PACA and Strategy Jörg Meyer-Stamer

Michael Porter, “What is Strategy?” Looking at a company: Strategy is not operational effectiveness –“Operational effectiveness (OE) means performing similar activities better than rivals perform them” –“The more benchmarking companies do, the more they look alike” Strategy means “choosing to perform activities differently or to perform different activities than rivals” Strategy = creating a unique competitive advantage

What is the meaning of “Strategy” in territorial development? Efforts to –create a “local enabling environment” –perform core LED tasks (real estate development, infrastructure, etc.) are similar to “operational effectiveness” Territorial strategy = a systematic effort to create a unique local competitive advantage Porter’s conceptualisation of “factor conditions”: Basic factors Advanced factors Generalized factors Specialized factors

Strategy and territorial development: Henry Mintzberg‘s “5 Ps” Strategy as plan: consciously intended course of action Strategy as ploy: maneuver intended to outwit an opponent or competitor Strategy as pattern: strategy as consistency of behavior, whether or not intended Strategy as position: strategy is a means of locating an organization in a competitive market or environment Strategy as perspective: strategy as an ingrained way of perceiving the world.

Strategy and territorial development : Henry Mintzberg‘s “5 Ps” Strategy as plan: consciously intended course of action Strategy as ploy: maneuver intended to outwit an opponent or competitor  Strategy as pattern: strategy as consistency of behavior, whether or not intended Strategy as position: strategy is a means of locating an organization in a competitive market or environment Strategy as perspective: strategy as an ingrained way of perceiving the world.

Strategy and territorial development : Henry Mintzberg‘s “5 Ps” Strategy as plan: consciously intended course of action Strategy as ploy: maneuver intended to outwit an opponent or competitor Strategy as pattern: strategy as consistency of behavior, whether or not intended  Strategy as position: strategy is a means of locating an organization in a competitive market or environment Strategy as perspective: strategy as an ingrained way of perceiving the world.

Strategy and territorial development : Henry Mintzberg‘s “5 Ps” Strategy as plan: consciously intended course of action Strategy as ploy: maneuver intended to outwit an opponent or competitor Strategy as pattern: strategy as consistency of behavior, whether or not intended Strategy as position: strategy is a means of locating an organization in a competitive market or environment  Strategy as perspective: strategy as an ingrained way of perceiving the world.

Strategy and territorial development : Henry Mintzberg‘s “5 Ps”  Strategy as plan: consciously intended course of action Strategy as ploy: maneuver intended to outwit an opponent or competitor Strategy as pattern: strategy as consistency of behavior, whether or not intended Strategy as position: strategy is a means of locating an organization in a competitive market or environment Strategy as perspective: strategy as an ingrained way of perceiving the world.

Territorial Development: Strategy vs Strategic Planning Strategic Planning: broad effort for stakeholder mobilisation / participation / consultation comprehensive data collection and fact finding effort result in the formulation of an unspecific “vision” the formulation of a huge planning document with ambitious goals, but vaguely defined entry points Territorial Strategy: evolving pattern of behaviour evolving shared perspective –based on practical, incremental territorial upgrading activities result in the formulation and implementation of catalytic projects –that address local upgrading opportunities –that contribute to a unique locational profile

How to launch local and regional economic development initiatives? The PACA view Look at strengths instead of weaknesses –identify potential for unique advantage –Porter perspective: how to turn disadvantage into unique advantage? Porter argument: strategy = a unique advantage that cannot easily be replicated Go for activities with a quick, visible impact –don’t get stuck in endless strategizing –don’t start by addressing the biggest of all challenges.

Background of the PACA approach (Participatory Appraisal of Competitive Advantage) PACA is supposed to kick-off LED activities –local stakeholders have limited knowledge of LED concepts and instruments –the are uncertain what LED/RED actually is –local stakeholders have no practical experience with LED –they are uncertain what they are supposed to do In this situation, strategy formulation is pointless –analogy to Dosi argument on technological uncertainty = second order uncertainty: decision- maker doesn’t know which options actually exist.

PACA and strategy: some considerations How are local stakeholders supposed to strategize about something they do not know? How can you plan something you cannot imagine?  It is crucial to conceptualize LED as a learning process  Only as local stakeholders develop an understanding of LED is it useful to formulate a strategy  It may be useful to formulate a joint vision and criteria at the beginning.

Not strategy, but vision: Criteria for good LED/RED proposals, 1 They make local markets work by removing barriers to entry –entrepreneurship development –mentoring, business angels –organized subcontracting –targeted business estates –targeted infrastructure development –promotion of business development services –business idea info service, fairs, attract franchises.

Not strategy, but vision: Criteria for good LED/RED proposals, 2 They make local markets work by resolving information problems –informal and formal get-togethers –business networking –local business directory –local business fair –real estate information system –locational marketing –labor market information system, matching schemes, skills fairs.

Not strategy, but vision: Criteria for good LED/RED proposals, 3 They make local markets work better by amplifying supply or demand –attracting specialized suppliers and service providers –needs- and bottleneck-driven skills development.

Not strategy, but vision: Criteria for good LED/RED proposals, 4 The remove obstacles to doing business –removal of unnecessary or obsolete regulations –streamlining of licensing and permit processes –creation of first-stop or one-stop agency.

Not strategy, but vision: Criteria for good LED/RED proposals, 5 They make improved use of locally available resources –skills: business working groups (núcleo), mentoring –finance: sponsoring, business angels, credit cooperatives –materials: solid waste recycling, biomass recycling, industrial ecosystems –innovation: cluster and value chain initiatives.

Summary: Criteria for good LED/RED proposals They make local markets work –by removing barriers to entry –by resolving information problems –by amplifying supply or demand The remove bureaucratic obstacles to doing business They make improved use of locally available resources.

Starting an LED initiative: Strategic Planning Advantages: Result = huge document –Useful in keeping supervisory bodies happy -- if performance is measured by input, not outcome –Useful in dealing with foreign donors Comfortable: you don’t have to leave your office –Let consultants and your junior staff to the legwork Disadvantages: Demotivates -- too complex, too many and too difficult proposals No action-orientation Does not stimulate learning- by-doing and adaptation of approaches.

Starting an LED initiative: PACA Advantages: Action-orientation Motivates stakeholders Quick, visible effects Learning-by-doing Constant adaptation of planning (revolving planning) Disadvantages: No big document, does not appear “scientific” Possible result of diagnostic: Better don’t start an LED initiative You have to leave your office, perhaps to listen to the complaints of companies.

Characteristics of different approaches Pulverization Strategic planning PACA Planning Iterative process Initial diagnostic ImplementationEvaluation 

Similarities between LED and business evolution: an analogy to Griener’s model PhaseNetworkLassoKick-off Focus Segment activities Delegate responsib. Pro-forma strategy Get projects under control formulate strategy Get LED projects moving Governance pattern Central information exchange, decentral responsibilities Clear distribution of tasks and responsib. Creation of Agency Informal M+E Emerging formalization InformalInexistent Reward system Identification with project objectives Latitude of decision Discipline + suffering Salary Excitement Personal motivation CrisisNetwork failure Mushrooming co- ordination and strategizing effort De-motivation of volunteers Fragmentation Lack of co-ordination

Options for LED strategies Generic locational policy Strategic locational policy Reflexive locational policy * Streamlining of regulations * Business-friendly local administration * One-stop-agencies * Real estate development * Real estate information systems * Locational marketing * Definition of focal areas of local development * Align local stake- holders for a shared goal * Selective, targeted LED activities * Organising discussion and reflection with local stakeholders and external expertise * No joint definition of problem and shared goal * No joint strategy with serious co-ordination challenges

Conclusion: What makes LED/RED different from earlier approaches? IRDP vs LED/RED SME promotion vs LED/RED less strategy, less comprehensive planning less government, more private sector more reliance on markets, more market creation wider approach (public sector reform, urban/regional planning, skills development, industrial ecology) multi-disciplinary  successful LED overcomes the problems of divisionalisation and fragmentation created in the Fordist age

Thank you for your attention!