Entrepreneurism: What Seattle can offer Detroit (and vice versa . . .)
I’m a Detroit native, but have lived in the Seattle area now for the past 18 years. I get back to Detroit fairly often to see friends and family and increasingly, for Free Vector-related opportunities.
Everyone is aware of the economic issues facing Detroit and the State of Michigan. The national news paints a very bleak picture of the area — the collapsed housing market, the GM and Chrysler bankruptcies, and the 15.2% statewide unemployment rate, almost a full 3% higher than Rhode Island, the second-worst state in the nation for unemployment (Bureau of Labor Statistics, June 2009 report).
But don’t count Michigan out just yet. There is a thriving entrepreneur community in the area and a lot of big money sitting on the sidelines. the State offers a fairly low cost of living; cheap real estate; an educated, motivated and skilled workforce; and tax credits and other incentives for the movie and entertainment and other industries that make an investment in the area something to consider.
Additionally, automotive buy-out packages for white-collar executives are being used to fund new business starts, albeit perhaps more out of necessity than opportunity. (Although I suspect that people who start a business out of need may be more motivated to succeed than those who start a business merely to take advantage of a perceived opportunity).
Seattle has not been immune to the recession. Unemployment in Washington is just under 9.3%, putting it in the bottom third of the latest unemployment rankings (BLS, June 2009). However, entrepreneurism has always thrived in Seattle. According to a the Prosperity Partnership 2006 — 2007 Puget Sound Regional Competitiveness Indicators report, Washington led in industry R&D dollars per capita at $1,504 – more than twice the national average. The Seattle area is also one of the top regions for VC investment, particularly in the areas of software, biotechnology, and telecommunications. Washington also has the highest business churn rate in the nation, a sign of a positive entrepreneurial environment and market dynamism.
As a gross generalization, Seattle is a knowledge-based economy, with a fairly vibrant funding and service economy that supports the creation of ideas. Its economy relies significantly on creating and licensing knowledge and the service sector built around supporting a knowledge economy. Detroit, on the other hand, historically invented and made things, relying on skilled labor and industry to support ideas geared toward a primarily manufacturing-based economy.
Seattle’s economy is a rabbit; it’s success relies upon innovation, and staying ahead of the curve of commoditization of its knowledge and service industry. (Yes, knowledge becomes commoditized, ask a friend in the IT service industry). Hence there is a lot of emphasis on developing the next “break-through” technology, drug, or platform, sometimes without a clear picture of its practical use. Yesterday it was desktop computing, today it’s social media and hosted technologies, tomorrow will be something else.
Detroit has historically taken a longer-view, more pragmatic in its thinking and application of ideas — the tortoise to Seattle’s hare. It’s reflected in the comparative politics of the region as well as business practices and attire (I am invariably too casual by Detroit standards at both business meetings and social events). Many businesses in Detroit are still fairly wary of technology, but that is changing. In fact, two of the best software-as-a-service offerings I have seen recently are both Detroit-based – each company focuses on a specific vertical and offer a very pragmatic and friendly user-based approach that simplifies workflow and eases access to and management of critical information for those industries.
So what can the entrepreneur in Detroit learn from entrepreneur in Seattle, and vice versa? The Detroit entrepreneur should look to adopt and develop technologies not for technology sake, but because they offer a real ability to increase revenue and reduce SG&A (such as social media tools and software as a service technologies). The Seattle entrepreneur might spend more time focusing on technologies that have practical application – like the two Detroit SaaS companies I mentioned — with less focus on creating individual wealth through a short-term IPO or acquisition, and more of an eye on creating long-term value.
