Archive for May, 2005

Flattening Our Assumptions

Monday, May 30th, 2005

by Dean Whittaker

In the movie “What the Bleep Do We Know?” many of today’s common beliefs are challenged through ideas from quantum physics. The movie points out that many of humankind’s firmly held beliefs were later found to be wrong. But at least one of those ideas, in an economic sense, anyway, appears to be enjoying a resurgence. Don’t you know the world really IS flat?

In Thomas L. Friedman’s new book, The World is Flat: A Brief History of the Twenty-First Century , he explains the implications of leveling the economic playing field and how it got to be that way. Technology has flattened the global economic playing field to the chagrin of some and the delight of others. Few books are a MUST read, but I think those who have read it would agree that this book is a “must read” for anyone engaged in any aspect of economic development.

What has brought about the seismic shift in wealth and power that Friedman recounts? One fundamental change has been in communication technology. The convergence of information technologies provides the tools to disaggregate the work flow into separate processes. Now, an order given at a McDonald’s drive-through may be taken by someone hundreds or thousands of miles away and communicated back to the on-site kitchen. Your airline reservation to Atlanta may be handled by a reservation specialist working from home in Utah (or India ). Just like in “What the Bleep ,” the economic time-space continuum has become frighteningly flexible.

On a recent flight to South Carolina to tour a former textile plant, I sat beside the owner of a company that supplies parts to a refrigerator manufacturer. His customer recently announced that they are moving their production from Michigan to Mexico . They have informed their suppliers that if they wish to continue as suppliers, that they, too, should consider relocating their operation in order to provide competitively priced parts. Previously, the assembler had paid shipping costs. However, in the new arrangement, shipping costs will be the suppliers’ responsibility. Therefore, a competitive supplier would need to produce parts near the assembly operation.

This scenario is being played out around the country. What can economic development practitioners do to mitigate the consequences and seize the opportunities that this continuous evolution of the global economy brings about? Many regions are focusing on innovation as their salvation, hoping that local firms will become centers of innovation within their respective fields. By producing the “new new thing,” domestic firms can remain competitive players in the global marketplace. For instance, could a local life sciences firm, by jumping ahead of new trends in genomics and bioinformatics, become your next economic driver?

Challenges? Sure, we’ve got a bunch. But what a great time to be alive. With change comes opportunity. We are experiencing some of the greatest opportunities our race has ever seen. It’s time to look carefully at our current assumptions and at old and new ways of doing things. Even outworn ideas–such as the world being flat–may be worth a second look!

What is Open Source Software?

Monday, May 30th, 2005

by Josh Morse

Linux. Firefox. MySQL. Even casual computer users are familiar with some of these programs. Yet the open source licenses under which all three are released are often mysterious to even the most computer-savvy person. Today I hope to help clear up some misconceptions that surround open source software.

To understand open source software, it is important to understand the difference between an executable program, or binary, and its source code. Nearly all software that is purchased or downloaded is in binary form. This allows the software to be run on a computer. The code that was compiled into the binary is referred to as the program’s source code , and this code is usually written by internal company programmers. If other programmers were able to access the source code, they could modify it and compile it themselves, perhaps selling the new binary. As a result, companies like Microsoft zealously guard the code to Windows and other software they produce.

The aim of the open source movement, unlike the goals of Microsoft and other major software companies, is to spread their software’s source code and encourage others to modify it to suit their own needs. As a result, open source licenses, such as the General Public License (GPL), require that any software that is licensed as GPL and released must also have its source code available for download. This also applies to proprietary software that uses open source software, though the proprietary code only need be released if the open source software is made available to the public. For example, if a company uses Linux for its operating system to develop its own proprietary health care software (which we will call HealthCarePlus), they would not need to release the source code for HealthCarePlus, because Linux is only used internally. However, if the company used a copy of the open source MySQL database as part of their software package, they would need to release the source code for HealthCarePlus as well. In this way, companies are free to use open source software internally, but releasing it to clients or customers as part of a proprietary software solution means that the company’s commercial software must also be made open source. This helps encourage the idea of a “free exchange and improvement of software” that the open source movement was founded upon.

It should be noted that open source software does not have to be released for free. While most open source software is released for free since the source code must be made available, it is not a violation of the GPL to charge for the software and its code, as long as the source code does not cost more than the program binary. Many programs, like Linux, have free versions available, but offer enhanced versions with better customer support for a cost. Other software, such as MySQL, is released under a free open source license and a paid commercial license that gives customers the freedom to package MySQL with their own software without releasing their source. Programs like the Mozilla Foundation Firefox web browser relies on the monetary donations of users and the time donations of volunteer programmers. While such arrangements may seem to be a recipe for financial disaster, many companies have been able to survive and even prosper under open source arrangements. Regardless of how one feels about the open source model, it is here to stay, and the important questions for businesses to ask is “how can open source software help me?”

For more information on the General Public License and open source software in general, visit www.gnu.org

Economic Development & Local Real Estate Partnerships

Monday, May 30th, 2005

by Pete Julius

Why develop them, what are the obstacles and how do you create them?

Recently, we were hired by two separate economic development organizations to present on how to build partnerships between economic developers and local real estate brokers. It has been an increasingly popular trend. Since our presentations, we have had numerous inquiries on how to set up this type of partnership. We have worked in both economic development and real estate for a little more than 10 years. Our presentations were derived from our experience and conversations with 15 professionals within the economic development and real estate fields. This article will focus on explaining the importance and need behind developing this type of partnership, and identifying some of the major obstacles and how to overcome them.

The main reason for developing this type of partnership is that both economic developers and local real estate brokers target the same audience-corporate real estate executives. In addition, economic developers and brokers attend the same conferences, such as Corenet Global and Industrial Asset Management Council (IAMC), in hopes of luring the same prospects to their local community. If you are targeting the same audience and attending the same conference, why not market the local community together? Doesn’t it make sense? Wouldn’t it be nice to be able to save marketing dollars and resources by working together? It sounds good. But if it is such a great idea, why are there not more mutually beneficial economic development and local real estate partnerships?

Major obstacles deter economic developers and local real estate brokers from establishing mutually beneficial relationships. First, there is a major lack of understanding of each other’s business and core competencies. Economic developers and local brokers must understand each other’s business to identify synergies. One of an economic developer’s main goals is to improve the community by generating quality jobs. The goal of brokers is to sell or lease property, which is the end game of an economic developer’s job. In addition, economic development organizations are typically bureaucratic, while local real estate firms are not. Second, there is a tendency to fear that someone is going to run off with the other’s prospect. This is a natural instinct, but each partner must learn to trust the other. Trust is the key to the success of any partnership and must exist to alleviate this fear. Third, understanding how economic developers and brokers are compensated or rewarded is critical. Economic developers are rewarded differently than real estate brokers. Economic developers are typically measured by the number of jobs generated or by an increase in the local tax base. Their reward is then based on the attainment of these objectives. Brokers, as most of you know, are rewarded with a commission on the sale or lease of property. These are two very different reward systems that often cause conflicts. Now, how do you get around these obstacles to form mutually beneficial partnerships?

The very first, vital element in any successful partnership is that each partner must be willing to engage in such a relationship and see the value of the partnership. In addition, each partner must benefit from the partnership. This precedes the need to understand each other’s business, which is the next step in establishing a working relationship. Once there is an understanding of each other’s business, the new partners can identify synergies and areas of expertise. From this they learn how to efficiently and effectively work together and identify what resources and information can be shared. This process will also help build trust. Trust will help to form a very strong partnership by diminishing fears and assisting in the development of a strong foundation. Trust can be gained by identifying and addressing areas of conflict early in the formation of the partnership. Periodic meetings and an exchange of staff members for some period of time will assist in accomplishing all of these objectives. In addition, getting local brokers to sit on economic development boards and persuading them to help fund local economic development efforts are also very beneficial steps to making this type of partnership work. These partnerships can be built on previous working relationships or started from scratch with a small, mutual project.

There is no standardized procedure for establishing economic development-local broker relationships. Review the case studies to generate ideas for establishing your own partnership.

Resources

•  Society of Office and Industrial Realtors ( www.sior.com )

•  International Economic Development Council ( www.ideconline.org )

National Association of Industrial & Office Properties (NAIOP) ( www.naiop.org )

Affordable Housing

Monday, May 30th, 2005

by Tammy Hart

According to the U.S. Department of Housing and Urban Development (HUD), there is an ever-increasing demand and need for affordable housing. This is due in part to the overall rise in cost of housing and rentals being higher than the rise in incomes.

Housing prices have steadily increased over the past 50 years. One of the major contributing factors to the price rise is that financial institutions introduced record low- income rates for mortgages; they have also implemented steps to make the qualification process easier. Real estate agents and builders both agree that relatively low mortgage interest rates have been very encouraging to first-time home buyers.

Still, many people simply cannot afford housing. Not-for-profit agencies help: Habitat for Humanity International, for instance, has built and rehabilitated more than 150,000 houses, sheltering more than 900,000 people in more than 3,000 communities worldwide. But many people who need affordable housing fall through the cracks because their income levels fall between those qualifying for assistance and those able to afford to purchase a home on their own. Their numbers are bigger than you might think, and they include teachers, police officers, and fire fighters, to list a few.

These prospective buyers need affordable homes within a close (or at least reasonable) proximity to their workplaces and/or to the communities where they were raised. As disturbing as it might seem, some of our returning veterans are joining those squeezed out of the housing market. It is not hard to see why people are struggling: according to the U.S. Office of Federal Housing Enterprise Oversight, the cost of homes in California increased nearly 100% between 1999 and 2000. Such is also the case in certain sectors of New York . It seems as though financial institutions have formed alliances with the large builders who dominate the industry. For obvious reasons, they each have vested interests in the cost of housing continuing to rise.

Today the marked disparity between the annual increase in personal income and the annual increase in the median sales price of a single family home continues to grow. The construction, rehabilitation and maintenance of affordable housing need to increase to provide more rental options for people who cannot afford to own a home.

Theoretically, high housing prices will decrease if the overall supply of housing expands faster than the number of households. The short supply and high demand seem to be the driving factors for the current upward swing in real estate market trends. Migration from metropolitan areas may continue to contribute to soaring prices, even if a surplus of new housing occurs.

There is much debate about the idea of Smart Growth (which was developed as an innovative approach to serve the economy, the community, and the environment). Varying opinions weigh in about whether the concept of Smart Growth or the reality of sprawl conflict with the ability to provide affordable housing.

The goal of Smart Growth is to balance the many factors involved in residential development, such as preserving and protecting critical habitats and water supply, while also contributing to economic development. It also focuses on building strong neighborhoods, which includes providing a range of housing options to fit the needs of individuals at different income levels. Smart Growth claims to recognize the connection between community development and quality of life, since a strong community creates a greater capacity to address social, economic, and environmental issues and to develop action strategies. Many believe that Smart Growth is the instrument needed to achieve those goals.

Smart Growth is a success story in Maryland . There, over 80 programs assist in accomplishing Smart Growth, making efficient use of the land inside Priority Funding Areas and curbing sprawl outside of funding areas. The city of Davidson , North Carolina , implemented a Smart Growth rule to make 12.5 percent of all new housing affordable to families making less than the county’s median family income.

The 1991 HUD study, “Not in my Backyard,” determined that outdated, exclusionary and unnecessary regulations continue to block the construction or rehabilitation of affordable housing in some parts of America . More than a decade after the publication of “Not in my Backyard,” a different report, “Why Not in Our Community?” reveals that many communities are eradicating these barriers and supporting the production of housing that was formerly beyond the reach of many working families. It found that many jurisdictions were reducing regulatory barriers to affordable housing, particularly in areas where the supply of affordable housing is increasingly scarce.

President Bush’s proposed budget for fiscal year 2005 includes $31.3 billion for HUD. The spending plan continues to emphasize HUD’s commitment to promote affordable housing, strengthen communities and increase home ownership across America .

In association with HUD, the President is proposing initiatives to increase home ownership, including zero down-payment mortgages, The American Dream Down- Payment plan, home investment partnerships programs, housing counseling options, the flexible voucher program, single-family affordable housing tax credits, and self-help ownership opportunity programs.

More information about HUD and its programs is available on the Internet at www.hud.gov .

www.planning.org

Anthony Downs – www.brookings.edu

Ideas to Keep Your Marketing Efforts on Track…

Monday, May 30th, 2005

by Cory Koch

Separate suspects from prospects.

Too many advertising dollars and too much time are spent on people who are not responding to your marketing efforts. Unless your lead-generation advertising weeds these people out, it’s not working effectively. The media you select, the offers you make, your creative strategy, and even your tone all play key roles in drawing out high potential prospects and screening out suspects.

Sell the next step harder than you sell your community.

Your whole objective of lead-generation marketing is to focus on the sales process, not to finalize it. Initially your direct mail or e-mail should push for action on the next step: sending for more information, a free sample, or a free analysis. Once you have qualified prospects, you can concentrate on a full presentation of your benefits, features, and applications.

Once is not enough.

Give suspects more than a single time to qualify their status. No matter how clear your direct-mail package or email may be, your target may miss it the first time around. Give prospects multiple opportunities to respond to your offer.
This will involve getting additional information out to follow up with your prior marketing piece. The more you narrow your market, the more time you have to spend on each prospect.

Support your mail.

Direct mail is still your best business-to-business lead program. If you decide to try mail, support it. If your mail package is an expensive, dimensional one, announce its arrival with a teaser package, e-mail blast or print ad. If the mailing is relatively small, think about leaving a voice-mail message with the recipient. After the mailing drops, follow it up with telemarketing, a quick mail reminder or an e-mail.

Support your sales force, distributors and wholesalers.

Make sure they have full information on your marketing efforts–sample packages, copies of the print ads and e-mail messages. Keep them posted on results. An exciting “sell in” can be as important to your success as anything else you do.

Don’t make it TOO easy to reply…

…if you want more QUALIFIED leads. Checking off a single box on a reply card and putting it in an outbound mail pickup may not make a prospect. Simply asking prospects to hit “Reply” to your e-mail may not qualify them, either. Ask your prospects to fill in just a few lines of information and you’ll increase the quality of your response without damaging quantity.

Let your prospects tell you how serious they are.

Allow several options on your response form–ranging from “Have your representative call me immediately” to “No interest now. Call me in six months.” Even the “no interest now” respondents are prospects.

ENVELOPE, please!

Unless your objective is to drive prospects to your web site, it’s unlikely that self-mailers or postcards are going to work for you. Yes, they’re cheaper to produce, but the cost in lost opportunities is huge. In mailing to certain market segments, you need an envelope that indicates one-to-one correspondence. Words like “Important,” “Confidential,” “New” or even “First Class Mail” can kill one-to-one perception. In most market segments, think of your envelope as a billboard for what’s inside. Use sizes that will stand out in the mail. Test a strong offer or powerful benefit statement as teaser copy.

Plan separate creative strategies and offers for different levels of decision-makers.

Even if you’re prospecting within a specific industry, your copy, offer and sometimes graphics must change to fit the objective of your communication. The simple approach you make to a real estate contact may not work in addressing the CEO. And the CEO’s possible interest in your product/service will differ from the CFO’s.

Test a survey approach, particularly with suspects.

If it’s carefully structured, a questionnaire mailing can help you learn more about your target audience and how to approach it with follow-up efforts. Surveys engage interest as they begin selling. If they’re kept short, surveys can work in e-mail efforts as well.

Throw away the concept of response percentage.

If your market universe is 1,000, a 2% response rate is totally insufficient. Standard direct mail will not suffice. Your direct mail must be an “event in the mail box.” That may involve creating and mailing hand-assembled cartons, sending out videos, or delivering a series of premiums by courier. On the other hand, in working with very large universes (or with a very small sales force), a 2% response may mean you haven’t done a very good job of pre-qualifying prospects.

Use testimonials and case histories.

Aside from the credibility they inspire, testimonials provide the prospect with applications and usage guidance. Include testimonials which emphasize how companies were rewarded by finding out more when they were prospects.

When in doubt, play it straight.

Humor and cuteness can cut through clutter in a business environment. However, if you have the slightest doubt about how the message will be received, play it safe and use a strong statement of benefits to break through.

Include a “keeper” in your mailings…

…particularly if you’re planning only one mailing. We all want response immediately, but in most cases 98% of recipients have no need to respond at the moment. Give them something to remember you by after the “advertising” portion of your mailing has been discarded. It could be anything from a wallet-size calendar or tips for saving time or improving energy to a pad of post-it notes with your company’s name on it.

Use premiums with caution.

The right premium increases response to your lead-generation efforts, and may even lower your cost per response. It also maintains conversions to appointments and sales. But overemphasizing the premium can bring you response from “freebie junkies.” Select premiums with obvious value, but not enough value to be a bribe.

Test response lists.

Even though you’re not selling directly through the mail, you should be testing your response lists against the compiled lists you may be using. Proven willingness to open and respond to direct mail and e-mail solicitations is as important in lead generation as it is in direct selling.

Transform gatekeepers into advocates.

If you’re mailing to upper management types, be aware that most of their mail is still screened by administrative assistants. To get your message on top of the pile (instead of in the circular file), address a message to the screeners explaining why the VIP should see your communication.