Tuesday, July 8th, 2008

More Smart Economic Development Strategies

In my recent posting about the brand promise of Indianapolis, I advocated that far from rejecting Indy’s traditional brand image, the city should instead embrace the best of it, updating it for the future with optimism and ambition. Core to this was motorsports, which is the brand image of Indianapolis for many people, especially outside the United States. There was some lively debate around this in the comment thread to say the least.

Interestingly, an article in the Star [dead link] shows that motorsports isn’t just a good brand, it’s good business. The Indianapolis area has over 400 motorsports related businesses, with over 8,800 employees and a combined payroll exceeding $425 million. My simple math puts the average wage for that at about $48,300/year. Many of these are located in the racing cluster around Indianapolis Raceway Park in Brownsburg. What’s more, as a commentor noted, motorsports is actually a high technology business, making it a good fit for the city’s ambitions in that sector. You can read more about this at http://www.indianamotorsports.org/ and http://www.indianamotorsports.gov/

I previously discussed what makes a good economic development strategy, highlighting Indy’s very successful amateur sports strategy and the newer Music Crossroads initiative. They key is not to focus all of your efforts on markets like high technology and life sciences, where everybody and their brother wants a piece of the action and few cities have a differentiated strategy. It seems to me that every city I look at has pretty much the same strategy there. There will be winners to be sure, but the greatest benefits will accrue to only a handful of places, and the winners in some respects have already been chosen. No Midwest burg is likely to knock Silicon Valley from its perch as America’s tech capital, for example.

That’s not to say that cities shouldn’t try to build industries in those sectors. They should. Things like life sciences, high technology, green business, etc. are such growth areas and so omnipresent in the 21st century economy that you must have at least some presence there to even be in the game. A city without a life sciences strategy could end up like a company with no internet strategy – a has been. Conversely, that means these industries are, to a great extent, just the ante you’ve got to pay and don’t build a differentiated offering except in limited situations. They are a necessary but not sufficient condition.

What cities really need to do beyond the ante is to find areas where they can build their own version of what Warren Buffett would call “wide moat” businesses. That is, those that have a sustainable competitive advantage. Rather than trying to beat Silicon Valley at their game, I’d argue cities need to define their own games they can make others try to beat them at. The Indy amateur sports strategy was a great example of this.

Indy’s motorsports strategy is another. Because of the Indianapolis 500, the city has a huge reputation for motorsports. Having built up other events at the Speedway, plus the US Nationals and other premier events held at Indianapolis Raceway Park, it’s safe to say that there is no other city with a collection of racing events like Indy anywhere in the world. What’s more, as with amateur sports, the city didn’t just rely on events, but also built a cluster of businessness and expertise in all facets of the industry. This has led to the major job cluster that we observe. This is big business, and it is a wide moat business. What’s more, it has a huge positive impact on the city’s brand.

The great thing is, there’s a lot more gas in the tank, so to speak, in the motorsports strategy, and if it is extended and aligned with an overall brand repositioning for the city, the benefits could be enormous. I mentioned before the alignment of motorsports with high technology. Consider how this could be leveraged. We often hear the legends about how many safety and other pieces of equipment such as rear view mirrors debuted in the Indianapolis 500 before they made their ways to production cars. Why not try to revive that? Indy Car and Nascar have gone for purely standard kits, while Formula 1 has veered off into true high tech, with ever more esoteric gear requiring a budget in in the nine figures just to compete. But there is a third way. I can’t claim credit for this because Bob Kravitz of the Star I believe already threw out the challenge, but why not tweak the rules of Indy Car to make technology competition part of the sport again and orient it towards alternative fuels and green energy? Why shouldn’t IndyCar perhaps, at least in some type of event, be going for a pure hyrdogen car or a pure electric car, or something that both forces teams to compete, involves high technology with massive comercial spin-off potential, the ability to lure outside funding, and a huge boost for the city’s environmental image. Think of it as the Brickyard meets a version of the X Prize.

This is just one idea of how to capitalize on motorsports. There are many others. But the key is that the city has already built a successful wide moat business here. The challenge for Indy and other cities is how to find additional wide moat businesses they can build up and expand, and not be trapped playing solely in games that have lots of lots of competitors and entrenched market leaders.

By the way, that’s not to say life sciences or high tech can’t be part of that. But find your niche. Specialized laboratory and service companies employ 6,000 people in Indiana, for example. Still, I wouldn’t be putting all my eggs in those baskets.

10 Comments
Topics: Economic Development
Cities: Indianapolis

10 Responses to “More Smart Economic Development Strategies”

  1. Gary says:

    I could buy into the “motorsports” branding a little more if we had been able to keep F1 here. Like it or not, the fact the we lost that event was a major black eye to the city.

  2. Anonymous says:

    Interesting that the article linked from the Star talks about an oppurtunity for Westfield, but you make no mention of it. If it was in Carmel, Indianapolis would get second billing.

  3. thundermutt says:

    I think F1 will be back, probably before the Super Bowl comes.

    The revision to the road course for the motorcycles will eliminate the technical “Ralf Schumacher problem” (loading due to high-speed banked turn) on Turn 1 (F1 turn 13).

    When the economy turns good in the next year or so, Tony George should be able to line up a title sponsor.

  4. Gary says:

    Thundermutt I would like to believe you are right and I appluad your opptimism. But I follow racing very close and from everything I’ve read I think our chances of getting F1 back here are slim to none.

    The head of F1 is an extremely arrgonat man. He never misses an opporunity to state that F1 doesn’t need the U.S. market. Let alone coming to Indy.

    Given that, getting F1 back into the U.S. is a daunting task. To say nothing of the fact that while F1 was here, the head of F1 (honestly I can’t remember his name) would not even stay the night in Indy. He flew back in forth to Chicago every day. He publicly stated there weren’t any hotels good enough in Indy for him to stay at.

    There never were really any technically problems at the track.
    F1 just tried to hold up George, and George didn’t buy into it.

    If F1 comes back to the states it will be in a high profile market. I have heard LV mentioned a few times. They raced there a few times along time ago.

    Don’t get me wrong. I am not fan of F1. I think is a rather boring (as far as competition goes) racing circuit. But, it is very high tech and very well placed in the global marketplace.

  5. Anonymous says:

    Gary, The announcement that F1 is comming back will be like the CEO of a large corporation saying the company isnt for sale until the day it is sold.

    Hats off to the Speedway leadership for the redevelopment of their new downtown. Indy could once again becoming the “Racing Capital”

  6. Anonymous says:

    Bernie Ecclestone is head of F-1. His arrogance is exceeded only by his greed. Race dates on the F-1 calendar are for sale to the highest bidder.

  7. Gary says:

    But see guys that is the problem.
    IMA doesn’t “need” F1 and F1 does feel it needs the U.S. Market and they don’t “want” the Indy market.

    I say that relationship is buried.

  8. Gary says:

    “IMS” sorry

  9. Anonymous says:

    “His arrogance is exceeded only by his greed.” 7/9
    Kinda like Tony George and the start of the IRL. He wanted to own the league.

  10. Anonymous says:

    speaking of sports, take a look at these beautiful buildings that China built for the 2008 olympics.

    http://www.nytimes.com/interactive/2008/07/12/arts/20080712_BEIJING_GRAPHIC.html

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