Long-term prosperity in a time of complexity and uncertainty
Updated: Apr 6, 2021
Some guidance on the creation of a future-proof economic development strategy
This article outlines a method for forming an economic development strategy in the context of an unpredictable world. By reflecting upon the changes we all witnessed and experienced throughout 2020, we intuitively grasp the need for updating our planning procedures. In particular, the need for fresh perspectives on how long-term local economic prosperity can be realised. Using a structured approach to asking a series of open questions that invite discovery and exploration, a set of more forward-looking inputs can be created for subsequent strategy development sessions. Concluding with several examples, the reader is encouraged to consider the approach canvassed.
Laying the foundation
If 2020 taught us anything it is that business as usual is not guaranteed. Wind the clock back to the latter half of 2019 and more than likely we were planning events and other activities for the coming year just like we had in previous years. We were marking calendars, writing budgets, developing strategies and project plans as if 2020 was going to be like any other year.
It didn’t turn out that way.
Businesses closed, tensions rose and uncertainty filled the air. Critical conversations were had, support programs were launched and we looked forward to the rhythms of life returning to how they once were.
For these last months have awakened us to the potential of dislocation. A dormant idea has been brought to life: the possibility of different ways the future may unfold. Last year taught us about resilience, about adaptability and about being flexible. It brought about changes that if they were ever to come to pass they would have happened at a much slower place (eg. remote working, digitisation of business operations, etc). And it brought to the surface a now oft-posed question – what will the new normal look like?
All of this leads to a renewed quest – how do we understand what lies ahead for our communities? What does the future hold and how do we prepare for it? If the recent past is any guide, uncertainty and complexity is set to be a feature of our local economies in the years ahead.
It will be important to create economic development strategies that lead to long term success in the face of unknowns. In the context of a future that is complex and uncertain.
Regarding the future, the time that lies ahead of us, the critical thought is this: what is your image of the future? Because the future does not exist, all we have to go on are ideas about the future. It’s through our imagination that we create and develop visions and impressions of what lies ahead. Words such as potential, possibilities, and scenarios come into play. And you and your community can either passively accept the changes that are happening and just react to the forces that shape your economy, or you can think through what could happen and actively prepare for a range of outcomes.
I would suggest that by considering what may lie ahead, your community’s economic resilience will be improved. That by thinking about potential alternate futures before making any plans you increase the prospects for better long-term outcomes.
What follows deals directly with the issue at hand: economic development planning in an unpredictable world.
Understanding complexity and uncertainty
One of the best ways to handle complexity and uncertainty is through the use of one or more frameworks. Frameworks can guide your thinking. They can bring a sense of order to any ambiguity you face. They can help you with your planning and your responses.
One framework that can be used to think through the complexity and uncertainty is the PESTEL framework. It’s a strategic tool that is used to understand macro-environmental factors. And for the context before us, we can further develop our understanding of the macro-environment by asking the question: “what seems to be happening” (not the more concrete “what is happening”, but rather the more open “what seems to be happening”).
Thus, the first set of questions are:
P - What seems to be happening in the political world?
E - What seems to be happening economically?
S - What seems to be happening in society?
T - What seems to be happening in the arena of technology?
E - What seems to be happening to the environment?
L - What seems to be happening with the law?
Answers to these questions will help you to start laying the foundations for long term success. Through the responses gathered you will start to discover different ways the future may unfold for your local economy. There may even be ideas that surface that are uncomfortable, that are challenging. On the other hand, you may discover opportunities and possibilities that release local potential.
The second framework to use is a PBA framework (PBA = place-based approach; discussed in detail in the following section). We can use a PBA framework to categorise economic development activity. And, in a similar fashion to how we used the PESTEL framework to understand the macro-environment we can use a similar question to outline potential place-based economic development activities.
The question to be used for the second framework is this: “what might we need to do?” (not the more pedantic “what will we need to do?”). The form of this question invites discussion about a range of potential actions. By using the responses from the first set of questions as inputs to the second set, you can start to form a view of what could be done for your unique locale. Used together, these questions help with surfacing a range of ideas for a plan’s strategic objectives.
And so, the second set of questions are:
What might we need to do with respect to the business ecosystem?
What might we need to do with respect to entrepreneurship and innovation?
What might we need to do with respect to local institutions?
What might we need to do with respect to external stakeholders?
Answers to these questions will start to strengthen the foundations laid from the answers to the first set of questions. This second set of questions will help you to develop, or renew, a vision for what could be. They will help you develop a strategic plan that is based on what could be, rather than what has been. About handling future uncertainties rather than responding to the challenges of the past.
Designing your place-based economic development strategy
Fabrizio Barca, who played an influential role in reforms to the European Union’s Regional Cohesion Policy over ten years ago had this to say about place-based economic development strategy:
“It is a long-term development strategy whose objective is to reduce persistent inefficiency (underutilisation of the full potential) and inequality (share of people below a given standard of well-being and/or extent of interpersonal disparities) in specific places”.
He stated that the factors of place-based policies are an integrated set of goods and services tailored to a specific context. Where the set of factors either originate in the local economy (endogenous) or are external to it (exogenous). Where the outcomes from the policies should: improve the productivity of business and the quality of life, strengthen formal and informal institutions, and should promote entrepreneurship and innovation. And where non-local bodies should improve their knowledge of the local economy and its preferences, its nuances and its linkages with other economies.
Although there are many other practitioners and academics who have much to say about place-based economy development strategy, the common thread to all discussions are these four factors:
The business ecosystem (e.g. workforce development, business attraction, regulations, etc)
Entrepreneurship and innovation (e.g. new businesses, new products, startup culture)
Local institutions (e.g. local government, business groups, networking events)
External stakeholders (e.g. higher levels of government, industry and special interest groups)
It’s all about mobilising the locale’s potential.
So far so good. We have seen that in order to navigate complexity and uncertainty it is good to use a structured approach. Where we ask sets of open questions to do two things: 1. help make sense of the dynamic macro-environment; and 2. bring direction to our emerging responses.
However, while it is stating the obvious, the thing to bear in mind is this: each locale is different. Each local economy is a complex and unique system that changes as it grows.
Each of these unique systems exhibit different behaviours. One professor who has studied urban development policies and economics for decades referred to “a place” as a localised social and economic machine. His perspective of the “local economy as a machine” described the locale has having three inter-related components: a productive apparatus sub-system, a set of hard and soft local institutions that form another sub-system, and a third sub-system that is comprised of its shared culture.
And so, the place-based economic development strategy is not just about ensuring a fit for purpose business ecosystem in and of itself, for example. But also ensuring that that ecosystem is understood by external stakeholders. Its not just about ensuring the strategy has relevant local government regulations, but also that there are linkages between local government and the startup culture.
Figure: The local economy as a social and economic machine
It’s about the complexity of the local economy within the context of an unpredictable world.
And, importantly, it is through structured thinking about our unpredictable world that prosperous long-term direction to our complex local circumstances can be brought.
Its how Royal Dutch Shell successfully navigated the oil-crisis of the 1970’s. It’s how South Africa was helped in the immediate post-apartheid years. And its how cities such as Dublin and countries such as Ireland plan for their future.
Regarding Royal Dutch Shell. In the years prior to the 1973 OPEC oil crisis a team within Royal Dutch Shell used a structured approach in their thinking about the future. One of the narratives that was developed spoke to the possibility of significant market disruptions. Although it is a long and complicated story, because of their futures thinking Shell went from a lesser global oil company prior to the oil crisis to one of the majors in the years following.
Regarding South Africa. The early 1990’s was a period of turmoil as the structures of apartheid were being dismantled. In the midst of this their future did look to be quite unpredictable. It was during this time that political parties, civic organiations, professional bodies, and so on, grappled with what could be. One series of workshops approached the task of thinking about the future in a systematic way. The range of stories and images this group developed about the future helped the nation chart a viable course through this period of turmoil.
Regarding Dublin and Ireland. The National Planning Framework (Project Ireland 2040) is the successor to their 2002 National Spatial Strategy. This new framework is quite thorough and includes planning related to economic activity, social progress and environmental outcomes. In developing the plan inputs were gathered from a variety of sources, including socio-economic forecasts, statutory organisations and many consultations with a wide range of groups. What is relevant here is that economic, environmental and demographic forecasts arose from a process that settled on a plausible future from a range of alternate futures. In other words – they used a series of questions and frameworks to help them make sense of a changing world.
Your next steps
Heraclitus, that Greek philosopher of sixth century BC said it best – “No man ever steps into the same river twice”. He was saying that change is the constant in life. And this axiom is quite applicable to any field in which strategic planning is undertaken, let alone in economic development.
We instinctively know that we can’t just rinse-and-repeat the last plan with some new dates. Economies change, societies evolve, technologies get updated all the time. There are even, as some would call them, black-swan events like world-sweeping financial and health crises.
And we haven’t even considered the dynamics of geo-politics!
But there is a way to improve economic development planning in an unpredictable world, and that is through meaningful deliberations about the future. Asking open and structured questions about the future invites discovery of what could be. And asking open and structured questions of what could be leads to an exploration of how it could be.
The local economies that will prosper in a complex and uncertain world are those that mobilise their locale’s potential in response to the drivers of change.
And so to close with a quote from Simon Sinek, “The challenge of the unknown future is so much more exciting than the stories of the accomplished past”
Barca F (2009) “An agenda for a reformed cohesion policy: a place-based approach to meeting European Union challenges and expectations”, Commissioner for Regional Policy, April 2009
Beery J, Eidinow E, Murphy N (1997) “The Mont Fleur Scenarios: what will South Africa by like in the year 2002?”, Global Business Network, 1997
Jefferson M (2011) “Shell scenarios: What really happened in the 1970s and what may be learned for current world prospects”, Technological forecasting and Social Change, Vol 79 pp 186-197
Kelly E (2015) “Toward a national planning framework: a roadmap for the delivery of the National Planning Framework 2016”, Environment, Community and Local Government
For available resources and services to assist you with conversations and actions related to this article, please navigate to the "strategic foresight resources" page.
This article was published in the 2021 Autumn Edition (Vol.14, No.1) of Economic Development Quarterly, the journal of Economic Development Australia