Inculcating neo-McKennaism

I have written on this subject in the past but I think it is well worth repeating as we head into a new year.

One of the only policy initiatives from the McKenna era that worked was his focus on attracting new business investment into the province. He envisioned and then sold the notion of New Brunswick becoming the ‘back office’ for North American business. His vision was that customer service functions, accounting services, IT development, etc. could be done here cheaper and better than in the large urban markets.

And he had some success with this vision. By my count there are close to 20,000 people working in this functions today that have employers that are based in Toronto, Chicago and beyond.

But many people, including Donald Savoie, have pointed out that the actual number of net new jobs during McKenna’s tenure was not overly impressive. In fact, New Brunswick’s employment growth was significantly below the national average during his tenure.

I would point out that there were steep declines in other sectors during the recession of the early 1990s and the aftershocks of Federal job cuts, etc. and that without this badly needed external business investment New Brunswick would have looked more like Newfoundland during that period.

But the fact remains that overall McKenna was not able to achieve his vision. And India picked up the ball and is now the ‘offshore’ version of what McKenna was striving for. In that country, there are literally several hundred thousands of workers doing customer service, software development, market research, medical transcription services, etc. for North American companies.

Now, New Brunswick needs to position itself as a ‘nearshore’ version of India. Not nearly as ‘cheap’ but closer, more secure and with great talent. But I’ll leave that for another day.

The point is that McKenna failed on two points: 1) not putting enough emphasis on ‘product development’ and 2) not inculcating his vision into the ranks of the economic development department and indeed across all of government.

I’ll start with point 2) first.

Ask anyone who remembers economic development from the early to mid 1990s and they will tell you it was the McKenna show. He was the sales guy. He got deals done. He was the closer. His office generated and worked hundreds of sales leads directly from the 2nd floor of the Centennial Building. The Department of Economic Development at the time played a support role – they were brought in to structure incentive programs – but essentially it was the McKenna show.

So when he left – so did the infrastructure.

I said back then and I’ll say today that what we needed was 20 McKenna’s (you know, the whole Jesus and his disciples model) – spread throughout government. And a top sales team indoctrinated in McKennaism.

The government in Ireland changed hands 4-5 times during the Irish miracle that led to that country leading the globe in foreign investment for something like 18 of 22 years in a row. Despite the changes in government, the focus on attracting industry did not waver.

Now you can call Premier Lord’s call in 1999 for a ‘made in New Brunswick’ solution to economic development (a renouncement of McKennaism) – political opportunism. You can call it political immaturity. But the bottom line is that there was very little infrastructure left to convince him otherwise.

So, my advise is this. Neo-McKennaists realize the strategic importance of a Premier. He/she must cast the vision and provide tireless leadership. But he/she must also spend time training up dozens of mini-McKennaists and making this ideology pervasive across the government and into the communities. This must transcend political party and be embedded in the culture of government and community development – it is definitely not there today.

On point 1).

With the ‘call centre’ sector, McKenna had an excellent ‘product’. Bilingual labour, lots of it, lots of empty buildings with cheap rent and great telecom with NBTel. Sure, he had to do some great sales efforts but the underlying value proposition was very strong.

This is not the case with other sectors. They tried plastics in the 1990s. That failed. They tried textiles in Northern NB. That underwhelmed. They tried online learning. That sputtered and all but failed.

The point here is that just like any organization, economic development needs to be nurtured. We need to carve out a unique value proposition – one that would be compelling to industry. Then we need to put on the McKenna hat and sell, sell, sell.

But if you are trying to sell Yugos and you are competing with areas that make Ladas for much cheaper – you will fail.

So, if we want to attract online learning (e-learning) companies, we need to step back and ask ourselves what infrastructure needs to be nurtured to make us attractive to this industry? Do we need to train 5,000 teachers as experts in online instruction? Do we need to teach specific IT skills? Do we need to establish a world-class e-Learning R&D centre in the province? Do we need to partner with a few top e-Learning providers and attract them here as anchor tenants in this industry?

And we need to do this with other sectors where we deem we have some advantage.

So, to sum up neo-McKennaism involves creating a culture in government and the communities that is open to and realizes the strategic importance of opening up NB to global investment. It involves having dozens if not hundreds of McKennas throughout the province. And it involves picking a few key sectors where we have some advantage (and that are growing) and building a solid infrastructure around them that would be attractive to global industry.

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0 Responses to Inculcating neo-McKennaism

  1. vivenewbrunswick says:

    I agree with your arguments, but not with their solutions. Being ‘business friendly’ does not mean having ‘lots of McKennas’. Companies move because the bottom line is cheaper and they can get things done.

    Go check out my recent story on Ireland to see that Ireland’s business model was not ‘efficient salespeople’. It was low taxes, and NO taxes on royalties, patents, foreign income and R&D costs. This was aimed at specific industries, which is not allowed under the EU, but because Ireland was so bad those extra concessions were made. Trouble is, what happens if the EU closes that door and grants it to another European backwater? Poof. There goes your miracle.

    Pharmaceutical companies aren’t doing research in Ireland because they were ‘sold’ on it, they did it because there are no taxes on patents. However, Ireland differs from other tax havens in that you have to PROVE that you do work there (although not much as Microsoft has proven).

    This helps a small centralized population, however, our ‘EU’ overseers in Ottawa have no interest in helping NB with such concessions. However, if you DO want such industries here take a look at Delaware which is easily the most ‘gung ho’ american state (trouble is now ALL states are matching them). As you say, if a multinational were to set up here, a bonus is being able to call up the Premier and various governmental leaders and meet with them that day.

    Of course you need FAR lower taxes than New Brunswick charges. Going down increments doesn’t help. Here’s where having people involved would help the governmental stalemate. What if you had NO taxes on banking profits so long as their head office was in the province? Ontario would scream bloody murder but who cares? They’d have to match it or shut up. What about NO taxes on automotive profits so long as some automotive construction is done in the province?

    You’d recoup the money by income taxes on those good jobs, as well as by the decreased reliance on social programs.

    Again, this doesn’t involve ‘selling’ it involves tax planning, which is what REALLY gets corporations attention. I’m liking the Ireland model more and more as it is the perfect example of how a backwater can become a tiger, but the problem is, does Ontario and Quebec WANT that. Absolutely not.

    Sorry to drone on, but I also have to disagree that ‘we tried plastics’ or any other industry. There are thousands of ways to measure success and failure, thousands of companies and managers, just because one or some didn’t succeed by specific standards, doesn’t mean they were failures.

  2. David Campbell says:

    I think we are agreeing. You are talking about the need to do what I would term ‘product development’ and I hope you are not insinuating that companies don’t pay taxes in Ireland. Microsoft paid $1 billion in taxes in Ireland in just four years. That’s more than all the companies in NB combined.

    And as for ‘sales’ – how do people know about your province if you don’t sell? I am not talking about hard selling a crappy product. I am talking about NB being world class in a few sectors and then ‘selling’ it effectively.

    http://www.davidwcampbell.com/2005/11/benefits-of-business-investment.asp

  3. Anonymous says:

    Of course they pay SOME taxes, that’s the point, read the article, they saved half a billion from what they WOULD have paid if they hadn’t set up shop in Ireland. That’s how a small population can benefit.

    Of course let’s not delude ourselves, New Brunswick has the same thing here, unfortunately they are just bad at the game. Irving and McCain’s have pretty much free reign and I have a feeling that the reason NB has one of the worst access to information records in the country is because people would be horrified at just how little these two giants contribute to the economy, relative to what they get out.

    As for the selling, it doesn’t take a dozen McKenna’s, it just takes a few ads in the right publications. But there is no point in ‘selling’ when you’ve got nothing to sell. McKenna had cheap labour because of no unions and empty buildings, now just about every place on the globe has that. There’s no point in hiring a sales team for an empty warehouse with no inventory.