CONTENT
Why we need to talk about a turning point
The general economic and social climate has changed dramatically in a short space of time. The pandemic, energy crisis, geopolitical tensions, supply chain disruptions, skills shortages, digitalization, climate targets, AI boost and security policy reassessments are having a simultaneous impact on companies and regions. For business development, this means that the logic of growth, land marketing and funding advice, which has often been the focus to date, falls short. Or to put it more clearly: it misses the mark.
What we are currently experiencing is not an economic dip, but a structural turning point. The term “turning point” aptly describes the permanent shift in economic, political and technological conditions.
Location development thus becomes a strategic task under uncertainty – with far-reaching consequences for economic development as an operational unit.
Abstract:
Crises, transformation and geopolitics are fundamentally changing the rules of the game for locations. Traditional economic development is reaching its limits with its instruments. How must economic development agencies position themselves in order to remain capable of acting, relevant and effective? In this article, expert Frank Balkenhol provides solutions and background information.
Economic development: From service provider to strategic navigator
For a long time, business development was mainly organized reactively: Companies reported needs, business development reacted and funding instruments were provided. This model is reaching its limits in a world of multiple transformations.
In the future, economic development agencies will need to proactively and continuously analyse, strategically prioritize and prepare political and administrative decision-making processes with overarching goals – including new guiding principles. This will turn economic development agencies into holistic, strategic navigators between business, politics, administration, science and civil society. Above all, with a focus on local needs and requirements – and not because a funding program suggests this, although its “software” (in the figurative sense) was already outdated when it was written.
“Dear economic development agencies, free yourselves from what the state and federal government consider to be effective general solutions. Your proximity, your local know-how and your flexibility are your strengths. And: less and less will anyone be able to tell you what “one” should do. It will be your role as an economic development agency to (courageously) define this yourselves in the future.”
Definition: Turning point
A turnaround describes a fundamental, long-term change in the framework conditions in which old strategies lose their effectiveness and new management logics become necessary. For location development, this means that new topics and new areas of tension are noticeably expanding the economic development agenda.
Wrong Way: Economic development agencies must now take on a new role – and new tasks
Time to act: 6 updates for economic development agencies
Finances and funding as pain points for local authorities
Part of the turnaround is also the uncertain forecasts for trade tax revenue in the municipalities; for many municipalities, this is the most important source of income. At the same time, the financial demands on local authorities are increasing in many areas, some of which can also be attributed to the turnaround: Investments in the transformation of the energy supply, changing mobility requirements, etc. Added to this are generally rising social costs and many other financial shifts.
The result: increased competition for the use of financial resources in the municipalities. Economic development – as a voluntary municipal task – must reposition itself so that it is not perceived as a cost factor on the savings side, but as a sensible and value-adding investment .
It is therefore all the more important now to position yourself as a municipal economic development agency with convincing strategy adjustments that are useful and effective.
“Those who are prepared to act more strategically, courageously and analytically will turn the turnaround into an opportunity for local and regional economic development.”
Location development under uncertainty – requires new instruments and skills
For a long time, planning security was a central promise of public location policy. Today, uncertainty is the norm. This calls for new instruments: scenarios, portfolio assessments, continuous data analyses, but also a much closer interlinking of economic development and urban and regional development. The latter in particular must become more digital more quickly.
There should also be more unity in communication: Economic development agencies that still believe that self-marketing takes precedence over place marketing should transform themselves quickly.
Definition: Location development vs. economic development
Location development refers to the strategic further development of a location as an overall system – i.e. all location factors that determine the future viability and attractiveness of a location.
Economic development is the operational unit that translates the objectives of location development into concrete measures and actively supports, attracts and retains companies and investments in the location.
Furthermore, industrial sites (if they can still be activated at all) are no longer just marketed, but transformed, which means they are energetically, functionally, mixed-use and strategically oriented. The question is no longer just “Who’s coming?”, but also “Who’s going?” or “Who’s leaving?” – The key question for contemporary location development must therefore be: Which companies, sectors and value chains will be systemically relevant for the location in the future – and which will not?
Questions relating to typical land instruments also require adapted thinking: “Is leasehold smarter than selling land (as before)?” or “Is third-party usability smarter than allowing special buildings (as before)?” or “Shouldn’t we invest ourselves (instead of not investing as before)?”
This is what business development agencies must be able to do and offer from now on:
- Strategic industry and value creation analysis
- Transformation and innovation consulting
- Data and AI-supported decision-making bases
- Active network and ecosystem management
- Moderation of politically sensitive topics
Conclusion: Turning point as a creative mandate
The turnaround is not a threat to economic development – it is a creative mandate. Those who continue to limit themselves to traditional role models will lose relevance. Those who are prepared to act more strategically, courageously and analytically, on the other hand, will, remains a central player in local and regional sustainability.
Economic development and location development are thus at a turning point: away from being pure enablers and towards being co-creators of economic and social transformation.
Sources: Federal Ministry for Economic Affairs and Energy (BMWi) – Sector and structural reports
Frank Balkenhol
ist Experte für Wirtschaftsförderung und Standortentwicklung bei der Stadtmanufaktur. Franks größte Leidenschaften: Städte, Standorte und Skifahren.
