Clusters Outside of Nebraska
Many ecosystem builders struggle when a company would really be better off in another market. There are certain markets – travel and advertising, being two – where being located in Nebraska may not be the best possible location. For example, Sojern moved its corporate headquarters to Silicon Valley about five years ago. This was a smart move because they are in digital advertising, and at the time, the company’s primary target market was travel-related. This meant personnel and jobs moved to the Valley. But the move also put the company in a better position to succeed. If our goal is to grow ecosystems – doesn’t that start with successful companies?
This type of move makes sense and should be expected. This was not a talent failure but a decision to be close to customers. Companies should locate near their customers because this is the mechanism to understand what customers want. Moreover, there has been great economics work done on the subject explaining why and how clusters of companies are important.1 As a country and a community, we, as citizens, and public policy advocates should attempt to strengthen these clusters, rather than weaken them to ensure that every community keeps its founders. We should actively work to help build stronger, transparent, accessible networks of people in our own towns. The best and probably go-to article on this topic is the one Laura reviewed last week – Michael Porter’s “Clusters and the New Economics of Competition”.
Many communities build their entire economic development strategy on the principles set out in the article, though these leaders may not completely understand its implications. One implication is that sometimes cities need to let their companies leave because there is a more natural ecosystem/cluster in which they will thrive. That is also why building clustered economies around specializations (as in the case of universities and other research hubs) is critical. Building not only where companies hope to be, but where they can realistically carve out competitive advantages to get the best talent, is a critical competitive advantage that cities and clusters can empower.
This is one reason that I wish our largest buyers (i.e. startup customers) would be more active in our ecosystem and in the innovation economy. It would dramatically improve our developing clusters in key areas – such as health care, financial technology, and construction technology. Leveraging the buying power of our hospitals, or our insurance companies, or our big architecture/engineering/design/construction (AEDC) companies would be a powerful tool as a means of getting new young firms to grow more rapidly in or move to Omaha.
Let me be clear, I am not calling out large companies that choose not to work with startups – but I do find it counter-productive to “support” the ecosystem without ever writing direct checks for products or services from nascent companies or working with high growth companies directly as c-level mentors or advocates to help find additional customers. It is much more effective and impactful to buy products from startups – than it is to sponsor a cocktail hour at an event.
This is one key example of where being “founders first” is challenging because it can be in conflict with our funders and our community’s stated goals. However, when leaders do the right things to help companies grow, it helps the community succeed over the long-term because it builds trust and respect from skeptical actors and entrepreneurs. In the case of Sojern, the company still employs a significant group in Nebraska. If Sojern had stayed here and died, that employment number would be zero… The problem with counter-factual situations is that, of course, this is not what happened. But, it does happen. Companies choose death over moving – that’s not good for an ecosystem.
Instead, when a company moves, finding jobs for those startup folks that did not move should be a priority, as should ensuring that the “home town” provides support and builds its network through the newly mobile company. However, I fear that, like sports team fans, we, community leaders, often treat employees, founders, and others as pariahs, rather than the startup heroes that are making our communities great. We can do better.