Framework for Localization-in Action

In my previous posting, Framework for Localization – an Overview, I introduced a set of slides that illustrated the interrelationships among key participants in a business ecosystem (see Framework4Localization Overview posted on SlideShare).

The final slide below, “Complete Localization Framework,” summarizes all of the key elements in one view:

It provides the starting point for this posting which outlines steps one can take to use the framework as a tool to help localize a community’s business ecosystem.

The slides shown in this posting are part of a presentation, Framework4Localization – in Action, which you may view or download from SlideShare by clicking the link in the title.

Purpose of Localization

The purpose of localization is to increase a community’s self-reliance and improve its chances for long-term sustainability. Localization done well results in more businesses that start-up and scale-up in response to demand from community members and do so profitably so they, too, are sustainable. But in order for that to happen within a local context, the metrics of success must be clear and the processes for business development must be well-managed.

Slide 1 below recommends that community members establish portfolio management practices and market metrics as a first step in their localization strategy. Given the emphasis on self-reliance and sustainability, the metrics that relate to basic needs, e.g., gallons of water, calories of food, kilowatts of electrical power, square feet of living space, etc., met by the local economy take precedence over others that are more readily available through the global economy.

Slide 1

Because all businesses within the community function within a business ecosystem, seeing them within a “community portfolio” is a useful construct. The dynamics of adding new, expanding some, and redirecting others to build the local economy invite wise use of community assets to do so, in other words, portfolio management. As pointed out in an earlier posting, participation by community members on many different levels which includes “investment” of community assets they own or control, is essential for localization to work. In effect, portfolio management practices provide the guidelines by which community members can effectively exercise their participation.

Bear in mind, this is not a social experiment. Even though businesses are in a community portfolio, that does not give them the latitude to be mismanaged and perform poorly. Profitability remains their primary goal since that is the only way businesses can stay in business and the only way the business ecosystem can sustainably localize.

Businesses listed in the community portfolio can be anywhere in their development cycle from an innovative idea, to a business case preparing for launch, to a business already underway and looking to expand, to a mainstay in the business ecosystem needing to modernize and redirect. In addition to where they are developmentally, they also have a spot on the localization framework.

Slide 2 below shows the distribution of business ideas and cases that surfaced during a series of stakeholder sessions conducted in Lorain County, Ohio during 2010 – 2011. While this does not capture all of them, it does show the variety of ideas and cases in each category.

Slide 2

Typical of our experiences in these forums, participants generated more ideas and cases in production than any other area. But knowing how ideas and cases fit into the framework is useful information because it offers insights into how to design the localization strategy going forward and where to bolster the localization inroads already made. For instance, strong output from local food production is certainly a plus in the overal drive to localize a community’s business ecosystem. However, a preponderance of local food production compared to downstream, value-added stages may relegate market access to a smattering of direct sales to community members in the local economy through farmers’ markets and community-supported agriculture (CSA) subscriptions, or contracted sales to food aggregators / distributors or retail food chains in the global economy. The former lacks sufficient volume at marketable prices to cover the cost of operations whereas the latter runs counter to localization.

Value-added stages between production and consumption with insufficient businesses to create viable business-to-business connections and increase access to local markets become opportunity spaces for new or expanding businesses to fill. Slide 3 below outlines several value-added stages in a red border to designate them as opportunity spaces ripe for business growth in the Lorain County example.

Slide 3

As examples, among those opportunity spaces identified, “energy flows” and “waste flows” offer a considerable range of freedom for business development in composting, anaerobic digesters, and other waste-to-energy alternatives. Notice, too, the absence of established portfolio management practices. If left unaddressed, this deficiency leads to poor communication and coordination among community members about how to populate the community portfolio and how to invest community assets to advance those entries.

Sound portfolio management practices include the development of a strategy that localizes the business ecosystem as expeditiously as possible. With sustained profitability as the goal, preferred strategies increase the number of high-margin transactions closer to points of consumption. This both speeds those businesses directly involved toward profitability and increases the amount of revenue that can be distributed throughout the value chain. The result contributes to the profitability of the overall localized business ecosystem, which derives maximum benefit and return from invested assets.

Slide 4 below draws attention to those transactions that occur within the opportunity spaces closest to the points of consumption.

Slide 4

In the case of localizing the food system in Lorain County, that meant focus on food preparation for quick delivery of ready-to-eat calories to consumers. Potential venues include schools, health care facilities, food trucks / carts, farm-to-table dining experiences, take-home meals for employees, and home deliveries.

Those business ideas and cases that emerged through this kind of gap-filling / start-closest-to-the-points-of-consumption strategy provide ample opportunities for community members to participate. Slide 5 below points out those areas of participation that are oftentimes discounted or forgotten compared to their more notable value-added counterparts.

Slide 5

These data management services identify, record, and track utilization of community assets through tools and techniques that include mapping, modeling, information flows, decision support, and portfolio management. In actuality, the processes that account for community assets build a formidable knowledge commons and know-how value network. These can be combined with available land, facilities, equipment, etc., under the control of community members to create highly adaptive business models and develop innovative solutions to address roadblocks along the way to start-up, scale-up, and sustainability.

Accounting for assets is an important step in any localization strategy. Slide 6 refers to the set of templates and tools available on LocalFoodSystems.org (LFS) that enables entrepreneurs, business ecosystem participants, and community members to begin documenting their assets and developing their strategies to apply them.

Slide 6

Note that the categories and color-coding listed in the legend for the LFS site correspond to the Framework4Localization diagram.

Click Business Ecosystem Map (see screenshot below) and, as the previous slide suggests, get your business on the map…and into your business ecosystem.

Also, check the LFS site frequently for new features you might find useful as you further develop your business ideas and cases.

Epilogue:

Lorain County participants led one of the first initiatives in Northeast Ohio to load their business ideas and cases into a “Community Investment Portfolio” and use it to shape the rollout of their localization strategy. Today, this strategy is encapsulated in The Oberlin Project.

Look for future postings on this blog which explore the general concept of a community investment portfolio in more detail and note how it has evolved over the past two years to become an effective economic and business development tool.

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Saturday, August 25, 2012

Framework for Localization-an Overview

The simple dictum is: successful localization of a business ecosystem demands widespread participation by community members. Easy to say. It’s another thing for community members to know what that means and what to do about it. This is where another kind of map — a “framework for localization” — comes in handy to help community members define their business ecosystem, understand its dynamics, and assess to what degree it is already localized.

During the course of my work on the USDA-SCRI and FFEF grants, I had the opportunity to develop such a framework. I documented it in two presentations available for view and download on Slideshare. The first, Framework4Localization – Overview, provides a graphic representation of a typical business ecosystem. It is the subject of this posting. The second, Framework4Localization – in Action, offers steps community members can consider as they develop a strategy for localizing their business ecosystem. It will be the topic of the second posting in this series. Together, these set the stage for community members to build a “portfolio” of business cases that attracts widespread participation and drives the localization process. The nature of this portfolio and how community members invest in it will be the theme of a third posting.

Let’s begin this overview with a general description of a business ecosystem. Like a natural ecosystem, the business version functions due to material and data flows from source points to use points. Again, as with its natural counterpart, sustainability depends on a continuous flow from sources to points of use.

As sources become scarce, costs go up and the search is on for a suitable alternative. For instance, businesses that require inputs that are unavailable locally at competitive prices, import needed materials from source points further away. And if suitable sources cannot be found, those businesses in the ecosystem that depend on them cease to operate because they cannot secure what they need.

The challenge for sustainability of business operations in their ecosystem is to draw upon their sources at rates that allow them to recharge, or slow their use so as to not exhaust them, or provide a window of time large enough to find suitable substitutes.

In the context of a community whose members have basic needs that must be fulfilled daily, the availability of water, food, housing, etc. becomes significant in terms of THEIR sustainability. The sustainability challenge is similar to what businesses must confront only with the caveat that the distance between life-giving sources and community members who depend on their delivery imposes another level of dependence and urgency. Localization, then, closes this distance gap and reduces dependence and anxiety levels.

With the general explanation of terms in mind, the purpose of this overview is to help community members “see” the various elements of their business ecosystem in relationship to one another as a first step in taking action to localize.

Slide 1 lays out the basics for a localization framework that, in effect, ties source points on the left to downstream use points and markets on the right.

Slide 1

Slide 2 outlines value-added (see USDA definition in italics below) functions that are central to the business ecosystem. This includes stages of production, processing, and preparation, installation, construction as well as the flows of energy necessary to make the conversions in each stage, and the waste management flows that seek to recharge sources with what is not used, repurposed, and recovered during conversions and consumption.

Agricultural product that has undergone a change in physical state or was produced, marketed, or segregated (e.g., identity-preserved, eco-labeling, etc.) in a manner that enhances its value or expands the customer base of the product is considered a value-added product.1

Slide 2

Slide 3 highlights a distribution and logistics system that manages the shipping and storage of material as inputs and outputs on their way to various markets. These functions are non-value-added given the USDA definition of “value-added” (see definition in previous slide).

Slide 3

Slide 4 targets those data-driven services that provide a virtual representation of the material side of the business ecosystem. Asset maps utilize a graphical user interface to capture all relevant data about participants in a business ecosystem so they are easy to see; ecosystem models readily demonstrate the dynamics among business ecosystem participants and generate likely scenarios about how to improve the efficiency, performance, and sustainability of the business ecosystem; information flows deliver real-time, continuous, detailed overlays and insights into the behaviors of preferred ecosystem models upon their adoption; and decision support provides an information-enriched knowledge commons for business ecosystem participants to access and apply in their decisions.

Slide 4

Slide five identifies the three main service areas that influence the larger context in which the business ecosystem functions. These three hold significant implications on the cost to adopt a different business ecosystem model, such as one dedicated to localization of the food system. The current globalized food system is held in place by entrenched legal, capital, and education institutions. To localize requires changes in all three. This means confronting major inertia.

Slide 5

Slide six posits governance as the backdrop for change in the system. Governance is the process by which laws, codes, rules, regulations, and curricula change. And that changes the legal, capital, and education institutions. And that expedites the localization of a business ecosystem. Governance provides fair and impartial incentives for community members to participate in localization by playing a diverse array of roles and exercising certain responsibilities, delivering value, and building on their reputations.

Slide 6

Slide seven illustrates the complete localization framework as a “map” that can be tailored to the specific circumstances of a community and its business ecosystem.

Slide 7

And that sets up the second posting in this series which shows how community members can use this framework to guide their localization strategies. Stay tuned…

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Saturday, August 18, 2012

  1. Community Food Systems-Other USDA Grant Opportunities

How to Have a Successful Start-up before Launch

As the title of my previous posting, “Want to Localize? Participation is Required!”, suggests, if community members truly want to strengthen their local economy and become more self-reliant, the majority must be actively involved in making it happen. The posting goes on to mention five areas of social, economic, and political activity in which community members can choose to participate in support of their local businesses. Savvy, local entrepreneurs and business owners within a particular business ecosystem know that community involvement is critical, not only for the success or failure of their businesses, but for the overall localization underway. As a result, they make it easy for community members to choose how they will participate in these five areas. In effect, they demonstrate how community member participation supports local businesses, strengthens the local economy, and contributes to their collective commitment to localization.

Such an engagement strategy does not come by happenstance, but by deliberate planning. In 2010, Michelle Ajamian and Brandon Jaeger value received a one-year Value-Added Producer Grant (VAPG) to develop product, marketing, and business plans for their budding community-based enterprise, Shagbark Seed & Mill.

Michelle and Brandon convened and led the grant team for the project that included Leslie Schaller, one of the co-founders of the Appalachian Center for Economic Networks (ACEnet) and co-author of “The 25% Shift – The Benefits of Food Localization for Northeast Ohio Local & How to Realize Them”; and June Holley, a network weaver par excellent, co-author on “Building Smart Communities through Network Weaving” and author of the Network Weaver Handbook; and myself as members.

One of the outcomes of our effort was a market network plan that outlined ways to increase participation by the community in starting, scaling, and sustaining the business. While the financial details of this plan pertained exclusively to Shagbark Seed & Mill operations, I extracted the main process points to form a market network planning template below that can be applied to local agriculture-based businesses in other communities.

This template applies to any food product, product line, or suite of products a local business seeks to put into the market. The primary purpose of the template is to inform marketing strategies that gain community member participation in support of a business venture (for simplicity’s sake, we’ll call it Local Foods) because of the value it brings to the community through its operations and products.

The template begins with the basic assumption that Local Foods is a community-based business regardless of how many communities in which it may do business. In other words, Local Foods strives to localize the value chain within the market area served by any one of its operations and products. The goal is to “know the local market” and “reach the local market” rather than identify and pursue customers wherever they are located. Just like it takes a village to support its members, it takes a healthy, localizing business ecosystem to support start-ups and scale-ups like Local Foods.

The template presents two views: Knowing the Market and Reaching the Market, based, in part, on one of my earlier postings entitled “Participation in Local Food Systems”. The Knowing the Market table below identifies five prompts for market participation in the left-hand column followed by three columns listing specific ways community members can participate according to those prompts. The levels signify a continuum ranging from the more individual-based at the first level to the more community-based at the third level. The more cells covered by the strategy, the more effective it will be in terms of impact.

The Reaching the Market table below identifies ways to connect with the market in support of the Knowing the Market process. The organizational structure of this table parallels that of the first table: five interface areas in the left-hand column followed by three columns of ways to connect with the more familiar at the first level to the more contemporary at the third level. As with Knowing the Market, the more cells put into play, the more connectivity throughout the market, the more informed the marketing strategies, and the more participation by entrepreneurs and business owners in the business ecosystem as it localizes.

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In summary, this template works best in a community where its members at least express a willingness to localize their business ecosystems, strengthen their local economy, and become more self-reliant. After that, it is a matter of how and to what degree they exercise that willingness through active participation. A sound market network plan provides awareness and rationale that invites participation as well as structured incentives that acknowledge community members for their participation. The better the execution of a sound plan, the greater the chances a business, like Local Foods, can successfully start, scale, and sustain.

Look for more examples and guidelines in subsequent posts on how to increase participation, buy-in, and support for business ecosystem localization using some version of this template!

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Monday, August 13, 2012

Want to Localize? Participation Is Required!

In a globalized business ecosystem, the market can be anywhere in the world and the customer is merely a transaction entry in a database. However, as a business ecosystem localizes, the market becomes the community and the customers are the people who live there. They have faces and names. They are known for who they are to one another: relatives, friends, associates, acquaintances, neighbors, and community members. And if self-reliance is their motivation to localize, they have a vested interest in applying their resources to relieve their dependence on the globalized ecosystem for their basic needs. In other words, they are prompted to participate.

Participation by community members is the key determinant in how fast and to what degree a business ecosystem localizes. To accelerate localization and impact the local economy requires that community members do as many of the following as they choose:

  • Buy local whether they think it’s a good deal, financially, or not–it may very well not be!
  • Believe in the principles and values associated with self-reliance as the motivator
  • Advocate on behalf of localization within the community as a way to achieve self-reliance
  • Influence legislation regarding taxes, regulations, and subsidies to favor localization
  • Invest in local businesses as entrepreneurs, resource providers, and stakeholders of all kinds

As you can see, there are many ways community members can choose to participate in localizing their business ecosystem. In fact, there’s really no reason why a community can’t expect 100% participation by all of its members in that each one makes a CONSCIOUS, INFORMED DECISION whether and in what ways to participate.

The presentation, Achieving 100% Participation in Local Agriculture Systems (click on link in title to view / download from Slideshare) I delivered during the grant projects encapsulates this concept. As an example, slide 15 defines “100% participation” in more detail:

In addition, my posting, How Do You Participate in YOUR Local Economy?, introduces the “100% Participation in Local Economies” diagrams and further explores the five ways in which community members can participate as initially outlined above. An example of the first diagram is embedded below:

Because of the direct association between participation and successful localization, a market network strategy that engages and encourages community members to take action is both necessary and quite different than one that attempts to tap into a global market. This will be the topic for my next posting. Meanwhile, have fun ramping up your participation!

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Saturday, August 11, 2012

Mapping as a Matter of the Mind

A mind map is a graphic representation of ideas and concepts in relationship to one another. The resulting visual organization of information provides a communication and decision framework for people to do the following:

  • Express their individual points of view about complex issues and more fully understand them
  • Identify opportunities to come together for a common cause that creatively addresses the issues at hand in ways that benefit all involved
  • Mobilize, coordinate, and sustain their collective efforts so they achieve what they envision and honor themselves and those they serve along the way

While mind mapping differs from the more tangible asset, process, and cluster mapping within business ecosystems as noted in my posting, Mapping: Deciding Which Is the Road Not Taken, it complements them, nonetheless, by assisting in problem resolution, strategic planning, and organizational adaptation—very necessary functions for any business to start, scale, and sustain itself.

A current project I’m working on calls for the application of mind mapping with a group of senior-level managers to help them puzzle out a growth strategy for their equipment manufacturing division over the next 5+ years. As with most change initiatives, the goal is to help them determine what will be the road (or roads) not taken.

The challenge is getting management to see and seriously consider roads other than the one they are on. One of the reasons why this can be more difficult than it seems is that the road they are on is the one with which they are the most familiar. The risk is that management will stick to the current path even if their performance is in the tank. It’s ‘better the devil you know than the devil you don’t’ when it comes to change. And if the organization happens to be enjoying a long run of success, the mere thought of abandoning the main road in favor of another less traveled one is even more harrowing.

It becomes a question of how to disrupt their prevailing world view so they look for, discover, and explore other roads. In other words, what concept seeds the mind map to become an attractor? What’s the entry point?

Earlier this week, a colleague and I got into a discussion about the destiny of 3-D printing in the manufacturing landscape over the next 5+ years. It has considerable potential to be a disruptor because it taps into the convergence of major trends toward a design anywhere, manufacture anywhere (DAMA) approach to the integration of product lifecycle management (PLM) and manufacturing execution systems (MES); customized, close-to-point-of-sale manufacturing, delivery, and support; and third, automation and robotics or more bluntly stated, the replacement of people by machines. Those three literally touch everything that goes on in the enterprise.

Extrapolate from the current state of 3-D printing on its evolutionary path to a future reality where, as a customer, I can spec what I want and it materializes in front of me. As a manufacturer, the strategic question is how do I close the gap between immediate satisfaction and how long it takes now between customer order and customer delivery? 3-D printing is on the technology road map that closes this gap, but where is it? What else is on that road? Where are the forks in the road up ahead? Which ones don’t I take?

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Friday, August 10, 2012

Mapping: Deciding Which Is the Road Not Taken

The refrain from George Harrison’s song, “Any Road” — “If you don’t know where you’re going, any road’ll take you there” — certainly speaks to the importance of having a destination in mind. Place one finger where you want to go on a road atlas and another on the place where you’ll start and the various routes to get from one to the other become obvious. Then, it’s a straightforward process to apply criteria such as distance, time, traffic patterns, etc. to determine which particular route to take.

The concluding lines in Robert Frost’s poem, “The Road Not Taken” state:

Two roads diverged in a wood, and I, | I took the one less traveled by, | And that has made all the difference.

In a classic style, Frost explains how he resolved a dilemma that confronts all of us at some point — a choice between two paths that, once made, offers no chance to go back and choose the other. Unlike the previous instance where destination featured heavily in which road to choose, in this one, the journey becomes more important than the destination. The choice depends on a willingness to explore a foreign landscape and take advantage of the opportunities discovered there.

Here, too, the traveler applies an equally valid process based on powerful criteria such as sensitivity to initial conditions, availability of resources, and degree of advocacy and participation to guide decisions of which way to go. These criteria are often represented in “maps” that don’t look like the more familiar road atlas, but serve a similar purpose in that they show the physical associations among people, places, things as well as define their characteristics in large data sets and frame their interrelationships to powerful concepts and innovative ideas.

During the course of the grants mentioned in my initial post, we introduced several types of maps and mapping processes that blended “destination” and “journey” perspectives, but focused on localizing business ecosystems and developing business cases. Among these are the following:

I encourage you to join LocalFoodSystems.org (it’s free!) so you can explore these mapping features more thoroughly and see how they apply in the context of YOUR business ecosystems as you decide which is the road not taken!

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Thursday, August 9, 2012

Introduction to Key Terms: Local and Localization

As one might infer from the title of this blog site and the objectives of our grant proposals, the concept of “local” featured heavily in the design and development of our projects. Local is one of those terms that carries multiple meanings. In some respects, it waxes nostalgic, recalling seemingly slower-paced times when we were more available in the present to do things that mattered for ourselves and those we cared about. Ah, if only we could return to that era.

Well, maybe.

For others, though, local translates into dull and boring and may even haunt some with the spectre of unwanted meddling, close-mindedness, and meanness that severely limits possibilities. We should get away and stay away.

Yet, there are those for whom local carries a more expedient meaning about survival over the long run. We belong to a community in which all our members commit to establish a sustainable course for this and many generations to come.

Of course, the truth for each person is a unique blend of these three. Local becomes a personal sense of place. It has a familiarity that says whoever is here belongs here; this is where I can do my best; this is where we can make our stand. It provides a measure of safety and security whereby I, along with my fellow community members, have the means among us to meet our basic needs and more. It establishes a foundation of community-centeredness and fair-mindedness for all to draw upon, yet encourages each of us to exercise personal freedom to pursue our individual goals, live our lives fully, and make a positive difference for ourselves by whatever criteria.

In this context, localization is the process by which members make their community that place where they and their families want to stay because there is nowhere else they would rather be. Localization is a community’s drive toward self-sufficiency and commitment to sustainability. It is an act of collective responsibility.

With this sense of “local” and “localization” in mind, community members direct more of their focus toward achieving self-reliance. This prompts them to take greater responsibility to meet their basic needs through the use of their own resources rather than importing from others much further away. Using terms introduced in my previous posting, such a shift in responsibility redraws the boundaries of the business ecosystem within a radius much closer to home. This opens the door for the development and application of business models that support the successful start-up and expansion of small-scale enterprises throughout the community and region. The net result is that more transactions occur locally, which keeps the wealth of the community at work for the community and goes considerable distance toward making the community the place to be and stay.

As a community localizes its business ecosystem, it produces more of its basic needs in terms of gallons of water, calories of food, kilowatts of energy, units of housing, articles of clothing, quality of sanitation, etc. This, in turn, spurs numerous opportunities for entrepreneurial activity specifically in agriculture and bioscience. Given these were focus areas for our grants, we could tap into the energy generated by the push for localization and the use of agriculture, particularly in food systems, as the economic development engine to advance our projects. In fact, our experiences with those dynamics in the course of our projects became the subject of multiple postings such as Which Food System Do You Use to Get Your Calories? over the past four years. Look for several more along similar themes to be referenced here in future posts under the Sustainable Local Economic Development heading and tagged as “localization.”

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Tuesday, August 7, 2012