A Map for Economic Renewal Begins in Maine

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Brian Kenny: Maine is the largest of the six New England states, but with the smallest population at just 1.3 million. And according to Business Insider, it has the 49th worst economy of the 50 states, ranking just ahead of Mississippi. Could food be the new fuel for Maine’s economy?

Today we’ll hear from Professor Karen Mills, about her case entitled “The Maine Food Cluster Project”. I’m your host, Brian Kenny; and you’re listening to Cold Call. Karen Mills is a Senior Fellow at Harvard Business School and Harvard Kennedy School. Prior to that, she served in President Barack Obama’s cabinet as the administrator of the US Small Business Administration. She is also a big proponent of regional innovation clusters, which we will get into shortly. Karen welcome.

KM: Delighted to be here. Thank you for having me.

BK: Can you set up the case for us. Who is the protagonist, and what’s on his mind?

KM: Well this is a case that I have been so excited to write. The protagonist is Craig Denekas, and he actually runs a foundation in the State of Maine. And he is confronted by an economy that really hasn’t been growing. And one of his concerns is how can he, in his foundation with his mission, help that economy. Now the Libra Foundation, is not your usual foundation. It has the chief investment in three food companies, a couple of which they actually started, a potato company, a cheese company and a beef company. So Craig thought, could we do something around a food cluster that would help the economy of Northern Maine, which really has been struggling. The state has potatoes. It has lobster. It has fish. It has blueberries. How can that sector become a more vibrant part of the economy?

BK: And you know Maine pretty well, full disclosure, you lived there. Your husband was the president of Bowdoin College right.

KM: That’s exactly right. We have lived in Maine for 14 years. My husband Barry just stepped down as president of Bowdoin College. And in my time there, I had the great good fortune of being able to spend many hours with the governor of Maine on clusters and cluster theory. In fact, one of the things that I did in 2005 was form a cluster of the Maine boat builders, and the composite technology sector. And as things evolved, that’s what led me to President Obama’s cabinet, So I have a real passion for this, really that came from those early days in Maine, and from the work of Michael Porter here at Harvard Business School.

BK: Can we take a look at the State of Maine and its economy, and you present a nice historical look at where the economy was, and sort of how it got to where it is today.

KM: Maine is one of the poorest states. If you look at all of the metrics that are available in the Porter Cluster Tool, and you look at the comparisons, it ranks 40th, 45th, 49th, in all kinds of economic measures. And it turns out Maine is also a tale of two parts of the state. The southern part of Maine is actually doing pretty well. In Portland, the city has become vibrant. There is a technology hub. There is tremendous activity. But Northern Maine, which really had a history in textiles, and then paper, has been suffering, particularly as the paper mills have been closing, and nothing is really replacing it. If you can define what a cluster is and how it looks, and how we know that we are looking at one that would be great.

If you look at a regional economy and you think how am I going to make a difference in creating good paying jobs, one of the best ways to do it is to look at how you can form a strong, or add to a strong industry cluster. When you look at Maine, and you do the analysis, it turns out that the food cluster, which combines the fishing, the livestock, and the food processing sub segments, that super cluster, we called it, is the largest employer of all the clusters. So if you’re looking for a place where you can have a big impact, particularly in the north of Maine, it is a likely candidate. How do you take this nascent set of activities that we describe in the case, that have over 120 existing organizations, and make something happen that drives the growth rate in a positive way. And the answer is, it’s not enough to just have a cluster, you have to have what we call here a cluster initiative. You have to have people from business, from government, maybe from other sectors, innovation sectors, or philanthropy, get together and decide they are going to do a series of actions that help large and small businesses in that sector do better. Maybe they need skilled workforce. Maybe they need access to capital. Maybe they need innovation and technology. Maybe they just need another market outside of Maine to sell their goods. And the first step is to look and see what the sector needs, but the important step is to get organized, provide some leadership, and get some things done.

BK: Yeah, so who takes the lead in this case?

KM: Well that’s the question of the case.

BK: [Laughter]

KM: Who will take the lead? Should it be Libra? Should it be one of these 120 other organizations? Should it be the business leaders in the food industry? And that’s the question that we put to the students. And it’s not entirely clear. So to give them a little direction, we look at three other places where successful food clusters have been built. Not surprisingly, the first one is Vermont, which always gets Maine’s competitive juices going.

BK: [Laughter]

KM: And, Oregon is another one. And Denmark, interestingly, also has done a food cluster. And each of them did it differently. And then once again, we come back to Craig Denekas, and wonder what he should do.

BK: Yeah, so let’s assume that Maine can make this work. They’ve got the right coalition together. They’ve got the right leadership. Is this a model that you think could expand?

KM: We funded clusters all over the country in all kinds of sectors. And many of them were regional. They had multiple states because, a cluster might easily go over state borders. And it turns out that clusters are a much better way of thinking about economic development, than just a single city or, you know, regional approach, because those effects do spill over, and you want to have suppliers. So there is a cluster in northern Ohio that includes everything from Akron and Youngstown, and all the way over to Pittsburgh. And that connection to, let’s say Carnegie Mellon, helps the flexible electronic cluster that builds off the Akron Polymer expertise. So you really can start to see areas of the country like that, which traditionally you would call the rust belt, benefit form innovation, benefit from a collective sense of opportunity. And it’s creating a lot of jobs.

BK: What do you anticipate might be some of the reactions?

KM: having done a lot of activity around clusters, I think one of the critical things that people wonder is how is this actually going to create jobs. How are we really going to get together in a room and not just talk? And the secret to that is really the homework that is described in the case. It’s understanding what the cluster needs and wants -- skilled workforce, innovation, access to capital -- and how the various players who might deliver that can be orchestrated within some kind of collaborative initiative, and then getting that done. One of the things we know is that government alone cannot create clusters. They tend to fail. But when you’ve got the businesses at the table, particularly the small businesses, and the large anchor businesses together, lots of good things happen, because these, there are spill over effects. These businesses are related, and when they start to communicate and get together on resources, positive things happen that couldn’t happen without the cluster.

BK: Fabulous, well I hope the case goes well.

KM: Thank you.

BK: And I look forward to keeping an eye on Maine and seeing how it goes. Karen, thank you for joining us.

KM: Thank you so much.

BK: You can find this case, along with thousands of others in the Harvard Business School case collection at HBR.org. I am Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.

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Brian Kenny: Maine is the largest of the six New England states, but with the smallest population at just 1.3 million. And according to Business Insider, it has the 49th worst economy of the 50 states, ranking just ahead of Mississippi. Could food be the new fuel for Maine’s economy?

Today we’ll hear from Professor Karen Mills, about her case entitled “The Maine Food Cluster Project”. I’m your host, Brian Kenny; and you’re listening to Cold Call. Karen Mills is a Senior Fellow at Harvard Business School and Harvard Kennedy School. Prior to that, she served in President Barack Obama’s cabinet as the administrator of the US Small Business Administration. She is also a big proponent of regional innovation clusters, which we will get into shortly. Karen welcome.

KM: Delighted to be here. Thank you for having me.

BK: Can you set up the case for us. Who is the protagonist, and what’s on his mind?

KM: Well this is a case that I have been so excited to write. The protagonist is Craig Denekas, and he actually runs a foundation in the State of Maine. And he is confronted by an economy that really hasn’t been growing. And one of his concerns is how can he, in his foundation with his mission, help that economy. Now the Libra Foundation, is not your usual foundation. It has the chief investment in three food companies, a couple of which they actually started, a potato company, a cheese company and a beef company. So Craig thought, could we do something around a food cluster that would help the economy of Northern Maine, which really has been struggling. The state has potatoes. It has lobster. It has fish. It has blueberries. How can that sector become a more vibrant part of the economy?

BK: And you know Maine pretty well, full disclosure, you lived there. Your husband was the president of Bowdoin College right.

KM: That’s exactly right. We have lived in Maine for 14 years. My husband Barry just stepped down as president of Bowdoin College. And in my time there, I had the great good fortune of being able to spend many hours with the governor of Maine on clusters and cluster theory. In fact, one of the things that I did in 2005 was form a cluster of the Maine boat builders, and the composite technology sector. And as things evolved, that’s what led me to President Obama’s cabinet, So I have a real passion for this, really that came from those early days in Maine, and from the work of Michael Porter here at Harvard Business School.

BK: Can we take a look at the State of Maine and its economy, and you present a nice historical look at where the economy was, and sort of how it got to where it is today.

KM: Maine is one of the poorest states. If you look at all of the metrics that are available in the Porter Cluster Tool, and you look at the comparisons, it ranks 40th, 45th, 49th, in all kinds of economic measures. And it turns out Maine is also a tale of two parts of the state. The southern part of Maine is actually doing pretty well. In Portland, the city has become vibrant. There is a technology hub. There is tremendous activity. But Northern Maine, which really had a history in textiles, and then paper, has been suffering, particularly as the paper mills have been closing, and nothing is really replacing it. If you can define what a cluster is and how it looks, and how we know that we are looking at one that would be great.

If you look at a regional economy and you think how am I going to make a difference in creating good paying jobs, one of the best ways to do it is to look at how you can form a strong, or add to a strong industry cluster. When you look at Maine, and you do the analysis, it turns out that the food cluster, which combines the fishing, the livestock, and the food processing sub segments, that super cluster, we called it, is the largest employer of all the clusters. So if you’re looking for a place where you can have a big impact, particularly in the north of Maine, it is a likely candidate. How do you take this nascent set of activities that we describe in the case, that have over 120 existing organizations, and make something happen that drives the growth rate in a positive way. And the answer is, it’s not enough to just have a cluster, you have to have what we call here a cluster initiative. You have to have people from business, from government, maybe from other sectors, innovation sectors, or philanthropy, get together and decide they are going to do a series of actions that help large and small businesses in that sector do better. Maybe they need skilled workforce. Maybe they need access to capital. Maybe they need innovation and technology. Maybe they just need another market outside of Maine to sell their goods. And the first step is to look and see what the sector needs, but the important step is to get organized, provide some leadership, and get some things done.

BK: Yeah, so who takes the lead in this case?

KM: Well that’s the question of the case.

BK: [Laughter]

KM: Who will take the lead? Should it be Libra? Should it be one of these 120 other organizations? Should it be the business leaders in the food industry? And that’s the question that we put to the students. And it’s not entirely clear. So to give them a little direction, we look at three other places where successful food clusters have been built. Not surprisingly, the first one is Vermont, which always gets Maine’s competitive juices going.

BK: [Laughter]

KM: And, Oregon is another one. And Denmark, interestingly, also has done a food cluster. And each of them did it differently. And then once again, we come back to Craig Denekas, and wonder what he should do.

BK: Yeah, so let’s assume that Maine can make this work. They’ve got the right coalition together. They’ve got the right leadership. Is this a model that you think could expand?

KM: We funded clusters all over the country in all kinds of sectors. And many of them were regional. They had multiple states because, a cluster might easily go over state borders. And it turns out that clusters are a much better way of thinking about economic development, than just a single city or, you know, regional approach, because those effects do spill over, and you want to have suppliers. So there is a cluster in northern Ohio that includes everything from Akron and Youngstown, and all the way over to Pittsburgh. And that connection to, let’s say Carnegie Mellon, helps the flexible electronic cluster that builds off the Akron Polymer expertise. So you really can start to see areas of the country like that, which traditionally you would call the rust belt, benefit form innovation, benefit from a collective sense of opportunity. And it’s creating a lot of jobs.

BK: What do you anticipate might be some of the reactions?

KM: having done a lot of activity around clusters, I think one of the critical things that people wonder is how is this actually going to create jobs. How are we really going to get together in a room and not just talk? And the secret to that is really the homework that is described in the case. It’s understanding what the cluster needs and wants -- skilled workforce, innovation, access to capital -- and how the various players who might deliver that can be orchestrated within some kind of collaborative initiative, and then getting that done. One of the things we know is that government alone cannot create clusters. They tend to fail. But when you’ve got the businesses at the table, particularly the small businesses, and the large anchor businesses together, lots of good things happen, because these, there are spill over effects. These businesses are related, and when they start to communicate and get together on resources, positive things happen that couldn’t happen without the cluster.

BK: Fabulous, well I hope the case goes well.

KM: Thank you.

BK: And I look forward to keeping an eye on Maine and seeing how it goes. Karen, thank you for joining us.

KM: Thank you so much.

BK: You can find this case, along with thousands of others in the Harvard Business School case collection at HBR.org. I am Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.

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