Friday, August 2, 2013

Uncovering Existing Business Relationships

By Matt Tarleton, Senior Manager, Research and Projects.

If you’ve read our blog before then you’ve probably reached the conclusion that there are some serious data nerds at work at Market Street. I’m not pointing any fingers (just hyperlinks). Sometimes we just can’t contain our excitement. This is one of those times.

Many of our clients ask us to examine the business sectors or clusters of economic activity that are driving growth in their communities. Identifying these clusters, their composition, and their challenges can help us develop strategies that focus limited economic development resources on those sectors that are likely to produce the greatest return on investment. This process, known to many as “cluster development” or “targeting” is a common component of many comprehensive economic development strategies. And for most of you out there, I am telling you something you already know.

What you may not know is that a wealth of interesting information exists to support cluster analysis, much of it unbeknownst to and underutilized by the economic development community. With the assistance of Economic Modeling Specialists, Inc. (EMSI), Market Street is starting to bring some of this information to our clients.

Data covering inter-industry linkages is allowing us to better understand the relationships between existing businesses within a community. In one recent client community,  we were able to examine data covering the expenditures of existing businesses and determine that medical device manufacturers in the region are heavily networked with existing providers of contract research services. More than 90 percent of medical device manufacturers’ expenditures on outsourced research and development activities stayed within the region. This incredible amount of expenditure capture illustrates the strength of the cluster in terms of applied research and development. However, nearly 75 percent of medical device manufacturers’ expenditures on core inputs into the manufacturing process (rubbers, plastics, metals, etc.) were leaving the region as manufacturers purchased these inputs from suppliers outside the area.

With this information, we are able to develop more targeted strategies for the client that seek to reduce the leakage of expenditures on these basic inputs, supporting the existing business community. This includes important substitution activities whereby economic developers work with medical device manufacturers to identify potential suppliers of rubbers, plastics, and metals within the region that could be suitable alternatives to their current suppliers outside the region. The information can also help the region refine their medical device recruitment efforts to more explicitly focus on suppliers of these intermediate inputs that can help complete the medical device cluster’s value-chain.

With a specific focus on the needs of the healthcare services sector in the rapidly growing community, we are also able to examine the degree to which the region is exporting services to new residents, quantifying the economic and fiscal impact of healthcare providers’ ability to attract non-resident patients. Data covering the age composition of more than 700 individual occupations is allowing us to evaluate the susceptibility of the region’s healthcare workforce to impending retirements, determining if licensed practical nurses, registered nurses, nursing managers, or nursing aides are going to face the greatest shortages in the years to come.

These are just a few of the many ways in which we are applying new data at our disposal to answer questions that we previously could not answer, either at all or with such precision. If you think you understand your targeted sectors, ask yourself the following questions. Do you know which business sectors are sourcing inputs (services and goods) from other businesses in the region, and which ones are purchasing their inputs elsewhere? Do you know which occupations are going to be aging rapidly in the years ahead, leaving local employers scrambling to find replacements? Do you know if you have a sufficient pipeline of younger workers to replace those impending retirees?

This is where I was going to write something along the lines of “You’ve got questions and we’ve got answers,” but apparently that is already a corporate slogan and we aren’t in the trademark infringement business.

But we are most certainly in the data nerd business.