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- An Introduction to Open Source Economic Development
- Changes in our economy hit home
- Moving from a First Curve to a Second Curve economy
- The Urgency of Open Innovation
- New, Networked Approaches to Economic Development
- Building an open civic process: Strategic doing
- The emerging role of the civic leader
- The importance of mapping our networks
- Mapping and aligning Second Curve networks
- Open Source Economic Development: A Glossary
Moving from a First Curve to a Second Curve economy
In the old industrial economy, business firms and their communities prospered by transforming and moving large volumes of material efficiently. So, for example, in the Great Lakes states, we became very skilled at producing steel. In other communities, we became very skilled at producing automobile parts and assembling these parts.
In the beginning, these skills were relatively rare, and they were highly compensated. So, our communities prospered. We built and managed large industrial enterprises that were vertically integrated. We generated wealth with hierarchical organizations and efficient command-and-control management practices. These business models evolved to manage large flows of industrial and commercial products: steel, chemicals, automobiles, appliances.
Now this First Curve
industrial economy is giving way to a Second Curve economy based on
knowledge and networks. The Internet provides a powerful metaphor to
explain how this new economy works. Wealth comes from our ability to
generate and apply new knowledge. By applying new knowledge to new
products and services we generate new wealth.
So, for example, we
generate new wealth in our rural counties when we take agricultural
products and transform them into renewable energy sources, like
bio-diesel. Or, we generate new wealth when we transform an idea into
a new software package that makes computations easier. Or, we generate
new wealth when we attract visitors to a unique experience in one of
our historic downtowns.
In other words, the pathway to creating wealth is no longer straight and clear. Now, a single entrepreneur can create wealth with a new idea and the willingness to build the networks she needs to bring her idea to market. In our networked world, the locus of wealth creation is shifting from large hierarchical corporations to networks of connected people both inside and outside corporations.
Wealth creation is now a function of relationships and networks. Michael Porter, a professor at Harvard, was one of the first academics to spot this shift. In the early 1990s, he pointed out that wealth arises from clusters of interconnected organizations: businesses, educational institutions, and nonprofit organizations. He argued that clusters provide the key insights into how economies -- as small as neighborhoods and as large as countries -- create wealth. The challenge for economic developers has come in applying these insights. As one commentator notes, “Clusters are hard beasts to tame for economic development purposes”.
Nevertheless, Porter's perspective is important. He was one of the first economic analysts to understand that the ongoing changes in the world economy have led to a new type of economic growth. We are now living in the interplay between our First Curve and Second Curve economies.
Successfully competing in this situation demands greater adaptability and a readiness for change. The old economy was based on business models that excelled at supplying commodity goods. The new economy is based on the integration of new knowledge with goods and services. High volumes are still important, but not nearly as much in the past. Indeed, the Internet empowers business models that serve very narrow markets.
Our central challenge involves moving our old economy assets to adapt the new economy dynamics. We need new models of economic development, new approaches to shape our thinking and guide our actions. These models need to support an accelerate new approaches to wealth generation -- new approaches that are based on open network business models.
