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

Business Model Development within a Local Economy

A business model illustrates how an organization or combination of interdependent organizations sustains itself based on certain output metrics.

Furthermore, a business model addresses the basic question of concern by anyone starting or expanding an organization: Is the amount people will pay for the perceived value of the products and services delivered by this organization sufficient to cover its operational expenses and sustain it?

Consideration of this question begins with the posting, Business Models for a Local Economy, which outlined five key characteristics of business models for a local economy. In summary, these are as follows:

  • Universal participation by community members
  • Initial focus on meeting the needs of community members without fail
  • Integration across all value-added steps from the point of consumption back to the points of production
  • Utilization of community assets and resources without reliance on outside funding
  • Application of performance metrics that deepen the resolve to establish a fully functioning local economy, spur creativity and innovation to find business solutions, increase the rate and degree of adaptiveness, and significantly improve the odds of long-term sustainability

The first two have links to previous postings that offer more detail. This post focuses on the two in bolded italics.

The previous posting, “Does Your Community Meet the Needs of Its Members?,” stressed the importance of community members knowing the following:

  • Are any community members hungry; homeless; living in unhealthy and unsafe conditions; or are they confronted with no paid work; illness; limited healthcare, and inadequate life skills to influence their circumstances?
  • How do you and your community keep score on needs met?
  • What are you and other community members doing to impact the scorecard?

The results of this survey assist community members to focus their creative energy on conditions and circumstances that warrant their collective attention. Such an overview enables them to quickly define those opportunity spaces wherein the community has the most to gain. This quickly leads to the development of robust and dynamic business models that undergird the development of business cases for clusters of interdependent businesses and community-based organizations. Those clusters have the potential for significant impact according to the scorecard metrics of the community. Furthermore, when loaded into a portfolio they offer opportunities for members to reinvest in their community and manage the launch and expansion of clusters.

In effect, community members take ownership for their sustainability. To do so entails the development and application of business models that increase community asset utilization while prioritizing the introduction of essential work modules.

The following diagram builds on a basic framework introduced in the previous posting. Both illustrate the flows of work functions and assets required to prepare infrastructure projects and business clusters for launch, provide the means to carry them out, and track results through a system of output metrics. However, the one below describes each flow in more detail and establishes the relationships between them.

In order to add value, an organization solves a problem or meets a need or frequently, does both. As mentioned at the outset, a business model shows how the organization does that and sustains itself.

The problem to solve in a local economy is how to conduct efficient, affordable distribution of needs to the points of consumption or use. The term “last mile” as a descriptor originated in the telecommunications industry during the 1990’s to describe a situation where, despite the relatively short distance (the “last mile”) between mainline fiber optic cables and subscriber homes and businesses, the installation costs prevented connections. In other words, the efficiency of the global economy did not reach into the communities, neighborhoods, and rural areas that lacked the infrastructure to make the connection given the prevailing state of technology. It required the development of another solution, wireless, for instance, to solve the last mile problem.

A similar “last mile” problem exists in the local economy whether it is the delivery of food, energy, housing, education, health care, etc. Organizations execute work modules in each of these that add value throughout the integrated steps of preparation, processing, waste recovery and reinvestment in year-round and cyclical production. But getting those products and services delivered to the point of consumption and assuring their utilization by the vast majority (80-90%) of community members is a challenge. The infrastructure of food carts, commercial kitchens, electric-drive vehicles, battery exchange stations, anaerobic digesters, modularized do-it-yourself (DIY home construction kits), experience-based learning, accessory dwelling units (ADUs) for eldercare / healthcare, etc. is not in place. The local economy is in the same situation as many areas in the U.S. 10-15 years ago when looking for affordable ways to have high-speed Internet access. That last mile can be a killer!

An infrastructure of integrated work modules itemized above solves the last mile problem. It also inspires the development of a long list of potential business and non-profit organizations required to fill the gaps. This is where the assets and resources of the community are brought to bear on interdependent business and support organization clusters so they take shape and continue along their paths to successful start-up and build-up.

The development of a business model or number of interrelated business models guides the association of assets / resources to work modules as they deliver across the last mile to consumers. The purpose of the model is to show how to execute the work functions required to meet needs and keep the organization sustainable. The steps in business model development include the following:

  • Identifying where assets and resources are located in the community (Maps)
  • Aligning the assets and resources so they support the mission of the business cluster in the most efficient and least costly manner (Models)
  • Monitoring what happens during operations of the newly aligned cluster in order to anticipate issues and opportunities before they become crises or target them quickly if they surface unexpectedly (Information)
  • Applying practical experience, theories in practice, and action frameworks through human engagement and embedded intelligence to resolve problems, improve operations, and course correct if appropriate (Know-how)
  • Loading a cluster of interdependent businesses and support organizations required to meet needs, add value, generate revenue, manage costs, and assure sustainability of operations for all involved into a community investment instrument (Portfolio)

The bottom line is that for a business model within a local economy to be effective and sustainable the consumers’ needs must be met; businesses and support organizations must collaborate to contain costs; and the value-added steps from consumption to production must be integrated to conquer the last mile. And there’s one more… The final key characteristic, application of a common set of performance metrics to help community members keep their investments on track, will be addressed in an upcoming post.

More to come…

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Saturday, September 4, 2010

Does Your Community Meet the Needs of Its Members?

Everyone needs food to eat, water to drink, air to breathe, clothes to wear, a house to live in, and energy to heat and cool it just to survive. And to assure sustainability, add safety, health, and education for good measure. Communities where people live have the same imperative. Either they provide the means by which members can meet their needs or they outsource the responsibility to others some distance away. In the former, communities are on a sustainable path whereas in the latter community survival is put at risk when needs cannot be met.

Needs met is the universal measure of success and sustainability of any community. Does your community meet the needs of its members? To find out, take a quick survey of your community by considering the following three questions:

  • Any community members hungry; homeless; living in unhealthy and unsafe conditions; or are they confronted with no paid work; illness; limited healthcare, and inadequate life skills to influence their circumstances?
  • How do you and your community keep score on needs met?
  • What are you and other community members doing to impact the scorecard?

The answers to these questions speak loudly. If your community is like most, the answer is “Yes” to the first one. It’s almost impossible to eliminate these conditions. However, the next two answers tell the tale as to whether your community is on track to sustainability.

Their order is important. Tom Peters is quoted as saying, “What gets measured, gets done.” As a community addresses the issues identified in the first question, the answers to the second question are calories of food, gallons of water, kilowatts of energy, cubic feet of fuel, units of housing, tonnage of recovered waste, etc. Those metrics shape answers to the third question in the form of infrastructure projects and business cases that deliver outputs according to the scorecard.

In effect, how a community responds to these three questions highlights economic choices made by community members. Those responses can be mapped onto a flow diagram, such as the one below, to give an overview of the local economic system for the community.

In the local economic system above, the drive for local economic sustainability precipitates flows of community assets and work functions that increase in their range of application and depth of value-add as they proceed to a community investment portfolio loaded with infrastructure projects and business cases that, when launched, generate calories, gallons, kilowatts, units, etc., in an effort to meet the needs of community members.

By placing their emphasis on how to meet their needs, community members take ownership for their sustainability. This commitment frames opportunities to charter projects and develop businesses. It also establishes a local economic context for business models that are based on widespread participation.

So, what’s the scorecard for your community? Calories in meals or community gardens? Gallons of water or number of water meters? Kilowatts of power or utility bill assistance? Housing units or vouchers? And so it goes… How does your local economy rate in terms of progress toward community sustainability? Are unemployed and underemployed community members engaged in paid work through local businesses and organizations whose outputs help meet local needs?

These are topics for further consideration in future posts. Stay tuned…

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Wednesday, September 1, 2010