Lund is right

Stephen Lund spoke to the SJ Board of Trade yesterday and his key theme was one of focus.

A top business development guru says New Brunswick must pick a single industry and brand itself as the best in the world if it wants to build its economy. Enlarge Photo Stephen Lund “You’ve got to pick winners or the losers will find you,” said Stephen Lund, president and chief executive of Nova Scotia Business Inc., the private-sector led business development agency for the bluenose province. “Why be mediocre at everything when you can be the best at a couple of things,” he added. “You can’t be all things to all people.”

To paraphrase Bryan Adams, I have been saying that tell my fingers bled but it’s a hard message to get through.  Most economic development agencies are still trying to ‘sell’ some general value proposition centred on ‘cheaper’ and ‘good workers’.   

Usually when I talk like this to folks in the economic development world, they will say we can’t focus on one or a small group of industries.  We can’t pick winners and losers.  Every other industry group will complain, etc.

The problem with that logic is that runs completely counter to our own experience over the past 15 years.

From 1996 to 2006, the province added about 37,000 net new jobs (increase in employment – using Census data).  We also know that around 15,000 of that increase can be tied to publicly funded jobs – government, health care, education which leaves around 22,000 net new private sector jobs.  We also know, again roughly because there is no ‘customer contact industry’ in the NAICS classification, that there were close to 15,000 jobs created in the customer contact centre sector during the decade. 

Or about 68% of all net new private sector job creation over a ten year period.

Now we can haggle over the numbers but even if it was 50% – it would be amazing that one single sector created at least half of all net new jobs in the entire province.

So, in point of fact, New Brunswick had the most concentrated sector focus – probably in the history of the universe – and just didn’t realize it.

And that industry has crested.  So where will the next 15,000 private sector jobs come from? Remember that construction, retail, etc. are reactive – i.e. they do not stimulate primary economic growth – they react to growth.  If a 500 person customer contact centre sets up in your town, you need 300 new housing units (roughly).  You don’t build 300 new housing units and hope that a customer contact centre comes to town.

The fact is that the customer contact centre industy was a gift in that the province did very little to build the value proposition.  It pre-existed.  Lots of large, empty buildings for cheap rent, good telecom network, lots of available bilingual workers and incentive programs that provided close to 50% of start up costs.  A tailor-made value proposition that was off the rack.

We don’t have that for biosciences, or ICT, or even increasingly the forestry sector. 

We need to figure out the next big industry (or handful of industries) with potential here and make investments. 

The NB government spends hundreds of millions on education each year.  It could easily align that with a targeted growth industry.  The fed/prov governments spend millions on R&D.  That could easily be tied to a targeted growth industry.  The province spends hundreds of millions on roads, bridges and other physical infrastructure.  That could easily be tied to a targeted growth sector. 

The province just slashed corporate and personal tax rates.  That could have easily been tied to a specific growth sector (s).  Why not a tax break for workers moving to New Brunswick into the specific growth sector?  – $3,000 personal tax credit for five years to help seed a new growth sector.  It’s been done many times before (just not here).

NB Power could easily adjust its rate structure to province an incentive rate to a targeted growth sector.

BNB spends over $50 million per year.  That could easily be targeted to a specific growth sector (s).

RDC spends over $200 million per year.  That could easily be targeted to a specific growth sector (s).

There are over 400 economic developers in New Brunswick – one for every 900 employed persons in the province – they could easily be focused on developed a specific growth sector (s).

An EDT ADM asked me one time “why would Nortel ever want to set up a manufacturing plant in New Brunswick?” This was back  in the 1990s when everyone wanted to attract Nortel.  I was flummoxed. Here was a guy in leadership in the department tasked with growing the economy and he couldn’t see why a company would locate here.

Cecil Freeman told a legislative committee that when he was the head of investment for BNB he essentially had nothing to sell.  We put a guy in charge of attracting investment to New Brunswick that thought we had nothing to sell.  Imagine having a VP of Sales that didn’t believe the product was worth selling.

Well, if we focus, if we build a strong value proposition, guys like Freeman will have something to sell.

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4 Responses to Lund is right

  1. John Doe says:

    Why not focus on renewable energy? Umoe is (supposedly) building a large solar panel manufacturing plant, which requires enormous amounts of wood (which we definitely have), and they are also attempting to spur research in solar energy with the University of New Brunswick.

    The demand for solar power and clean energy will only increase in the future, and with wind farms popping up, tidal energy creation in the Bay of Fundy, we already have a number of directions to take. Renewable energy is a buzz word among every hipster dufus in the US, and I can’t see any reason why we can;t use our abundance of resources to create clean energy and sell it off to the increasingly “green” conscious individuals in the United States. It would also have benefits for residents of New Brunswick, but it would all depend on whether the Irvings are willing to keep their hands off the puppet strings in Fredericton.

  2. Anonymous says:

    Excellent post of crucial importance to the future of New Brunswick.

    You have saved the province millions of dollars in consultants, task forces and analysis.

  3. Samonymous says:

    “You’ve got to pick winners or the losers will find you…”

    Unfortunately, the government has done a way better job at picking losers while, in the meantime, breaking the backs of small and medium size businesses in the province (the group that picks up the expensive tab for their government friendly competitors via high taxes).

    Furthermore, there is no empirical evidence that the few winners that do come here (and there are few), wouldn’t have ventured here in the first place or even earlier had the business climate been more to their liking instead of having to beg them to relocate with taxpayers money.

    Let me tell you, I dream of the day when a company comes to New Brunswick because of the great economic climate it possesses, not because some bureaucrat is offering them some short term cash handed out at the taxpayers expense.

  4. Anonymous says:

    “Cecil Freeman told a legislative committee that when he was the head of investment for BNB he essentially had nothing to sell.”

    > Unfortunately, he was right. As for focusing on one sector, I completely agree with you and Lund. However, this is extremely difficult to accomplish in an environment as heavily politically charged as New Brunswick. Just to cite one example that is close to you: why should the province bother about the biomedical sector when there is so much more capacity and expertise available in plant sciences (i.e. agriculture and forest)? The money that the Atlantic Cancer Research Institute has received so far could have been used far more efficiently (in terms of ROI) by areas where there is more capacity and that take far less time to reach the markets.

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