Amazon HQ2 Decision Should Prompt Reflection on State, Local Strategies

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All great leaders I've learned from have emphasized the importance of questioning norms. Why do we do this? Why do we do it that way? As times change, the things we do and the ways in which we do them should reflect those changing conditions.

The fact that Indiana was unable to make the final cut for Amazon’s multi-faceted HQ2 mega project when it boasts the 10th-best business climate should cause leaders to pause and ask whether their economic development strategy is the right one for the economic conditions in which we live.

This is not to diminish the fact that Indiana assembled high-caliber teams who put forth terrific proposals, with one making the final 20 cut. In no way is this written as a critique of them or their efforts. Rather, it’s about the bigger picture.

What is the single common thread shared among Amazon’s three-plus HQ2 winners? In a word: people. New York City, Crystal City, Virginia and Nashville vary in many respects, including their business climates. But what they all have now, and have the potential to accommodate more of, is people.

Indiana did not win a share of the HQ2 project because it didn’t offer the cheapest operating conditions. It was not due to inadequate transit systems (though that may be a factor). The bottom line is that Indiana did not win because it has not yet demonstrated the ability to attract and retain the talented workers that would be necessary to support such an investment.

Let me provide some statistics to support my case. Indiana’s employment levels have remained at record highs since historical peak employment was surpassed in July, 2015. Currently, there are 2.7 million Hoosiers employed in the private sector. Meanwhile, Indiana’s unemployment rate sits at an historically low 3.5%.

Fast-growing companies of all kinds across Indiana are currently struggling to fill critical positions. Some might suggest we train our way out of this problem with more effective workforce development practices. This is only partially right. Why? If we could wave a magic wand and place every single unemployed Hoosier into an available job, we would find that there are simply not enough people.

Indiana’s primary economic challenge is people. Talent. There isn’t enough. On top of this, Indiana ranks only 25th in domestic migration, with more Americans moving to other states than to Indiana. Indiana leaders need to focus on this just as they have focused for many years on creating and maintaining a top-ranked business climate.

I’ve learned that failure is not “good” or “bad” on its own. Instead, failure is simply one step in a long process that offers an opportunity to get back up, reflect, learn, and improve. In other words, we get to choose what failure means to us. From a tactical perspective I have no doubt that, as Hoosiers, we will maintain a positive mindset and use this competitive Amazon exercise to our advantage in securing future wins.

However, the reality of historically high levels of employment, historically low unemployment, and negative domestic migration has not altered the core strategic focus within economic development of business attraction. In fact, we need both business and people attraction strategies.

This is an opportunity to fine-tune economic development for today’s economy. Many jobs of today, and many more jobs of tomorrow will follow people. Economic development strategies and budgets should be adjusted to reflect this reality.

There are no silver bullets to Indiana’s challenges. Though at the state level, the Regional Cities Initiative and Stellar Communities program represent efforts to tackle some of them. They are designed to help communities throughout Indiana strengthen on a local and regional basis as a means of enhancing quality, thereby becoming more attractive to people. Unfortunately, these programs struggle to secure legislative support that translates into funding at adequate levels.

I’m proud that Indiana has been an economic leader over the last 12 years. If Indiana intends to remain an economic leader in this country, it should use this Amazon opportunity to reflect, learn, and take steps to position the state for the future. Not to be more like New York City or to win the next mega project, but to become the best version of Indiana.

Eric Shields is principal of Cardinal Strategies, LLC, an economic development and public affairs firm in Indianapolis.

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