.
The results of these innovative models will provide contin-
ued guidance to economic development practitioners and
community leaders as they embrace entrepreneurship as a
way to transform the economic futures of rural places across
the country. ? ? ?
1
The Appalachian Regional Commission launched its Entrepreneurship
Initiative in 1997. The Rural Entrepreneurship Initiative, a partnership
among the Kauffman Foundation, the Rural Policy Research Institute
(RUPRI), the National Rural Development Partnership, the Nebraska
Community Foundation and Partners for Rural America, began in 1999 as a
way of advancing our understanding of rural entrepreneurship as a develop-
ment strategy. In 2001, the RUPRI Center for Rural Entrepreneurship was
created and we have traveled throughout rural America, learning from entre-
preneurship practitioners and developing a framework for energizing entre-
preneurs. In 2003, the Kellogg Foundation and CFED collaborated on
“Mapping Rural Entrepreneurship,” a project that ultimately led to Kellogg’s
investment in regional collaboratives that are creating innovative entrepre-
neurship development systems in six unique landscapes across rural
America.
2
Karl N. Stauber, “Creating New Rural Development Strategies: The Role of
Nonprofits,” in New Governance for a New Rural Economy: Reinventing Public
and Private Institutions, Proceedings of a conference sponsored by the Center
for the Study of Rural America, Federal Reserve Bank of Kansas City, May
2004.
3
A more complete discussion of this framework can be found in Deborah
Markley, Don Macke and Vicki Luther, Energizing Entrepreneurs: Charting a
Course for Rural Communities, Nebraska: Heartland Center for Leadership
Development, 2005
4
Resources on the link between entrepreneurship and economic growth
include the Global Entrepreneurship Monitor project, a cross-national,
ongoing annual research project (www.gemconsortium.org); Advanced
Research Technologies report for the U.S. Small Business Administration
Office of Advocacy and the Edward Lowe Foundation, The Innovation-
Entrepreneurship Nexus: A National Assessment of Entrepreneurship and
Regional Economic Growth and Development, April 2005; work in progress by
staff at the Center for the Study of Rural America, Federal Reserve Bank of
Kansas City.
5
Brian Dabson, Jennifer Malkin, Amy Matthews, Kimberly Pate and Sean
Stickle, Mapping Rural Entrepreneurship, W. K. Kellogg Foundation and
CFED, August 2003.
???
Supporting Rural
Entrepreneurship:
What Can States Do? What Should They Do?
Many rural residents pride themselves on their rugged inde-
pendence and ability to persevere in tough times. Rural com-
munities and their leaders are no different. Instead of simply
bemoaning their fate, rural leaders are seeking to transform
their regions through the embrace of new economic develop-
ment strategies, including entrepreneurial development.
Fortunately, they’re not on their own. State governments
can and should play a critical role in supporting rural entre-
preneurs and communities that are trying to support and
nurture such activities. This essay takes a look at the field.
State governments are relative newcomers in their support of
rural entrepreneurship, but they are now engaging in a big
way. What are they doing right? What’s not working? By
reviewing the work of several “early adopters,” we can gain a
better understanding of where the field is going and where it
ought to go in the future.
Defining the issue
As other essays in this volume attest, it’s pretty hard to devel-
op a single monolithic definition of “rural America.” After
all, Jackson Hole, Wyoming, the Pine Ridge Indian
Reservation, the Mississippi Delta, and the Iowa cornfields
are all rural, yet they face widely differing economic, political
and cultural circumstances.
But acknowledging differences doesn’t mean that there
are no similarities. At the broadest level, these regions face
similar economic challenges. Their traditional economic
anchor – agriculture – can no longer support a large portion
of the population. Economic anchor number two – manu-
facturing – is also under fire. Rural America’s competitive
advantage of low cost offers fewer advantages when the com-
petition is global and firms can easily move production over-
seas. Various other anchors, such as tourism, still persist, but
they may not be able to provide the number and quality of
jobs needed to keep a community economically viable.
Faced with these daunting circumstances, rural leaders
have opted to look within. If they can’t count on a new
branch plant coming to town, new tools for economic devel-
opment are required. As a result, entrepreneurial develop-
ment has taken hold as an alternative approach and it has
reached critical mass quite rapidly. As recently as the year
2000, few rural communities and even fewer states had an
entrepreneurship strategy. Today, such programs are com-
W I N T E R 2 0 0 6 Economic Development America 7
It’s a commonplace observation that the twin processes
of globalization and technological change create winners
and losers. While this statement is true, it is no consolation to the
“losers,” those regions that have been hard hit by economic change.
While lots of places - such as Pennsylvania’s steel towns or Detroit’s
auto plants - have been hard-hit, rural America arguably has faced the
most wrenching economic trans-
formation over the past few
decades. Small towns across the
U.S. face depopulation, declining
industries and significant econom-
ic development challenges.
By Erik R. Pages
EntreWorks Consulting
???
monplace. In fact, researchers at the Center for Rural
Entrepreneurship note that there are now 600,000 places you
can go on the Internet to explore rural entrepreneurship.
What should states do?
As in urban areas, rural entrepreneurship is a local or region-
al affair. Most activity and most new program ideas will be
generated at the local level. This issue of Economic
Development America highlights numerous examples of such
grassroots innovation – but they can’t do it alone. Many
rural communities lack the size and resources to develop
scalable programs. State governments and agencies should
consider stepping in to assist when necessary.
While the state’s basic role – the enabler and supporter of
locally-led innovation – is clear, things cloud up when we dig
into the details. Here are some other guidelines for what
states can and should be doing:
• Get Out of the Way: Eliminate red tape and
bureaucracy
• Show Them the Money: Invest in rural enterprise
• Be Entrepreneurial: Test new ideas
• Start at Beginning: Embrace youth entrepreneurship
Let’s look at each of these categories in turn.
Get Out of the Way.
Job number one for state government is to avoid screwing
things up. It’s hard to be successful as an entrepreneur. It’s
even harder in a rural community where one is far from
potential markets, and support resources may be far away as
well. In these instances, every little bit matters. If local or
state regulations create serious burdens for local business
owners, their potential success will be jeopardized. For exam-
ple, some communities use zoning laws to prevent the estab-
lishment of “incidental businesses” on farmland. This well-
intentioned farmland preservation strategy has the effect of
blocking farmers from creating new businesses on their own
farms.
Thus, a critical role for state governments involves a
detailed review of existing rules and regulations to ensure
that they are “entrepreneur-friendly.” Fortunately, many gov-
ernors have heard this message. Dozens of states have com-
pleted or are presently engaged in major regulatory stream-
lining initiatives. Typical initiatives include the following:
• Appointment of a Small Business Ombudsman or
Advocate (Georgia, California, Louisiana)
• Requiring a “Small Business Impact Statement” prior to
the adoption of new rules and regulations (Michigan,
New Jersey, North Dakota, Washington)
• Creation of “one-stop centers” for business licensing
and registration (Michigan, Wisconsin, Rhode Island)
Regulatory reform has been quite popular, and it is likely
to remain so. Many governors are now adopting a version of
model regulatory reform legislation developed by the Small
Business Administration’s Office of Advocacy in 2002.
Fourteen states and one territory have adopted some version
of the model rules, and others are in the process of doing so.
Show Them the Money.
If state governments want to nurture rural entrepreneurship,
they need to invest in the process. It’s not enough to use the
bully pulpit and proclaim support for rural entrepreneurs;
governors need to put real resources on the table. The great
interest generated by regulatory reform is partially attributa-
ble to the fact that such activities are relatively low-cost.
Meanwhile, few governors or state governments have gone
ahead and made major investments to support rural entre-
preneurship.
Two exceptions can be found in Kansas and Wisconsin. In
Kansas, the Legislature enacted the Kansas Economic Growth
Act of 2004. This bill created the Kansas Center for
Entrepreneurship, a statewide coordinating body for entre-
preneurship support providers, and calls for more than $500
million in new investments to support entrepreneurship
(both urban and rural) across the state. More recently, the
8 Economic Development America W I N T E R 2 0 0 6
A critical role for state
governments involves a detailed
review of existing rules and
regulations to ensure that they
are “entrepreneur-friendly.”
??? W I N T E R 2 0 0 6 Economic Development America 9
state has created a new venture capital fund (focused on
biotech) and has revised its angel investor tax credits to
expand their use and availability.
In Wisconsin, the “Grow Wisconsin” program has gener-
ated a host of activities to support entrepreneurship. The
Wisconsin Entrepreneur’s Network offers peer networking
and support services to new business owners across the state.
The state also is committed to expanding existing programs
for venture and angel capital, and has increased bonding
authority for the construction of new incubators across the
state.
Showing them the money is not just about investing in
new programs. It can also entail support for initiatives – both
public and private – that help generate investment pools that
can be tapped by rural entrepreneurs. The creation and sup-
port of angel investor networks should be a top priority for
all state governments. Here again, the news is promising. A
2004 study by the Community Development Venture Capital
Association found that 19 states offered state tax credits to
accredited angel investors. Since that study’s completion,
several others states have followed suit.
Be Entrepreneurial.
If states want to support entrepreneurship, they should act in
an entrepreneurial manner. This means being willing to take
risks and test out new ideas. State support of rural entrepre-
neurship is a relatively new concept, and there is no clear
template or menu for moving ahead. Thus, states may have
to resort to learning by doing.
The benefits of such experimentation can be profound,
as the following examples should indicate. In Kansas, the
Kansas Department of Commerce and Housing has been
investing for four years in five rural development projects
employing the Enterprise Facilitation model pioneered by
the Sirolli Institute. Since its inception, the program has
created hundreds of jobs in some of Kansas’ most isolated
rural communities.
In North Carolina, the Department of Commerce and the
North Carolina Rural Development Center have provided
grants to 11 pilot projects supporting entrepreneurs in sec-
tors such as eco-tourism and handicrafts, and providing
mentors and coaching for minority entrepreneurs. Another
project – New Opportunities for Workers – offers entrepre-
neurship training to displaced textile workers.
In Georgia, the state has created a popular “Entrepreneur-
Friendly Communities” program. Interested communities
receive extensive training from leading experts in effective
practices for supporting entrepreneurs. To date, 11 commu-
nities have received the certification.
Start at the Beginning.
Effective rural entrepreneurship programs involve transform-
ing local business cultures and convincing residents that
entrepreneurship is both a viable and desirable career choice.
Such transformation does not occur via government pro-
grams alone. These concepts must become embedded in the
schools, and rural youth should be exposed to entrepreneur-
ship education at an early age.
Lots of effective youth entrepreneurship programs, such
as REAL (Rural Entrepreneurship through Action Learning)
Enterprises are in place, but they face major challenges to
their expanded use. For a variety of reasons, school systems
and state education departments have been unwilling to
embrace entrepreneurship education. In fact, only two states
– West Virginia and Nebraska – have appointed state-level
officials to help promote entrepreneurship education. If state
governments are truly serious about getting rural
youth to embrace entrepreneurship, they must make
entrepreneurship a regular offering in rural schools.
Final thoughts
States can play an important role in supporting rural
entrepreneurship, but they can’t – and shouldn’t –
lead this effort. The real leadership must come from
rural entrepreneurs themselves, with the backing of
committed and dedicated community leaders who
want to transform their regions. By supporting their
experiments with prudent investments and a positive
attitude, state governments can make important
contributions to promoting entrepreneurship
throughout the heartland. ? ? ?
???
Boomtown clearly has struck a nerve. The book is going into
its fourth printing, and Schultz has been asked to do more
than 200 talks since it published. Boomtown is part toolbox
and part pep talk, a kind of self-help tome for towns. With
great enthusiasm, Schultz cites example after example of suc-
cessful strategies from small towns across the country and
provides a framework for understanding why those strategies
have worked.
It’s a book that will change the mind of even the most
hardened cynic about the future of small town America. It
advocates looking inward for the keys to success – nurturing
vision and optimism, building on existing assets and leverag-
ing leadership.
In this interview with Economic Development America,
Schultz talks about some of Boomtown’s keys to success,
some surprises he encountered in his research, and shares his
recent thinking on the role of entrepreneurship in small
town properity.
Leadership and the Effingham experience
Schultz has first-hand experience with the turnaround of a
small town in economic crisis – that of his own town of
Effingham, Illinois (pop. 12,384 in 2000), located almost
smack in the middle of the state.
“In our town in the late 1980s, within about six months,
we lost two major manufacturers, we had a third that was
looking at moving its production to South Carolina, and a
fourth was looking at consolidating one of its three plants.
So, out of 4,000 higher-paying manufacturing jobs, we sud-
denly had 3,000 that were somewhat up in the air,” says
Schultz. “The whole economy just dried up. Banks couldn’t
make loans; dealers couldn’t sell cars.
“A small group of us got together and decided that we
had to do some things. We could no longer be ‘held hostage’
by one of these big companies,” he says.
Effingham undertook a number of initiatives to change
its fortunes, including a community planning process and
marketing and image-building campaigns. “No companies
came to town as a direct result of any of this,” Schultz writes
in Boomtown, “but through these efforts the community
began to recover its spirit, enthusiasm and optimism.”
After five years, the town attracted what would be the first
of several new mid-sized manufacturers, and during the
1990s, Effingham realized a 70 percent increase in new
Jack Schultz:
A Man with 7
1
/2 Keys to Small Town Success
Jack Schultz is the CEO of Agracel, Inc., a firm that
specializes in industrial development in small towns.
His work led him to wonder about the roots of small-
town health and prosperity. That curiosity, coupled with some
research, resulted in 2004 in a
popular book, Boomtown USA:
The 7
1
/2 Keys to Big Success in Small
Towns. In it, Schultz attempts to
answer a perennial question: What
separates the thriving towns from
the struggling ones?
By Louise Anderson
10 Economic Development America W I N T E R 2 0 0 6
International Economic
Development Council; Editor,
Economic Development America
Boomtown USA has garnered much interest among peo-
ple concerned about small town vitality. Author Jack
Schultz, above left, has become a popular speaker
since the book's publication in 2004.
??? W I N T E R 2 0 0 6 Economic Development America 11
“What many people and towns don’t realize is that
staying with the status quo brings its own risks,”
says Schultz in Boomtown.
manufacturing jobs. The story doesn’t mean to imply that
attracting small manufacturers is the key to success; that’s
simply what worked for that town at that time. Success came
because community members came together and acted
strategically to change the town’s fortunes.
Not what you’d expect
When it comes to figuring out what makes one town prosper
while another nearby is withering on the vine, Schultz says
he was surprised by what he found.
“As I was doing research, I started out with a bias of what
‘good’ towns were going to look like, of what resources were
really going to be critical. The really good towns were going
be near a major metro area, were going to lie on an interstate
– probably two – and they were going to have a four-year
college. And in the research, I was shocked to find that those
aren’t necessarily the things that define success or lack of it,”
says Schultz.
“On my list of what I consider to be the top 100 small
communities in America, 70 of these lie over 100 miles away
from a major metro area. Fifty-nine of the top 100 are over
25 miles away from a single interstate, and only 16 had a
four-year college. While those are great resources, they aren’t
necessarily going to determine success or failure. It’s more
about attitude,” he says. “You’ve got to work with what you’ve
got.”
Another surprise for Schultz was a turnaround in his
thinking about the importance of downtowns. “I have con-
fessed in my talks that when I first got started in economic
development, I viewed downtown revitalization as throwing
good money after bad,” says Schultz. “I’ve really had a 180-
degree turn from that. What I’ve seen is, the really good
communities have figured out a way to leverage their down-
towns and to create a unique sense of place, which I think
people and companies are looking for.
“You don’t create a sense of place in the lobby of a big
box store. You create it in your downtowns, in your schools,
in your parks. Anyone who is looking at where they want to
live isn’t just looking for a house or school; they are looking
for a community. That sense of place is becoming more
important in my mind as people look at where they want to
live and raise their families.”
He sees downtowns as important for other reasons as
well. Pride of place fosters a sense of ownership and inspires
leadership and involvement. In addition, many of the busi-
nesses in a downtown area are small and entrepreneurial in
nature. Finally, there’s the curb appeal factor. Boarded up
and vacant buildings don’t communicate success; they create
a bad impression for both residents and outsiders.
The importance of branding
Schultz believes that the concept of branding is not well
understood; it’s more than a marketing ploy. As he writes in
Boomtown, “It’s a personal message about the product, com-
pany or person. It promises something; you expect the same
thing from that product, company or person every time.” He
talks about branding as something that almost arises natural-
ly out of hard work in other areas.
“A lot communities think, ‘Well, we’ll just come up with a
slogan,’ but it really is more than that,” says Schultz. “Some of
the better examples that I’ve seen around the country are
Leavenworth, Washington, which has done a good job at
branding itself as a Bavarian village in the Northwest. On a
national and international basis, probably the best town is
Branson, Missouri, ‘the live music show capital of the world.’
“Another one that has done a great job – a little different
from the other two – is Mooresville, North Carolina, which
in 1989 branded itself as ‘Race City USA,’ even though they
only had one race team located there. But today they have 60
race teams headquartered in Mooresville because of the qual-
ity of life and because they established themselves as the
???
12 Economic Development America W I N T E R 2 0 0 6
place to be. It’s one of those chicken and egg things – did the
drivers locate there, or did the people who take care of them
locate there first? They’ve got 150 entrepreneurial businesses
that have started up to take care of those race teams – to sup-
ply them with decals and computers, tires, rebuilt engines,
trained pit crews and all the things you need if you’re a race
team.
“I think the risk is that if you don’t brand your commu-
nity, other communities can brand you in a way you might
not like,” he says, giving the example of towns that are
known for little more than being the home of the state peni-
tentiary.
Entrepreneurship
As Schultz’s research on small town success continues, he has
come to a greater understanding of the importance of entre-
preneurship.
One of the reasons entrepreneurship is key, he says, is that
only about 200 major projects (those with over 200 employ-
ees) are done on an annual basis in the U.S. Any more, “It’s a
needle in a haystack when you’re going after these big com-
panies,” Schultz says.
The Internet and the ease of communication play big
roles in fostering entrepreneurship in small towns. Schultz
cites a statistic that nearly three-quarters of a million people
make some or all of their living on eBay.
“In virtually every town I go into I’m seeing businesses
being developed on the Internet. It doesn’t matter the size of
the town. Take an Amish town of 2,200 people, where a guy
is selling Amish buggies over the Internet and propane
refrigerators. There are other people who have a need for
that – hunting lodges, that kind of thing. If the Amish are
understanding the importance of the Internet, that’s what I
would call a tipping point,” he says.
Another business that has expanded dramatically over the
Internet, says Schultz, is Dakota Cabin Quilts in Hettinger,
North Dakota. At a population of 1,300 people, Hettinger is
the largest town for 40 miles around. A town of that size
would not be able to support a quilting store, but Dakota
Cabin Quilts sells its products all over the world via the
Internet and now has six employees.
Yet another business he cites started in Effingham: Mid
America Designs began selling Corvette patches, jackets,
shirts, glasses and owners manuals at auto events and
through a simple catalog; the company since expanded its
line and now does $50 million in sales per year.
Schultz sees these businesses as the next generation of
mail order catalogs – many of which started in very small
towns – but with much more accessible markets. Coldwater
Creek, a purveyor of women’s clothes and accessories, was
started as a catalogue business in isolated Sandpoint, Idaho,
by two former New Yorkers who never wanted to find them-
selves caught in the Holland Tunnel again. It now has over
4,000 employees.
The town of Leavenworth, Washington, reinvented itself from a declining
sawmill and lumber town to a Bavarian village that now attracts over 1.5
milion tourists per year. The inset photo shows dancers at one of the
town’s festivals.
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??? W I N T E R 2 0 0 6 Economic Development America 13
1. Adopt a can-do attitude. Schultz writes that it’s ideal when a town’s civic leaders have a can-do atti-
tude that permeates their discussions, agendas and goals.
2. Shape your vision. Vision marks the roadmap to success. It takes into account the destination, the sur-
rounding terrain, and the roadblocks and hazards along the way.
3. Leverage your resources. These include current industries, businesses and institutions; natural
resources such as lakes, beaches, mountains and forests; man-made resources such as lakes, parks and
recreation areas; local celebrities (either living or dead); local flavor; and the local “brain bank” – the
solid core of bright people who are committed to the community’s welfare.
4. Raise up strong leaders. Schultz writes that leaders come in all shapes and sizes and from all walks of
life. In small towns, leaders come from all sectors – government, business, education, healthcare, reli-
gious and service – and have not only the opportunity but the responsibility to play a leadership role
in their area of expertise.
5. Encourage an entrepreneurial approach. What’s in an entrepreneur’s self-interest is also often in the
best interest of a town. “Nurture these people, and give them room to operate,” he writes. “Towns that
recognize that the better their entrepreneurs do, the better the town will do, generally find themselves
on a positive growth curve.”
6. Maintain local control. When government is easily accessible and people feel they can make a differ-
ence, it promotes community involvement and sense of control that contribute to prosperity. A town
with local ownership of institutions such as banks, newspapers, and businesses in the retail, manufac-
turing and service sectors has a greater chance of being strong and vibrant than a town without.
7. Build your brand. Schultz writes that branding sets towns apart by giving the region, state or even the
nation notice of what the town is about and what it offers. He believes that a town shouldn’t focus its
initial efforts on its brand, citing examples of Mackinac Island, Michigan; Tombstone Arizona;
Branson, Missouri; and Leavenworth, Washington, as places that worked to achieve a vision first, then
a brand. “It might surprise you that your town has a message, but it does – whether it has been con-
sciously crafted or not. That message is delivered to outsiders each time they visit your town and to
your townspeople on a daily basis,” he writes.
7.5 Embrace the teeter-totter factor. Schultz says that it only takes a small shift one way or the other to
make a negative or positive impact on a community. “Just as one person can really make a difference in
a small community, any of the keys to small-town success can make a difference – either for good or
for bad. In other words, any key can be the deciding factor in whether a town is headed toward greater
vitality and prosperity or toward troubled times.”
Boomtown, USA:
The 7
1
/2 Keys to Big Success in Small Towns
“As I dug deeper, I found the roots of small-town success
intertwined with the roots of individual success,”
writes Schultz in Boomtown.
???
14 Economic Development America W I N T E R 2 0 0 6
He also sees promise in the trends of telecommuting and
“homesourcing,” in which workers such as JetBlue’s call cen-
ter reps do their work from home.
But what about the potential for sectors with great
growth potential and high wages, such as manufacturing and
technology, in small towns?
Schultz recognizes the limitations to starting technology-
based businesses in areas that don’t have similar businesses
or a technologically advanced workforce, but believes the
playing field is leveling.
“In Tom Friedman’s book, The World Is Flat, he quotes
Bill Gates of 20 years ago, asking whether you would rather
be born average in the U.S. or a genius in some small town in
China?” (The answer then was assumed to be the former.)
“Well, that’s reversed today. The technologies of FedEx, of
telecommunications, of air travel, really allow you to start a
business anywhere and compete very effectively on an inter-
national basis,” says Schultz.
For example, he cites John Larsen, a technology executive
who has moved his latest startup, HomeMovie.com, from
outside of Seattle to the community of Winthrop in rural
eastern Washington. Larsen moved to Winthrop seeking a
higher quality of life for his family, and now wants to help
the town retain its young people.
Schultz also mentions the importance of clustering and
critical mass. He says the small town of Warsaw, Indiana, has
become the orthopedic manufacturing capital of the country
– one entrepreneur developed a device there, and now the
area hosts a number of medical device manufacturers.
Schultz is bullish on manufacturing, believing it’s gotten a
bad rap. “A lot of the media would have us believe that our
manufacturing sector is doomed,” he says. “My take is that
we are on the cusp of greatness in the manufacturing sector.
Just yesterday, in Wisconsin, I was in two small manufactur-
ing businesses that are growing at 20 percent a year.
“If you look at the U.S. economy, manufacturing as a per-
centage of the economy is at a very low level, but we are pro-
ducing more goods today as far as dollar value goes than at
any other times in our history. We’re doing it with fewer peo-
ple because of increased productivity.
“I see the potential for greatness in manufacturing in the
small businesses that are inventing new things – the entre-
preneurial spirit in manufacturing, as opposed to the branch
plant mentality. On a recent trip, the hosts were bemoaning
the fact that 83 percent of their manufacturers have sales of
less than $100 million. I see that as a big plus. The growth
potential is in these small, entrepreneurial manufacturing
businesses, rather than the big Fortune 500 businesses. Those
companies can’t compete because of their cost structure.”
Many of Schultz’s insights about how to foster entrepre-
neurship are echoed in other articles in this edition. They
include providing entrepreneurship education in schools;
expanding the concept of who an entrepreneur is (to include
more women, immigrants, minorities and retirees); thinking
regionally about assets; facilitating the development of the
entrepreneurial spirit into real businesses; and providing
access to capital.
He sees a bright future in the current Millennial genera-
tion, those who are approximately 25 and younger. “The
Millennial generation is going to be the most entrepreneurial
generation in history of U.S.,” he says. “In a recent national
survey, half the kids that are graduating from high school
today dream of starting their own business. I’ve already seen
comparisons of them to the generation of the 1880s that
transformed the U.S. These kids have got it in their DNA to
start new businesses and to be involved in startup operations.”
For more information on Jack Schultz’s research, visit his blog
athttp://boomtownusa.blogspot.com, or the Boomtown USA
Web site athttp://www.boomtownusa.net. ? ? ?
Branson, Missouri, has been very successful both nationally and
internationally in branding itself as “the live music show capital of the world.”
??? W I N T E R 2 0 0 6 Economic Development America 15
Six years ago, the founding partners of what is now known as
HomeTown Competitiveness (HTC) – The Heartland Center
for Leadership Development, Nebraska Community
Foundation, RUPRI Center for Rural Entrepreneurship, and
the Center for Rural Affairs – decided to work collaboratively
to change the landscape of rural Nebraska. They decided that
a developmental initiative was needed that builds on small
towns’ existing resources and assets, many of which go
unrecognized.
HTC’s goal is to assess a community’s current situation
and capacity, then build on four key elements:
• Developing and mobilizing leadership capacity;
• Capturing wealth transfer through charitable giving;
• Energizing entrepreneurship; and
• Attracting and engaging young people.
Together, these four essential elements create a synergy that
can significantly impact the future prospects of rural areas
experiencing out-migration and economic decline. HTC is
drawing significant attention in Nebraska and nationally
because rural leaders and practitioners recognize that even the
most distressed community has, to some degree, each of the
necessary elements to launch the initiative.
The HTC approach
The HTC framework was officially established in 2001, and
pilot work began in Valley County and Ord, Nebraska, in
2002. Other sites for HTC now include the cities and towns
of Stuart, Atkinson, Mullen, David City and O'Neill, and
Chase, Perkins and Knox counties - all in Nebraska - plus
Brookfield, Missouri, and south central Kansas. The four key
elements of the HTC approach, as outlined below, are illus-
trated in examples from these communities.
Mobilizing Local Leaders
For small towns to compete in the 21
st
century, they must tap
into everyone’s potential knowledge, talent and aspirations.
The Heartland Center for Leadership Development rejects
the outdated notion of relying on “the usual suspects” to get
things done. Rural communities must be intentional about
recruiting and nurturing an increasing number of women,
minorities and young people into decision-making roles.
They need continuing leadership training programs because
today’s leadership must constantly reinvent itself to reflect
the challenges of a changing global environment.
The Holt County communities of Stuart, Atkinson and
O’Neill are a great example of neighboring communities
teaming up to build a stronger region as they work together
on several HTC efforts. One of the key outcomes of this rela-
tionship is the HomeTown Leadership Institute, an annual
leadership program in which a class of 30 to 35 individuals,
from high school students to senior citizens, participate in
Rural Nebraska faces many challenges. Youth out-migra-
tion, a daunting transfer-of-wealth scenario, and many
towns’ depleted hopes for surviving – much less thriving
– prompt a desperate plea from
Nebraska’s rural communities for
innovative strategies that will bring
hope and sustainability.
The HomeTown
Competitiveness Initiative
By Don Macke
Co-Director, RUPRI Center
for Rural Entrepreneurship
David City, Neb., its downtown square shown above, is one of
the HTC sites.
???
16 Economic Development America W I N T E R 2 0 0 6
monthly leadership lessons and experiences. Part of the pro-
gram’s impact is that it works to match participants with
leadership opportunities in the community.
With the second year reaching completion and plans
under way for next year’s class, this strategy for building
leadership is showing results: 60 percent of the participants
indicated they plan to increase their volunteer activities as a
result of the Institute, and 57 percent shared that they were
interested in seeking public office in the future.
Capturing Wealth Transfer
The Nebraska Community Foundation has completed wealth
transfer analysis for each of Nebraska’s 93 counties. Rural
residents do not always recognize local wealth because so
much of it is held through land ownership. Most people are
at first shocked, and then highly motivated, once they under-
stand the enormous amount of local wealth that will likely
transfer to heirs who have migrated out of the area. In rural
Nebraska alone, more than $94 billion is at stake over the
next few decades.
Both the power and the will to use these assets will no
longer be tied to the community unless planned gifts are cul-
tivated now. HTC sets a target of converting at least 5 percent
of the local wealth transfer into charitable assets endowed in
community foundations to fund future community and eco-
nomic development efforts.
David City got a jump-start on its HTC work with
aggressive and successful fundraising efforts. The David City
Community Foundation is using endowment proceeds to
fund the following efforts:
• A local HTC Coordinator (also the director of the
David City Area Chamber of Commerce), who concen-
trates significant time on entrepreneur support;
• A countywide leadership program, focused on teaching
the HTC framework and building a pool of leaders to
implement and sustain efforts;
• Entrepreneurship classes at David City public schools;
and
• Computers and software for public and parochial
schools.
Energizing Entrepreneurship
Far too many rural communities continue to invest resources
in economic development for job creation and business
development that exports, rather than builds, local wealth.
The RUPRI Center for Rural Entrepreneurship and its part-
ners encourage communities to become actively involved in
nurturing local enterprise in three specific areas: 1) saving
Main Street and other key businesses through planned own-
ership succession; 2) helping entrepreneurial companies that
have the potential to break through to a broader product line
and/or a larger market; and 3) using local charitable assets to
support entrepreneurship development.
What’s the significance of ownership succession? Small
towns tend to have an aging owner-operator class. In some
towns, 50 percent of their Main Street businesses soon will
face some kind of transition. Most of these business owners
have no succession plan, so HTC tries to encourage a more
optimal outcome than liquidation – which is common – by
repositioning that business or real estate with a new owner.
Local leaders in Mullen (pop. 554), located in the
Nebraska Sandhills, are using the HTC framework to help
local entrepreneurs get established and grow their businesses.
Mullen has seen promising results from its entrepreneurship
agenda. In the just the past year, six new businesses and 12
new jobs have been created. In addition, 25 new jobs cur-
rently are available as a new golf course is constructed, and
an additional 53 permanent and seasonal jobs will be created
when the course opens.
Attracting and Engaging Young People
It is not just the call of the city that impels them; it is also the
perceived lack of opportunity and encouragement to “not
come back” that drives young people away from their home-
towns. HTC has developed a formula that small towns can
use in their efforts to address this trend.
Jana Jensen, right, with the Nebraska Community Foundation, “trains the
trainers” at a HomeTown Competitiveness Academy session.
More than 90 youth participated in a “Thinking Outside
the Box” rally in Knox County.
??? W I N T E R 2 0 0 6 Economic Development America 17
Using existing data on population change, the formula
provides small towns with realistic goals for youth attraction.
In many cases, the attraction of a handful of former high
school students per year, who return with young families, can
stabilize the population. HTC teaches people how to engage
youth in positive ways, create career opportunities through
business transfer and entrepreneurship, and nurture a sense
of ownership and vested interest in the community’s future
leaders.
Knox County joined HTC in 2004 and immediately
tapped into the potential and talent in the youth represented
in its 11 communities. At a youth-led “Thinking Outside the
Box” rally, more than 90 Knox County youth participated in
activities and events that allowed the students to interact
with local resource providers and entrepreneurs, hear from
guest speakers about the opportunities for living and work-
ing in rural Nebraska, and sign up for programs and projects
that would engage them in the community. In addition to
creating excitement around bridging adult and youth agen-
das in the county, the rally resulted in several key youth ini-
tiatives, including:
• A youth chamber of commerce;
• An inventors’ club to support youth interested in
entrepreneurship;
• A proposed youth community foundation;
• Involvement of youth in a leadership program; and
• An 11
th
grade summer entrepreneurship program.
The impact in Valley County
Early results in Valley County, which lost 10 percent of its
population in the 1990s, have been promising. When Valley
County first partnered with HTC, the county had a strategic
plan with 26 diverse priorities and it focused its attention on
industrial attraction. Now the county has prioritized business
succession and growing local entrepreneurs as its two key
strategies for economic transformation.
With the help of the HTC team, Valley County has identi-
fied a number of entrepreneurial enterprises, of which 10 to
15 have growth potential. In addition, succession planning
for several Main Street businesses is bearing fruit. A leader-
ship development program, now in its third year, is drawing
both adults and high school youth. Finally, the goal of cap-
turing 5 percent of the estimated 10-year transfer of wealth
($6.3 million) has been exceeded, in addition to the success-
ful establishment of a Builder’s Club (individuals who con-
tribute to an endowment to perpetuate the HTC work) that
now includes over 50 members.
An article that ran in USA Today may best sum up the
county’s success: “In three years, Valley County, Neb., (popu-
lation 4,647) has graduated 70 from a leadership class; set up
an endowment with $1.2 million willed by a local couple;
and hired a business development coordinator. Ord, the
county seat, has made seven small-business loans from a 1-
cent sales tax fund. The county must attract 27 percent of its
high school’s average graduating class of 67 to stabilize the
population by 2010.”
In addition, the article notes that “A wealthy alum living
in Arizona flies in to teach a class on growing entrepreneurs.
A graduate came home from Lincoln to start an irrigation-
well firm. Another plans a local dental practice.”
The process
Each of the current HTC sites in Nebraska has crafted a
strategic and purposeful game plan around its core assets in
leadership, entrepreneurship, wealth and youth. Engaging in
the HTC process has created observable and impacting
results for these communities, but it wasn’t without commit-
ment and work from the beginning.
HTC isn’t right for all communities, though most com-
munities can go through a series of steps to get them to the
readiness stage. Development success at the community level
is a function of two things. First, communities need a solid
game plan that fits the community’s reality and opportuni-
ties for development. Second, it takes broad-based communi-
ty commitment and engagement in the game plan.
Having the commitment and engagement that’s needed
to get started can be gauged by the presence of:
• Buy-in with the HTC process;
• Participation in an HTC Academy (a week-long train-
ing in which a team of eight to 15 people from the
community learns about the HTC elements and
process);
• Identified and committed local champions;
• Broad-based community engagement;
• Adequate staffing and dollars;
• Willing volunteers; and
• A long-term commitment to the community’s strategic
development.
With this assessment, a community will know if it is
ready to move forward. From there, the community works
with an HTC team in establishing priorities and agendas for
work around the four key areas.
In three years, Valley County, Nebraska, has graduated 70 from a
leadership class; set up an endowment with $1.2 million willed by
a local couple; and hired a business development coordinator.
???
18 Economic Development America W I N T E R 2 0 0 6
A model for success
The hope and renewed sense of vision and purpose that
HTC is bringing to seven communities in Nebraska has been
nationally recognized. CFED’s study, “Mapping Rural
Entrepreneurship,” recognized HTC’s Nebraska communities
as one of two places in rural America with high entrepre-
neurship activity. In addition, HTC has received the
International Community Development Society’s Innovative
Program Award.
By presenting a come back/give back approach to rural
community building, HTC provides a comprehensive strate-
gy for long-term rural community sustainability. This
approach goes beyond the traditional tunnel vision of eco-
nomic development and offers communities a holistic and
realistic framework to guide their development efforts.
Basing each community’s efforts on their unique assets and
capacity creates energy around locally driven change that
happens one heart and one mind at a time. ? ? ? In David City, a crowd gathered for the ribbon-cutting opening of Mama
Moo Cow quilting.
Entrepreneurship Development Systems:
From Theory to Practice By Jennifer Malkin, CFED
Entrepreneurship Development Systems (EDS), sev-
eral of which are described in this publication, are
the new trend in homegrown economic develop-
ment. But what exactly is an EDS, and can it trans-
form a rural region?
In June 2004, on behalf of the W.K. Kellogg
Foundation, CFED and a team of experts launched
the “Entrepreneurship Development System in
Rural America” project to test the EDS concept. In
celebration of its 75th anniversary, the W.K. Kellogg
Foundation invested $12 million to support six
sites, each of which is developing an EDS. CFED is
currently tracking the progress of each collaborative
as they move from theory to practice.
The EDS framework centers around three core
objectives:
• Creating a pipeline of entrepreneurs by nur-
turing entrepreneurial aspirations in youth,
identifying and supporting potential entrepre-
neurs, and fostering an entrepreneur-friendly
environment that attracts entrepreneurs;
• Implementing a system of support for all
entrepreneurs; and
• Fostering a supportive policy and cultural
environment of entrepreneurship within the
public, private and non-profit sectors.
The six grantees represent a range of unique
contexts and approaches, each born from its own
regional reality. These entrepreneurial development
systems bring organizations and institutions togeth-
er in new and challenging ways, introduce unfamil-
iar concepts to rural communities that have little or
no entrepreneurial culture, and test approaches to
delivery in areas where economies of scale are diffi-
cult to achieve and geography is a barrier.
Elements of three of the collaboratives –
HomeTown Competitiveness in Nebraska, North
Carolina’s Rural Outreach Collaborative, and
Oweesta Collaborative – are profiled in this edition
of Economic Development America. The three
remaining collaboratives are Advantage Valley, in
West Virginia, Kentucky and Ohio; Connecting
Oregon’s Rural Entrepreneurs (CORE); and The
Northern New Mexico Empowering Business Spirit
Initiative.
??? W I N T E R 2 0 0 6 Economic Development America 19
Incorporating Entrepreneurship
into North Carolina’s Economic
Development Infrastructure
Rural North Carolina is proud to be one of six U.S.
regions working under W.K. Kellogg Foundation fund-
ing to build a rural Entrepreneurship Development
System (EDS). The team’s intent is to develop an economic develop-
ment system for firm startup and
growth as strong as the innovative
systems that the state built in the
19
th
century for agriculture and in
the 20
th
century for manufacturing.
In the 21
st
century, the new chal-
lenge is to accelerate the flow
of knowledge, ideas and resources
to entrepreneurial people in all
sectors who can reinvigorate their
own local economies.
By Leslie Scott
Director, Institute for Rural
Entrepreneurship, N.C.
Rural Center
In 2003, the North Carolina Rural Economic Development
Center recognized the need to focus more attention on small
business development and growth. The center validated that
businesses with fewer than 50 employees created most of the
net job growth in North Carolina’s rural counties between
1998 and 2002.
North Carolina has had a steady stream of manufacturing
layoffs in recent years – even “leading” the nation in 2002 –
and those job losses were concentrated in rural places. The
state’s major recent new industry recruits (including Federal
Express, Dell and CreditSuisse) are locating in urban areas
where the education levels and other infrastructure are
strongest, while the need for economic renewal becomes
more acute in the rural areas. In October 2003, the Center
created the nation’s first state-level Institute for Rural
Entrepreneurship to support self-employment, small busi-
ness development, and stronger entrepreneurial culture and
policy in rural North Carolina.
One of the first priorities of the Institute was to coordi-
nate the various organizations that educate, counsel and cap-
italize small business owners and entrepreneurs around the
state. By summer 2004, the North Carolina Business
Resource Alliance included 20 organizations representing
higher education, state agencies, nonprofits and lenders.
They were well-positioned to pursue the Kellogg EDS grant,
which required broad-based collaboratives.
The Institute for Rural Entrepreneurship now leads a 21-
organization team focused on building entrepreneurship
infrastructure in the 85 counties of rural North Carolina
over the next two years, with specific attention to three high-
poverty regions in the east and west extremes of the state.
Many of the partner organizations also provide business
development services in the 15 urban counties and will help
ensure a strong rural-urban connection.
The EDS team believes that an entrepreneurship system
can be built to parallel and complement the state’s other eco-
Four rural entrepreneurs from southwestern North Carolina answer
questions from community leaders about their business experiences.
Graham County, N.C., October 2005.
???
20 Economic Development America W I N T E R 2 0 0 6
nomic development assets. For example, North Carolina has
a strong industrial recruitment infrastructure, developed
over the past 30 years, that helps keep the state near the top
in site selection rankings. Key elements of that infrastructure
include:
• Community college-based worker training customized
to industry needs – available at 58 community colleges,
which are within a 30-minute drive of all citizens;
• A program for certifying the quality and “shovel-readi-
ness” of industrial sites and that gives certified sites
marketing priority in a site search database – this
approach was developed by AdvantageWest, a regional
economic development partnership, and later adapted
by the N.C. Department of Commerce for use
statewide;
• Financial incentive programs, including a job develop-
ment investment grant and tax credits for job creation
that favor investment in rural counties;
• A vibrant statewide network for economic developers,
the N.C. Economic Developers Association, as well as
public-private partnerships in each region;
• Professional development programs for economic
developers, including from the School of Government
at the University of North Carolina; and
• Perhaps most importantly, local and state leadership
culture that believes and invests in all those efforts.
North Carolina now requires a complementary system
focused on the education, technical assistance, financing,
networking and policy culture for entrepreneurs to create
“homegrown jobs.”
The Kellogg Foundation and the national think tank
CFED describe five pillars of a comprehensive system for
developing successful entrepreneurs: Entrepreneurship edu-
cation for all ages; technical assistance for business owners at
all stages; access to capital; entrepreneur networks; and sup-
portive culture and policy. These are the same five areas that
rural business owners identified as needing improvement
when they were convened in focus groups in 22 distressed
and minority communities throughout North Carolina in
2003.
The Institute for Rural Entrepreneurship and partners
developed a baseline assessment of those five EDS pillars in
rural North Carolina, which revealed:
• Much of the rural adult workforce has low literacy, so
traditional education formats don’t reach them.
Entrepreneurship education must also be more wide-
spread for K-12 schoolchildren, the next generation of
business owners.
• The current system of technical assistance is better
developed for existing small businesses than for aspir-
ing or survival entrepreneurs, who require more hand-
holding and are less likely to travel to a stranger to seek
help.
• Loan capital providers have ample funds but many
aspiring rural entrepreneurs need improved business
literacy to become qualified candidates, and growth
entrepreneurs need more angel investors and venture
capital.
• Local networks of rural entrepreneurs are rare and the
flow of new ideas to the state’s distressed places is slow.
• Limited understanding of entrepreneurship prevails
among rural elected boards – and the local workers –
who long reaped the benefits of the industrial branch
plant or farm economy and are now unequipped for
the innovation economy.
Based on this assessment and direction from the Kellogg
Foundation, the EDS team developed the following work
plan for addressing the five elements:
1. Demystify, publicize and improve education offerings for
rural entrepreneurs at various stages of business develop-
ment. Educate rural children to understand and practice
entrepreneurial thinking their whole lives. Pilot a program to
graduate urban-educated technology entrepreneurs back to
rural areas.
2. Create a seamless collaborative system of high-quality
technical assistance. Design creative approaches to reach all
of North Carolina’s rural entrepreneurs near where they live
with affordable business problem-solving assistance –
through trained community brokers, regional events, Web-
based tools, and distance learning. Develop confidentiality
agreements for service providers to cross-refer clients, as well
as a common set of performance metrics to measure joint
economic development impact.
3. Increase individual understanding and uptake of avail-
able financial capital. Develop interactive materials, work-
shops and Web tools for rural entrepreneurs and their busi-
ness counselors about available entrepreneurship capital
sources and their requirements. Identify capital gaps and
work jointly to fill them.
4. Use people and information networks to connect rural
entrepreneurs with new ideas. Draw upon proven experts
such as the Council for Entrepreneurial Development to
develop materials and workshops for communities and
entrepreneurs on establishing local entrepreneurs’ clubs,
mentor/apprentice arrangements, and topic-centered forums.
Ensure rural entrepreneurs have access to high-speed
Internet at nearby technology centers, if not at home.
5. Develop cultural change agents and policy to support
them. Develop the capacity of rural leaders to support entre-
preneurship as an economic development strategy. Inform
local, tribal, state and federal leaders about simple steps they
can take to strengthen their entrepreneurial culture and out-
comes. Track the aggregated results of the collaborative,
including in influencing policy and public opinion.
Creating a seamless system for developing entrepreneurs
is ambitious but critical for rural prosperity. With continued
innovation and adaptation of its economic development
infrastructure, North Carolina aspires to be known as a
top place for both corporate relocation and the startup and
growth of new firms, including in the most rural areas.
? ? ?
6
N.C. Employment Security Commission data
???
The Pine Ridge Indian Reservation in southwestern
South Dakota, home to the Oglala Lakota (Sioux), is
one of the most hauntingly beautiful places on earth.
Its varied landscape ranges from rolling grassy hills to deep, forested
canyons, to the castle-like peaks, gullies, buttes and wide prairies of
the Badlands. The reservation covers an area of 3 million acres, rough-
ly the size of Connecticut.
By Elsie Meeks
Executive Director
First Nations Oweesta Corporation
However, it is also one of the poorest places in the United
States. The decimation of the great herds of buffalo in the
late 1800s was followed by confinement to the reservation by
federal policy. Although much of the Lakota culture and
sense of ancestry remains, this effectively ended the Lakota
peoples’ lives as a self-sufficient nation.
As a result, the Oglala Lakota people have one of the low-
est life expectancies of any group of people living in the
United States. Fifty-two percent of Pine Ridge’s 30,000 resi-
dents live below the poverty line, compared with 13 percent
statewide. Of the various government experiments attempted
over the past 100 years to build the economy of the Lakota
people, not one has succeeded.
In 1985, tired of the government’s top-down approach,
Lakota people from across the reservation decided to take
things into their own hands. During an economic develop-
ment planning summit, ideas to address unemployment and
the lack of private businesses on the reservation began to
emerge. Out of this summit, the Lakota Fund, the first Native
community development financial institution (CDFI), was
born with the mission of creating a private-sector economy
through financing and capacity-building for entrepreneur-
ship development. Aided by the First Nations Development
Institute’s Oweesta Program, the Lakota Fund began lending
in 1986.
1
Myriad challenges
The challenge was much greater than anyone expected. After
several years of lending, a study revealed that 85 percent of
the Lakota Fund’s borrowers had never had a checking or
savings account; 75 percent had never had a loan; and 95
percent had never owned a business. Added to this was a
complete lack of business experience. Since there were only a
few private businesses on Pine Ridge when the Lakota Fund
was started (and most were owned by non-tribal people), few
people had even had the chance to work in a business.
The Lakota Fund itself faced organizational challenges as
it undertook difficult programs without local networks of
support and without the ability to hire the experienced,
knowledgeable staff that might be found in an urban setting.
It had to begin with baseline development of not only staff
and board, but also with an introduction of private sector
business principles to the Lakota community. Most of the
people who wanted to start a business were first-generation
entrepreneurs.
Indeed, when the Lakota Fund first started, people found
themselves wondering if being in business meant that they
were forsaking their culture. Business ownership had not
been a part of their history, as Lakota people had been
nomadic hunters and gatherers. There also was a perception
that businesses should be owned by the tribal government,
W I N T E R 2 0 0 6 Economic Development America 21
Entrepreneurship on
Tribal Lands
The Lakota Prairie Ranch Resort, under construction near Kyle,
South Dakota, is the first motel on the Pine Ridge Reservation.
???
22 Economic Development America W I N T E R 2 0 0 6
instead of by individual entrepreneurs. This perception per-
sisted even though all of the tribally-owned businesses at
Pine Ridge had failed.
In addition to the ambivalent perception of business
ownership, there was a need to teach people about credit and
the importance of repaying loans. Because of the grant-wel-
fare mentality and poor performance of Bureau of Indian
Affairs credit programs, people had to adjust to the knowl-
edge that loans must be repaid. Changing mindsets about the
role of private business ownership on an economy, and the
accountability of borrowers, became the Lakota Fund’s first
goal. The second was to teach simple financial literacy.
Despite these enormously challenging circumstances,
during its 20 years of operation the Lakota Fund has
approved approximately 600 loans, mostly in the range of
$1,000 to $75,000, for a total of over $3 million. It also has
provided countless hours of technical assistance, training and
marketing services to more than 1,600 arts and crafts micro-
entrepreneurs.
The June, 2003 South Dakota Business Review noted that
since 1985, real per capita personal income growth in
Shannon County (encompassing the Pine Ridge Reservation)
outpaced that of South Dakota as a whole, with growth rates
of 80 percent and 44 percent, respectively. Growth in real per
capita earnings for Shannon County was 92 percent, com-
pared to 73 percent for the state. Shannon County’s employ-
ment growth of 80 percent during the 1990s was the second
fastest of all South Dakota counties.
These changes came about one small business at a time.
Crazy Horse Construction grew from one part-time subcon-
tractor to a multi-million dollar company. Big Bats
Convenience Store also has over $1 million in revenue. Both
of these businesses have contributed significantly to the
decline in unemployment, but there are numerous other
smaller businesses that together have made a tremendous
impact.
Continuously adapting
Survival and growth for an organization like the Lakota Fund
in an environment such as Pine Ridge is difficult, to say the
least. But it is precisely because of these difficulties that the
Lakota Fund has become a model resource, creating new
programs and marshaling existing institutions to engage in a
systematic approach to entrepreneurial development.
For instance, some of the biggest barriers to business
development are the reservation’s poorly constructed busi-
ness regulations, lack of zoning laws and a dysfunctional
court system. Several years ago, the Lakota Fund was instru-
mental in creating the Pine Ridge Area Chamber of
Commerce by applying for the initial startup grant. The
Chamber has since focused on working with the Oglala
Lakota Tribal government to make changes to its laws and
constitution. The first step in this process was to educate
Tribal Council members about effective economic systems,
since most Council members did not have business experi-
ence. Workforce development is another area of the
Chamber’s focus. Pine Ridge’s multi-generational high
unemployment rate has resulted in a very inexperienced
workforce, prompting a commitment to increasing the busi-
ness skills of the community.
It has taken the Lakota Fund 20 years to understand that
it must move beyond just financing and technical assistance
to have a real impact on Pine Ridge’s business environment.
So recently, the Lakota Fund started the Wawokiye Business
Institute (WBI), a partnership with the Pine Ridge Area
Chamber of Commerce, Oglala Lakota College and the
Lakota Fund.
In addition to providing client-centered capacity-building
for entrepreneurship through training, coaching and a net-
work of specialists, its overall purpose is to build a better
The Foodstop Café in Kyle, S.D., grew with the help of loans and technical
assistance from the Lakota Fund. Carol and Buzzy Ferguson are pictured.
Changing mindsets about
the role of private business
ownership on an economy,
and the accountability of
borrowers, became the
Lakota Fund's first goal.
??? W I N T E R 2 0 0 6 Economic Development America 23
business environment in a culturally sensitive manner. The
goals of the WBI over the next three years are to:
• Provide intensive, long-term service to the 65 active
clients of the Lakota Fund portfolio;
• Provide consultation services to 200 prospective entre-
preneurs per year;
• Start 40 businesses and create 250 jobs;
• Provide refresher training opportunities to 300 business
owners and employees; and
• Establish a network of 25 technical assistance profes-
sionals to support entrepreneurship on the reservation
in the disciplines of accounting, marketing, sales,
fundraising, strategic planning and production man-
agement.
Replicating the model
Pine Ridge’s model of creating a systematic approach to
reservation socio-economic change through entrepreneur-
ship is now being replicated at a number of other reserva-
tions, and Native CDFIs again are the catalysts. Two such
organizations are Wind River Development Fund at the
Wind River Reservation in Wyoming and Four Bands
Community Fund at the Cheyenne River Reservation in
South Dakota.
Wind River Development Fund (WRDF) is a true partner
in helping reservation entrepreneurs take their business ideas
to the next level. WRDF is not just a lending organization; it
is a comprehensive economic resource for the community. It
provides business training, one-on-one business develop-
ment assistance and small business loans for entrepreneurs.
By developing extensive partnerships with tribal, state and
federal organizations, it helps ensure reservation entrepre-
neurs can tap into all the resources available to them. Four
Bands Community Fund is another CDFI that is working to
build and strengthen reservation-based enterprises that can
further the goals of Tribal self-determination and self-suffi-
ciency, and a stronger economy for the Four Bands of the
Lakota Nation.
Oweesta itself in many ways has grown out of the inspira-
tional work of the Lakota Fund by way of initial sponsorship
from the First Nations Development Institute. As the only
U.S. Treasury-certified, national Native CDFI intermediary in
the country, Oweesta assists Native communities with finan-
cial education training, technical assistance, and access to
local and national capital markets. From Maine to
Washington, nearly 70 Native communities have either start-
ed or are in the process of starting CDFIs. Many of them also
are finding that the process of building entrepreneurs is part
of the process of nation-building.
During his tenure as president of the World Bank, Jim
Wolfenson toured the Pine Ridge Reservation and saw its
poverty first-hand. After his tour, he said, “Private ownership
around the world is key to easing poverty…To me, what I'm
seeing here isn’t the poverty, it’s the chance to see new busi-
nesses that are being established and meet entrepreneurs that
are taking their future into their own hands. The difficulties
we’re trying to solve around the world are to be found right
here. The first is ownership. The second is lack of recognition.”
Oweesta believes that Native CDFIs, given their unique
combination of training, technical assistance and lending
services, are the most effective tool that a tribe or Native
community can employ to create the financially sustainable
economies Mr. Wolfenson alludes to. They create local entre-
preneurs, homeowners and tribal businesses. They also devel-
op the infrastructure and knowledge that lead to solid and
culturally appropriate governance, legal systems, business
practices and community-focused financial opportunities.
? ? ?
1
The First Nations Development Institute is a policy, research, grantmaking
and lending institution. Its Oweesta Program, which became the First
Nations Oweesta Corporation in 1999, works with Native financial institu-
tions and financial education providers to provide capital for Native devel-
opment efforts.
???
24 Economic Development America W I N T E R 2 0 0 6
As the economy continues to globalize,
developed countries with higher wage rates,
like those of the United States, increasingly
seek to encourage economic
development that focuses on the
front end of the product lifecycle
– R&D. The goal is to get new
ideas coming out of university
and private laboratories to market
as quickly as possible.
By Thomas S. Lyons, Ph.D. and
Gregg A. Lichtenstein, Ph.D.
Innovation Commercialization
in a Rural Region:
The Case of Greater Johnstown, Pennsylvania
The rationale for this economic development strategy is that
it leverages the U.S.’s strengths, which include knowledge,
expertise and the availability of financial capital, and mini-
mizes its greatest weakness, which is its inability to compete
with developing countries when it comes to cost-saving stan-
dardized production.
This strategy – which goes by several names, including
technology transfer, technology commercialization and
innovation commercialization – has been adopted and sup-
ported at all levels of government. Millions of dollars are
poured into these efforts each year, and yet we are only
beginning to understand what does and does not work in
this arena.
There is a strong tendency to attempt to replicate the suc-
cesses of places like Silicon Valley, the Golden Horseshoe and
the Research Triangle, using essentially the same tools and
approaches. However, the question of whether these regions’
success in implementing innovation commercialization
strategies can and should be replicated in other locations
remains unanswered.
This article examines an innovation commercialization
effort in the Greater Johnstown, Pennsylvania region to
explore the compatibility between traditional approaches to
this strategy and the opportunities and constraints posed by
a rural area.
The Greater Johnstown region’s approach
The Greater Johnstown region is a principally rural area in
the western part of Pennsylvania that comprises two coun-
ties and includes the small cities and towns of Johnstown,
Cresson, Ebensburg, Loretto and Windber. The region has
struggled in recent decades with the decline of the coal and
steel industries and the departure of manufacturing plants to
offshore locations. It also has a declining population and a
median household income that is 28 percent less than that of
the nation.
Despite these challenges, the region is not without its
assets. It is home to four small institutions of higher educa-
tion – Mount Aloysius College, Penn Highlands Community
College, Saint Francis University and the University of
Pittsburgh at Johnstown; six private R&D organizations with
a wide spectrum of activities and several vibrant companies
in diverse industries. The four colleges/universities boast a
total enrollment of about 7,000 students and 650 faculty;
however, none of these institutions grants a graduate degree
in a technology-related field.
The private R&D facilities, however, do engage in post-
doctoral R&D work. In an effort to leverage these assets,
Johnstown Area Regional Industries (JARI), a regional eco-
nomic development organization, and several other partners
applied to the Commonwealth of Pennsylvania’s Keystone
??? W I N T E R 2 0 0 6 Economic Development America 25
Innovation Zone (KIZ) Program for funding to create a
Greater Johnstown KIZ (GJKIZ).
The KIZ Program was developed by the Pennsylvania
Department of Community and Economic Development as
a vehicle for investing in regional collaboratives involving
institutions of higher education, communities and private
businesses. Its goal is to foster the creation of new technolo-
gies and to support the entrepreneurs who take these tech-
nologies to market. The state investment in a KIZ can be
used to support operations, engage in planning and provide
a pool of tax credits.
JARI and its partners were successful in getting the
GJKIZ recognized and supported by the state. GJKIZ’s win-
ning approach was two-fold: to link together the intellectual
capital of the institutions of higher education and the private
R&D organizations, then link that capital with local entre-
preneurs and enterprise development service providers. The
overall goal is to maximize the region’s ability to create new
ideas and commercialize them without creating an addition-
al level of administrative bureaucracy.
The plan
The GJKIZ seeks to develop an entrepreneurial culture in a
region that was once dominated by a single industry – steel –
by targeting four industry sectors that have experienced
rapid growth in the region in recent years: advanced manu-
facturing, environmental/energy technology, information
systems/technology, and life sciences.
The first phase of this effort was to pilot the GJKIZ’s plan
by working with one of the private R&D organizations in the
region, the Center of Excellence for Remote and Medically
Under-Served Areas (CERMUSA), located on the campus of
St. Francis University. The plan was to develop a system to
identify opportunities with commercial potential, profile the
entrepreneurial skills and experience needed to capture these
market opportunities, then recruit entrepreneurs capable of
taking the respective opportunities to market.
CERMUSA was selected as the test bed for the GJKIZ’s
approach to innovation commercialization because of its
international reputation as a high-quality research lab in its
field, the relevance of its work to the region’s industry
sectors of interest, its sizeable inventory of technology inno-
vations that had not yet been successfully taken to market,
and its location on the St. Francis campus and close univer-
sity ties.
The process
The first step was to establish a set of criteria for evaluating
commercialization opportunities (e.g., a clear set of cus-
tomers with the ability to buy the offering, investment
required, potential rate of return and immediacy of revenue
stream, etc.). Once these were established, a team reviewed a
portfolio of CERMUSA’s innovation activities, from which
eight potentially viable market opportunities were identified
for further exploration.
CERMUSA then hired a student intern – an incoming
student to St. Francis University’s MBA program – to con-
duct a market feasibility analysis on each opportunity. The
student produced a two-page summary of each market
opportunity (with additional documentation), which was
reviewed by the participants in several rounds as more
detailed research was done.
After sufficient research, a meeting was convened to eval-
uate and prioritize all eight opportunities and to determine
which ones to pursue. Although all eight looked promising
under different conditions, one market opportunity was
selected to be the primary focus of the project’s commercial-
ization effort.
The next step in the process, which is currently under-
way, is to find a local entrepreneur to lead the commercial-
ization of the selected opportunity. Taking each idea to mar-
ket will involve, among other things, arranging a deal to spin
out the opportunity while maintaining a relationship with
CERMUSA.
Once these arrangements have been made, the entrepre-
neur will prepare a business plan with assistance from the
local Small Business Development Center (SBDC). Ongoing
support in obtaining contracts, seed money, etc. will be pro-
vided by stakeholders in the region. Using the tools of the
Entrepreneurial League System
®
(see box on p. 27), the
The plan was to develop a system to identify opportunities
with commercial potential, profile the entrepreneurial
skills and experience needed to capture these market
opportunities, then recruit entrepreneurs capable of
taking the respective opportunities to market.
???
26 Economic Development America W I N T E R 2 0 0 6
entrepreneur’s skill level will be assessed and initial assis-
tance will be tailored accordingly.
Using this test case, the GJKIZ will develop a plan,
process and capacity for commercializing other technologies
emanating from CERMUSA, St. Francis University and other
R&D organizations in the region.
Lessons learned
The experiences in the Johnstown region have yielded les-
sons regarding the innovation commercialization process –
particularly the business concept recognition and feasibility
testing process – and broader insights regarding innovation
commercialization in a rural region.
• Feasibility assessment of potential market opportuni-
ties is best done in multiple iterations. Commercializ-
able market opportunities do not emerge fully formed
but must be shaped via rounds of feedback before they
can be effectively evaluated.
• It is tremendously helpful to prepare write-ups that
review the feasibility of each prospective market
opportunity, such as those produced in this case by the
MBA intern at CERMUSA. These make it possible for
multiple people to review the same opportunity several
times, provide coherent feedback, and understand and
comment on the observations of others.
• R&D laboratories tend to think in technological terms
in their assessment of market opportunities. This is
only half of the equation. The missing perspective is
often the “commercial” one. MBA students, with the
support of experienced entrepreneurs, can effectively
provide this missing business perspective.
• It is important to engage several successful entrepre-
neurs and experienced businesspeople at various points
in the assessment process. Having enough pairs of com-
petent eyes is essential to a review of sufficient depth
and breadth, and is a way to permit the full review of a
greater number of prospective opportunities.
Participating entrepreneurs must have experience in
a range of different market opportunity types so that
their judgments will be varied. This will insure that
opportunities are not judged as being infeasible simply
because the entrepreneurs involved do not have the
necessary understanding or experience to pursue them,
rather than because they are unworkable in general.
• Greater involvement of business students from partici-
pating universities, especially those with entrepreneur-
ial ambitions, in the assessment process can be very
beneficial. This exposes these students to opportunities
that they may want to pursue, either on a full-time
basis or part-time as they complete their degrees. This
can be facilitated by establishing a “Market
Opportunity Register” consisting of feasibility study
write-ups of the various opportunities assessed.
• Many universities try to put tech commercialization
programs in place whole cloth, before the first oppor-
tunity has even been identified. In other words, they
take a programmatic approach. St. Francis University is
only now building its innovation commercialization
apparatus in response to a process that hopefully will
commercialize a real market opportunity. This puts the
university in the position to build and refine its formal
process and to use the proceeds from the first success-
ful commercialization effort to fund its innovation
commercialization office.
• Another commonly held misperception in the tech
commercialization arena is that the viability of an
opportunity is based solely on its patentability, e.g.,
something that can be managed as intellectual property
(IP). However, in the Johnstown case, eight viable mar-
ket opportunities were identified and assessed, none of
which was likely to be patentable.
Yet it was deemed that all of these opportunities had
potential for revenue generation, with possibly a very
favorable return on investment rates. This suggests that
conventional wisdom may be unnecessarily limiting.
We may be missing countless opportunities for local
and regional economic development by adhering to a
narrow definition of opportunity viability.
This last observation has particular relevance for rural
areas that are attempting to commercialize innovations. A
focus solely on patentable market opportunities may be
effective in regions with a strong technological base and edu-
cational institutions that are actively engaged in research, but
this is not the case in most rural areas.
Rural areas literally cannot afford to overlook non-
patentable business opportunities just because they don’t fit
the traditional model of innovation commercialization. In
Johnstown, the intent is to use early successes with non-
patentable opportunities to leverage activity in the venture
capital-backed IP arena in the future.
The lack of infrastructure for supporting innovation
commercialization in rural areas must be acknowledged and
addressed. Greater Johnstown is fortunate to have assets such
as institutions of higher learning, private R&D facilities, larg-
er companies in industries important to the global economy,
and economic development officials who are thinking and
acting entrepreneurially. To its credit, the community has
worked to identify all of its assets, to link them together and
to focus them on supporting regional innovation commer-
cialization efforts.
Rural communities that do not possess such assets may
be faced with only two choices: to not attempt to undertake
an innovation commercialization strategy, or to partner with
an urban area in the larger region in a way that would per-
mit the rural community to benefit from the spin-off com-
mercialization activity taking place in the city. ? ? ?
??? W I N T E R 2 0 0 6 Economic Development America 27
The critical determinant of a
community’s economic vitality is
the quantity and quality of its entre-
preneurs and how well they are
matched to the market opportuni-
ties they pursue. We methodically
cultivate many other kinds of talent,
why not entrepreneurs?
Modeled after one of the most
successful processes in the world for
systematically developing talent –
the farm system of professional
sports – the mission of the
Entrepreneurial League System
®
(ELS) is to create a supply of highly
skilled entrepreneurs capable of
building successful companies, and
to do so in sufficient numbers to
transform a region’s economy and
create individual as well as commu-
nity wealth.
The ELS establishes a breeding
ground for entrepreneurs and helps
them build the skills necessary for
success as they work their way up
the various league levels, just as ath-
letes do in baseball. Current pro-
grams in enterprise development
only deal with half of the equation
for economic success: They address
the needs firms have for technical
and financial assistance, but do
nothing to build a pipeline of highly
skilled entrepreneurs capable of
using that assistance effectively to
build companies.
The ELS classifies entrepreneurs
into different “league” levels accord-
ing to their skills in starting and
operating a new enterprise.
Entrepreneurs are recruited by
Talent Scouts, who use a variety of
methods to find or encourage indi-
viduals with the potential and drive
to become an entrepreneur. Led by a
Performance Coach, entrepreneurs
at the same skill level are organized
into Success Teams to develop the
skills necessary to be successful
entrepreneurs and to support each
other in the tasks needed to build
their businesses.
With the help of their coaches,
entrepreneurs establish individual-
ized “game plans” that help them
focus their energies on reaching
their goals. Consulting services,
technical and financial assistance are
customized and delivered according
to the entrepreneurs’ level of devel-
opment and their need. Participat-
ing service providers are organized
into a coordinated, disciplined sys-
tem to improve entrepreneurs’ abili-
ty to get the right kind of help at the
right time and the right price. These
processes facilitate the entrepre-
neurs’ progress up the ladder to the
major leagues – not in terms of size,
but in terms of performance and
profitability.
The ELS also includes an inno-
vative market development service
led by individuals known as
Opportunity Scouts, whose function
is to actively identify new market
opportunities and link them to
existing and prospective entrepre-
neurs. The final operational compo-
nents are local stewardship and per-
formance monitoring, which lead to
a system capable of continuous
improvement.
The ELS provides entrepreneurs
with a clear ladder to success and
access to resources, psychological
support and opportunities to devel-
op new skills. These benefits make
the business less costly to start, more
likely to succeed, less time-consum-
ing to achieve success and more
capable of generating a greater
return on investment. For service
providers, the ELS produces more
qualified, prescreened clients who
are willing and eager to capitalize on
the assistance they receive to grow
their businesses.
The Entrepreneurial League
System was created by this article’s
authors, Gregg A. Lichtenstein and
Thomas S. Lyons.
The Entrepreneurial League System
®
???
28 Economic Development America W I N T E R 2 0 0 6
Kentucky Leadership Program
Coaches Entrepreneurs
In Kentucky, building a strong entrepreneurial cul-
ture and economy is more important today than
ever as the state makes the painful transition away from a traditionally
tobacco-dependent economy. To
address this challenge, the
Governor’s Office of Agricultural
Policy and the Kentucky
Agricultural Development Board
have invested more than $1 mil-
lion in tobacco settlement monies
to create the Kentucky
Entrepreneurial Coaches Institute.
By Ronald J. Hustedde
Director,
Kentucky
Entrepreneurial
Coaches
Institute;
Professor of
Community
and Leadership
Development,
University of
Kentucky
This innovative program is creating a regional network of
community leaders who are entrepreneurial advocates and
coaches in 19 tobacco-dependent rural counties in the north-
eastern part of the state. The goals are to facilitate the emer-
gence of a strong entrepreneurial culture and to strengthen
the region’s entrepreneurial infrastructure.
The idea for the Institute germinated during my 20 years
working in rural areas. I observed that many self-taught “nat-
ural” entrepreneurial leaders and coaches felt isolated from
each other and expressed frustration about being ill-
equipped for their roles. In other cases, I saw that rural com-
munities were entrepreneurial-tolerant but not necessarily
entrepreneurial-friendly. My colleagues and I believe that if
we invest in rural lay leaders – providing them with new
skills and knowledge and expanding their network base –
they can significantly influence cultural, political and eco-
nomic changes in the region. This article explains exactly
how the coaching program works.
The KECI Fellows
The process to apply for participation in the program is
highly competitive. Those chosen receive a fellowship valued
at $18,000, which covers the costs of nine seminars, mini-
grant projects, meals and lodging.
The first class of KECI Fellows participated in the pro-
gram from September 2004 through November 2005. The
second class began its training in September 2005 and will
finish the program in November 2006. Both classes were
designed to be occupationally diverse; participants have
backgrounds in agriculture, small business, education, eco-
nomic development, homemaking, professional services and
other fields.
The initiative also is designed for sustainability. After
graduation, each participant donates a minimum number of
hours to entrepreneurial advocacy, coaching and leadership
for the following two years, and participates in four post-
graduation seminars.
The curriculum
Over the 15-month period, the Fellows are exposed to some
of the best and brightest thinkers and activists in rural entre-
preneurship, leadership studies and community develop-
ment. The seminars are intended to teach leadership and
coaching skills, to broaden creativity, and to actively engage
participants in the community.
Although each of the seminars is unique, they tend to
include the following four elements: 1) visits with innovative
entrepreneurs from the region; 2) the arts – dance, story-
telling, poetry and music are used to stimulate fresh perspec-
tives; 3) required “homework” between sessions, to foster
more engaged and effective leaders; and 4) a teaching
methodology that minimizes the lecture format and actively
engages the participants in dialogue.
Fellows of the Kentucky Entrepreneurial Coaches Institute
learn how to help entrepreneurs through a form of
structured facilitation known as “supercoaching.”
??? W I N T E R 2 0 0 6 Economic Development America 29
The first seminar introduces the “big picture” of entrepre-
neurship, leadership and community development from
leading thinkers in the field. Participants expand their cre-
ativity by using the tools of appreciative inquiry and asset
mapping. After the first seminar, the participants interview
citizens, leaders and entrepreneurs in their home counties to
become more engaged leaders and expert listeners.
The second and third seminars provide practical skills
about entrepreneurial coaching. Six aspiring entrepreneurs
from the region are coached during these sessions. The
Fellows learn a methodology known as “Supercoaching,” a
form of structured facilitation in which the coach asks point-
ed questions about the core competencies of the manage-
ment team and the uniqueness of the product or service, as
well as issues of competition, marketing and finance.
As homework, the Fellows then start putting their
networks to work. First, they find their own entrepreneur
(or entrepreneurial team) back home to coach. After six or
seven sessions, they work closely with the entrepreneur or
entrepreneurial team to put together a “dream team” of advi-
sors, investors, suppliers, customers or a potential board of
directors for whom the entrepreneur makes a 15-minute
presentation.
The coach does not provide any technical assistance or
advice but keeps the entrepreneur focused on the tough
questions that any investor might ask. In essence, this presen-
tation engages the entrepreneur with a cross-section of valu-
able contacts in the community or region. Established tech-
nical assistance providers are brought into the process when
needed.
Other seminars cover networking, rural entrepreneurship
policy, marketing, visits with entrepreneur-friendly commu-
nities and business incubators (such as ACEnet in Athens,
Ohio), and youth entrepreneurship.
Mini-grant experiences: Building regional alliances
One of the goals of the Institute is to form a regional identi-
ty, because Kentuckians tend to identify strongly with their
individual counties. The mini-grant experience helps foster
this regional identity by putting Fellows in cross-county
teams to develop mini-grant project proposals that are cri-
tiqued by the class.
Class participants form six teams based on their interests
in building an entrepreneurial culture. Team projects have
included technical college and high school entrepreneurship
initiatives; an entrepreneurial contest for innovative ways to
use wood waste; policy work on starting a regional innova-
tion center; a seven-county agri-tourism project and an
entrepreneurial awareness program. Project funding is equal
to $1,000 per team member (teams have ranged in size from
three to 10), and teams are required to find an outside match
of at least 25 percent.
The mini-grants provide direct experience in projects that
build an entrepreneur-friendly region, but the most impor-
tant aspect of the experience may be the written and verbal
reports that Fellows present about the lessons learned. These
visceral reflections allow participants to internalize insights
about entrepreneurial leadership and advocacy. They also
foster new thinking about regional identity and cooperation
among institutions. For example, elected leaders from seven
counties in the region are moving forward with the agri-
tourism initiative, a tremendous accomplishment in a region
with traditionally county-based mentalities.
Rural Scotland: Understanding global markets
The 2004-2005 class took part in a 10-day tour of rural
Scotland, mostly in the highlands and islands area, and the
2005-2006 class will take a similar tour. This region was cho-
sen for its similarities to Appalachian Kentucky and because
many Kentuckians can trace their ancestry to the British
Isles.
The trip offers multiple learning opportunities: to
observe youth entrepreneurship initiatives, entrepreneurial
coaching in action, and how rural entrepreneurs can link to
global markets; to learn about rural entrepreneurship policy
and to visit an entrepreneurial-friendly community. The par-
ticipants had first-hand experiences of how isolated rural
entrepreneurs can tie into markets in the U.S. and Asia. As
one participant noted, “I thought our county was isolated,
but isolation is relative in a global context. These (Scottish)
people are even more remote. If they can tie into global mar-
kets, so can we.”
While there were many educational benefits from the trip,
the shared experience built an incredibly strong support net-
work among the Fellows. “We’re family now,” was a common
refrain. This is significant thinking in a region that is proud
of its tradition of fierce independence.
Evaluation: So what?
An external evaluation team is collecting quantitative and
qualitative records of the Fellows’ accomplishments and
other lessons learned, and a report about the 2004-2005 class
will be issued in the spring of this year. Not only are those
graduates now coaching business start-ups and expansions,
they are making differences in changing the mindset and cul-
ture of the region through their mini-grant experiences. In
addition, five participants from the 2004-2005 class and one
from the 2005-2006 class are running for elected office on
pro-entrepreneurship platforms.
Fortunately, the project’s funders understand that the
most significant payoff from this initiative probably will not
be seen for at least five years. However, the reputation of the
Institute’s current accomplishments is triggering interest in
expanding the program to other parts of the state. Our team
also has been approached by economic development leaders
from several states who are interested in replicating aspects
of the initiative. Indeed, the Kentucky Entrepreneurial
Coaches Institute may serve as a model that can be integrat-
ed into existing leadership programs throughout the country.
For more information, visit the Kentucky Entrepreneurial
Coaches Institute Web site athttp://www.uky.edu/Ag/KECI/.
? ? ?
???
30 Economic Development America W I N T E R 2 0 0 6
Wyoming Business Camp
Encourages Youth to Make
Their Own Jobs
The Converse Area New Development Organization
(CANDO) in Douglas, Wyoming, is concerned about giv-
ing Wyoming youth a reason to stay in the state. If teens cannot find
the jobs they are look-
ing for after graduating
high school or college,
CANDO is encourag-
ing them to consider
making those jobs by
creating their own
businesses.
By Linda Wolfe
Research shows that youth and young adults ages 14-21
come up with innovative, workable ideas for new businesses.
That’s why CANDO created its Youth Business Camp to give
Wyoming youth the entrepreneurial skills they need to turn
their business ideas into reality. The camp curriculum was
designed by CANDO in partnership with Paul Guinn, a seri-
al entrepreneur who also worked with Michael Dell when
Dell Computers was just starting up.
For the past five years, almost 100 teens ages 14-18 have
participated in the statewide camps. Some already have a
business; others have ideas but no business knowledge. Not
only does the camp increase their chances of being a success-
ful business owner, it also makes them better employees.
Once the camp has ended, they truly appreciate what it takes
to run a business.
The curriculum
Camp begins on a Sunday evening, when introductions are
made and camp rules given over pizza. The camp experience
is based on a team competition for a $250 award contributed
by a successful Wyoming entrepreneur.
Students then perform a personal skills analysis and cre-
ate a skills resume. After dividing into teams, leadership posi-
tions in four areas are posted for elections – executive, finan-
cial, marketing, and production. Students are encouraged to
run for at least one of these positions, using their skills
resume to introduce themselves and to get other members of
the camp to elect them.
Once the teams are formed, they receive a booklet of les-
sons on each step of creating a business plan and building a
business. Teams then begin working on their businesses by
choosing a name and logo.
Monday: Organizing a business
On Monday, students hear from a local entrepreneur about
his experiences. They then learn about business visions, val-
ues and plans; mission statements; performance goals; insur-
ance needs and exit strategies. After dinner, students partici-
pate in fun team-building activities.
Tuesday: Marketing
On Tuesday, participants develop a market survey and ven-
ture out into the community to conduct it. While perform-
ing the survey, teams also select the location for their busi-
ness. Students return to analyze their surveys and learn about
creating a promotion plan; using advertising media, includ-
ing how to create a radio spot; and designing flyers and signs.
Education and
Outreach
Manager,
Converse Area
New
Development
Organization
Every student walks away a winner from the CANDO Youth
Business Camps, but some walk away with more after
winning the $250 best business award.
???
Not only does the camp increase their chances of
being a successful business owner, it also makes them
better employees. Once the camp has ended, they truly
appreciate what it takes to run a business.
Students then go to a local radio station to create their ad,
which will be played the day prior to and the day of sales.
Students also tour a local business and create t-shirts to wear
on sale day.
Tuesday evening is focused on teaching finance princi-
ples, which continues on Wednesday. Topics include inputs,
fixed costs, startup budget and choosing price points.
Wednesday: Finance
On Wednesday, finance instruction continues with lessons
on contribution margin and break-even analysis, leasing ver-
sus purchasing equipment, cash flow projections, balance
sheets, and how to secure a loan. Toward the end of the day,
teams will have filled out actual bank paperwork to apply for
a loan. The teams then go before a bank loan officer who
reviews their applications and talks to them as if the ventures
were true business startups.
Once the teams receive their loans, they learn about stag-
ing equipment, prototyping the product, purchasing sup-
plies, and creating an action and risk plan for sale day.
By now you might think we’ve really worked camp par-
ticipants hard and that would be correct. That’s why on
Wednesday evening we take a hard-earned break and float
for two hours down the North Platte River.
Thursday: Making the sale
Thursday puts the students’ training to the test as they open
their businesses and begin sellng to the community of
Douglas. What, you ask, are they selling? Lemonade!
Think a lemonade stand is not appropriate? Donald
Trump didn’t. On one season of his TV program, “The
Apprentice,” the first task of the contestants who were com-
peting to work as his apprentice for one year was running a
lemonade stand.
The best camp team sales to date have been $298.26.
Students are allowed to divide up the profit as outlined in
the exit strategy and keep it. However, that’s Friday. Until
then, students spend the evening enjoying a movie at the
local theater.
Friday: Wrapping it up
Friday begins with filling out a profit and loss statement, a
goals analysis, and individual performance reviews. Once the
teams determine how much money they’ve made, they pre-
pare a presentation summarizing their week-long experience.
Parents and family members are invited to watch this and
the awards presentation at the end of camp.
Fun in learning
The true power in this camp is the interactive, hands-on
experience participants receive. Students end the camp with
enthusiasm and excitement about what the future might
hold. They have learned to network within the state and may
even have met their future business partner. And perhaps
best of all, they all say they had fun doing it. ? ? ?
This summer, CANDO will hold its fifth Youth Business
Camp from July 23-28. The camp costs $250 per student, but
with the aid of scholarships, the actual cost to each student is
only $50. CANDO is looking both for sponsorships and for
youth ages 14-18 to attend. For more information, contact
CANDO at 307-358-2000, or check out the Web site at
www.candowyoming.com/youthbusinesscamps.
The float trips are done every year after the teams have secured
business loans. The students have worked very hard up to this point.
The Fresh Squeeze open for business.
W I N T E R 2 0 0 6 Economic Development America 31
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