WHAT MOTIVATES CIVIC ENTREPRENEURS?

Profiles in Co-opetition
By Alec L. Hansen, Ph.D.1
Around the world, the phenomenon of cluster-based economic development is gaining recognition. From Silicon Valley and Connecticut, to Mexico and Morocco, economic development professionals are finding that using the competitiveness framework can revitalize regions and accelerate growth. However, many accounts of cluster development and regional competitiveness skirt around the fundamental driver of successful clusters: the role of the civic entrepreneur. These are the private sector business owners and managers who bring their vision and commitment into the arena of regional cluster development. How can we find them if we are not looking for them? Development planners and government officials who find themselves poised to launch a cluster process often approach the prospect with some trepidation. They read about private sector involvement, even private sector leadership, but then find themselves organizing meetings in which only a handful of participants are actually from the private sector, but which are nevertheless called cluster meetings. Often private sector leaders are propped up as chairpersons of committees that they are not really leading, and they founder in that role, ineffectual and frustrated. When one questions the organizers, one discovers that many of these well-intentioned officials think the notion of a private sector-led process is essentially rhetoric, and that clusters are driven by the usual cast of characters in most economic development programs planners, officials, politicians, consultants and association executives with a few business leaders included to lend legitimacy to the process. Perhaps unconsciously, they dont believe that a busy, profit-oriented business owner would choose to spearhead an economic development initiative in his or her region. Many accounts of clusters around the world gloss over the role of these private sector leaders. This article will attempt to rectify this omission, by focusing on the role of the civic entrepreneur, and considering the motivations of these remarkable individuals. With insights into what can bring out the best in potential cluster leaders, planners hoping to facilitate lasting change in their regions will be better able to support these civic entrepreneurs the individuals whose actions are ultimately most likely to result in a transformation of a regions economy.

President of the Economic Competitiveness Group, Inc., with research assistance from Kelly Cronen. Originally appeared in March-April 2002 edition of Industry Focus Magazine, Mauritius.

Copyright Alec L. Hansen 2002

What Motivates Civic Entrepreneurs?

Civic Entrepreneurs are generally CEOs and business owners, but can also be government officials, educators, union officials, or non-profit leaders. When others see problems and gridlock, civic entrepreneurs see opportunity and mobilize their communities on a path forward.2 The story of the rise of wine industry in California exemplifies the classic role of a civic entrepreneur.

How a Civic Entrepreneur can Transform a Region and an Industry

Robert Mondavi is the founder of the Napa Valley wine cluster in California, just north of San Francisco Bay. The Mondavi family was a well-established wine-making family in Northern California, owning thousands of acres. Their wines were what could best be described as jug wines, as were the other wines produced across the United States at that time. In 1962, Robert Mondavi took a trip to Europe where he was inspired by the European process of making wine. He felt that the Napa Valley region, with its intense sunlight tempered with fog near the harvest season, could also be a premier winemaking region, but that the approach to making wine would need to be completely transformed. Mondavis older brother Peter did not share his vision, and in 1966 the two split. Peter kept the estates and wineries, while Robert bought 160 acres in Napa Valley a tiny plot in a commodity business where quantity, not quality, was the traditional route to profits. Roberts goal, however, was to combine European craft and tradition with the latest American technology, management, and marketing know-how. To establish himself in the first year, he worked closely with top grape growers in the area. In doing this, he began to change the relation between growers and producers, opening up and transforming the grape growing industry. He introduced educational programs for the growers that would allow growers to understand the correlation between the quality of the grapes and the quality of the wine.3 He was also devoted to research and development, and wanted the winery to become a pioneer in research and a gathering place for the greatest minds in the industry. Mondavis vision was not just to produce the best wine in the world, but to ensure that wineries all over Napa Valley were operating at that level, because a single winery has a difficult time making a name for itself, as wine, like so many products, is known by region. His open and inclusive style was not a charitable activity, but motivated by his self interest: how could he produce and market a premier product unless growers of grapes, suppliers of barrels, label producers, agronomists in short the entire cluster surrounding him, were operating at his level? Over the next decade, his techniques spread to other winemakers, and by 1976, Mondavi and his colleagues were ready. On May 24 of that year, a few cases of wine from Napa

Henton, Melville and Walesh, Grassroots Leaders for a New Economy: How Civic Entrepreneurs Are Building Prosperous Communities, Josse Bass Public Administration Series, 1997.
2

Harvests of Joy: How the Good Life Became Great Business, by Robert Mondavi; Harcourt, Brace & Co 1998, Page 100.
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What Motivates Civic Entrepreneurs?

were entered in a legendary blind wine-tasting competition in Paris, organized by the famed wine merchant Steven Spurrier. When the results were tallied, Napa wines had swept the top rankings. Among the white wines, Chateau Montelenas Chardonnay captured 1st place, with other Napa wines capturing 3rd and 4th places as well. Among the red wines, Stags Leap Wine Cellars Cabernet captured first, placing ahead of Chateau Mouton-Rothschild. Such a strong showing from a previously unknown region was a phenomenal surprise. The French monopoly [on fine wines] was crushed permanently.4 In an ironic twist of fate, the shipment of crates from the Mondavi winery were delayed en route, and arrived too late to be judged. However, Mondavi had achieved his goal the recognition of Napa Valley as a premier wine-making region. Robert Mondavi wines won numerous awards in subsequent years, and his Special Reserve now sells for $200 per bottle. More importantly, the economy of the entire region has been transformed, with a quality of life unsurpassed among agricultural regions in the world.

Photo: Robert Mondavi

Mondavis vision, combined with the opportunity afforded by his dispute with his brother, was responsible for a revolution in an agricultural region. Are other industries similarly susceptible to the actions of a few individuals? The Interaction between Visionary and Catalyst The arrival of a leading researcher in 1956 to Palo Alto, California was another random catalytic event, one that helped tip the region around Stanford University from a panorama of apricot orchards to a landscape dotted with Apple Computers, silicon chip fabricators and software powerhouses: Silicon Valley. The visionary in this story was Fred Terman, Dean of Stanford University's Department of Electrical Engineering. His vision of close industry-university partnerships had already encouraged several spinoffs, including William Packard and David Hewlett, but the Valley had not yet taken off.

Ronn Wiegand, as quoted in The Day California Wines Came of Age, by Thane Peterson, in the Moveable Feast column in BusinessWeek Online, May 8, 2001.
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What Motivates Civic Entrepreneurs?

The big break came when Terman convinced Dr. William Shockley, the inventor of the electronic transistor, to come to Palo Alto, rather than MIT, where the leading electronics researchers at that time were based. In 1956, Shockley Transistor Laboratory was established in the new Stanford Industrial Park, with a brain trust of young engineers from MIT and other East Coast universities. Their work was set to revolutionize the electronics industry, allowing the shift from bulky vacuum tubes to tiny circuits embedded in silicon. However, frustrated and alienated by Shockleys caustic personality, eight of the brightest of these electronics specialists left Shockley to form Fairchild Semiconductor Corporation. It became the first firm to manufacture exclusively in silicon and rapidly developed into one of the largest firms in the California electronics industry. More than 70 high-tech companies, such as Intel and Motorola, are direct or indirect descendants of Fairchild.5

The proposition behind clusterbased economic development is that there are potentially dozens of Robert Mondavis and Fred Termans in a given region leaders who have vision and access to resources that can transform their region, but who lack a catalyst.

Again, it was a combination of vision Termans and a catalyst the arrival of Shockley and the fact that he couldnt hold on to his talented colleagues that spawned the economic miracle that became Silicon Valley.6

Is it possible to replicate Mondavis success in other regions?

Robert Mondavi and Fred Terman were probably not familiar with the term cluster they simply implemented a vision for their regions. The proposition behind clusterbased economic development is that there are potentially dozens of Robert Mondavis and Fred Termans in a given region leaders who have vision and access to resources that can transform their region, but who lack a catalyst to get them started.7 Where a natural catalyst is absent, a cluster-based approach, mobilized by the economic development community, can act as the catalyst, propelling these civic entrepreneurs to implement their dreams. Are there examples of such artificially accelerated clusters? What is the role of the civic entrepreneur in that environment? There are in fact numerous examples of successful entrepreneurs who made this transition as a result of a cluster development program in their region.

Mackun, Paul. "Silicon Valley and Route 128: The Two Faces of the American Technopolis" Online: Silicon Valley and IT History Site. Feb 1, 2002. Available at: http://www.netvalley.com/archives/mirrors/ sv&128.html.
5 6 7

Of course, other individuals and events contributed as well, but this was a defining moment.

What would have happened if Robert Mondavi had patched up his argument with his brother? Its possible that Napa Valley would still be producing jug wines. The buy-out agreement, which put monetary resources in the hands of a man with a vision, was a catalytic event for Napa Valley and the California wine industry. 4

What Motivates Civic Entrepreneurs?

Arizona Alan Hald is a co-founder of MicroAge, a Fortune 500 company based in Phoenix, Arizona that grew from a single a single location in 1976, selling hobby kit computers, to a systems integration powerhouse with over $4 billion in revenues. Although his company was successful, Hald felt that Arizona had become a branch plant state, attracting mainly low-wage, low-skill jobs. Without a radical new approach, the state would be unable to shake off a recent savings and loan scandal, whose impact on the real estate sector had crippled the economy. When Hald learned about a new cluster-based economic development initiative in the state, he became involved, and eventually was nominated to serve as co-chairman, along with then-Governor Symington, of the Governors Strategic Partnership for Economic Development (GSPED). Hald has served in this position tirelessly for nearly ten years, helping shape the states responses to education issues, the New Economy, and the challenges of developing eleven industry clusters. When asked in 1998 why he found the time and energy to attend so many meetings, he replied at every one of these events I also find something that helps my company an idea, a new contact, a possible connection. But there is a certain part of me that wants to do good I derive satisfaction from what were accomplishing here. If my children end up going to college in Cambridge, Massachusetts or Cambridge, England, I want them to feel that they can come back to Arizona and find a thriving economy and dynamic opportunities, as I have. I dont want my company to be the exception. Thats what keeps me going. Self interest, melded with the desire to build a strong regional economy, motivates this civic entrepreneur. The Pharmaceutical Industry At a recent conference hosted by the Council on Competitiveness in Washington, D.C., a discussion emerged on the motives of civic entrepreneurs and the question arose Why would a civic entrepreneur choose to be involved in a cluster development process? Ray Gilmartin, CEO of Merck & Co.,8 took the microphone, and gave an impassioned answer. I enjoy this work, but I dont do it out of charity. I do it because I think it will profit Merck. For example, I used to pay attention to my accounting staff when they told me that the most cost-effective place to locate our research laboratories is right next to our headquarters in Whitehouse Station, New Jersey. However, since learning about clusters of innovation, I am now building new research labs in San Diego and Southern Connecticut, so that my researchers can take full advantage of the climate of innovation in those regions. Apples in Cuauhtmoc, Mexico Oscar Armando Corral Perez owns more apple trees than anyone in the world. His orchards in Cuauhtmoc, a rural area in the northern Mexican state of Chihuahua, have

Gilmartin is President and CEO of Merck & Co., one of Americas leading pharmaceutical companies, based in Whitehouse Station, New Jersey. He is currently serving as Chairman of the Council on Competitiveness.
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What Motivates Civic Entrepreneurs?

earned him a place in the Guinness Book of World Records, and his delicious, high quality apples are recognized throughout Mexico. However, he knows that in order to successfully export to the United States, he will need even higher quality standards, and that his region will need to be recognized, not just his orchards. When a group of consultants from Chihuahua City9 offered their cluster development methodology, he jumped at the opportunity, and was soon asked to become co-chairman of the cluster in Cuauhtmoc.

Photo: Inset:

Oscar Corral (left) showing his packaging plant to a delegation from Jordan. One of Corrals many apple brands.

Corral has worked with his fellow apple farmers on a variety of joint initiatives. Together they are producing nets to protect their fruit from hail near harvest time, to develop brand names that can be used by all producers in the region, and to involve researchers from the local university to help improve quality. While this initiative is less than two years old, it is already helping to raise incomes and employment in Cuauhtmoc. An already successful businessman is poised to move his company to the next level by leading a regional initiative. Alonso Ramos, an economic advisor to Mexicos President Fox, reports that Corrals activities have reversed the actitud de derrota (mentality of defeat) which has characterized the region until recently. The intervention of government officials is increasingly seen as something less necessary (and even annoying). Other leaders have emerged to launch production and exports of non-traditional products such as strawberries and mink pelts, leading to diversification of the economy. The success of la initicativa privada in Cuauhtmoc has also stimulated a similar approach in Delicias, the traditional rival city.
9

Alderete y Socios, Chihuahua, Mexico. www.aldereteysocios.com 6

What Motivates Civic Entrepreneurs?

Do civic entrepreneurs work only outside government? In the mid-1990s, Campeche was a low-performing state in southeastern Mexico, not far from Cancun, but more concerned about letting its sleepy economy go the way of nearby Chiapas. A dozen private sector leaders, including a baker, a hotel manager, and an architect, learned about the cluster process following a trip to Chihuahua, and determined to launch a similar process in their state. Over a two-year period, they energized new strategies and new thinking throughout the state, and the results were tangible: 12 new factories where none had existed before, a new direction for their declining shrimp industry, and high-growth exports of nontraditional fruits, vegetables, and tropical nutritional supplements. The citizenry of Campeche could have reacted to this new agenda with suspicion and resentment, shunning the visionary program of these private sector leaders. On the contrary, they saw it as such a refreshing alternative to business as usual in state government, that they elected several of these entrepreneurs to public service. The baker is today the Secretary of Economic Development, the hotel manager is Secretary of Tourism, and the architect is Governor. Want to launch a cluster process? Give civic entrepreneurs a genuine role For every account of cluster development processes supporting private sector leaders as they transform their regions, there are an equal number of well-intentioned efforts that started off with similar enthusiasm, but led nowhere. The difference often lies in the role in which private business leaders have been cast. If cluster organizers see private sector leaders as symbolically important, but too busy to get deeply involved, or only motivated by charity, cluster initiatives will be run by cluster organizers not a bad outcome, if the organizers are talented, but seldom transformational. What if cluster organizers push the envelope, and genuinely trust that a handful of private sector leaders in their region are potential Robert Mondavis? The organizers would become a catalyst for action, using cluster facilitation methods to craft events and structures that will convince industry leaders to take the plunge. Essentially, the cluster framework allows entrepreneurs to commit to realizing their economic vision sometimes a vision they have held close to the vest for many years, but had always been reluctant to implement for fear that the risks were too great. Industry leaders will commit to the process when they are convinced that their time will not be wasted, and that their leadership will be acknowledged rather than subverted by a state-driven, political agenda. By respecting the true motivation of these civic entrepreneurs, their sustained participation, and hence the successful transformation of the region, is more likely. Ultimately, most private sector leaders are willing to invest their time in cluster development because of two intertwined motivations: a drive to make the region, and hence their company, an industry leader (the profit motive), and

What Motivates Civic Entrepreneurs?

a desire to make the region sufficiently prosperous and economically diverse that his or her children will have desirable opportunities to return to after college. Cluster organizers need to be willing to make room for local business leaders, and trust the vision and initiative of these civic entrepreneurs. When private sector leaders learn about the concepts and sense tangible support from cluster organizers, the vision will unfold organically and powerfully, from the ground up.

Dos and Donts for Launching a Cluster

DONT
Resist the profit-motivated self-interest of the entrepreneur dont view contribution as charity work Over-steer the process

DO
Acknowledge that self-interest is needed and welcome in order to transform the regions economy Allow for an open-ended process, with the private sector leaders driving, and donors, government and academia supporting Place equal or greater emphasis on generating detailed, fact-based strategies and action plans for individual clusters, with strong champions. Strong clusters will make the Councils more practical. Start with shorter, executive-style reports, saving funds for continuous analysis throughout the project; active clusters have on-going needs for answers to specific questions about best practices and market and technology trends.

Focus exclusively on creation of high-level Council of Competitiveness

Let analysis and report-writing dominate the budget. Too many cluster projects have resulted in a pretty report but no action whatsoever