"There is a changing  approaching which few have noticed. This tidal wave results from the intersection of the technology revolution and a demographic revolution which I call the Net Generation, or N-Gen ( children 2-22 in 1999 ). This baby boom 'echo' is the largest generation we've seen, and because they are the first to come of age in the digital era, they have a different culture, psychology, and approach to learning, consuming, working, and playing than their boomer parents. As these kids enter the workforce, they will blow all our estimates for electronic commerce right out of the water."
  Don Tapscott, Alex Lowy and David Ticoll -- Blueprint to the Digital Economy

Over the last six years I have had the pleasure of being a staff member of the National Economic Development Institute. My friend Ken Oilschlager, a previous Dean of the Institute asked me to become involved. When he introduced me at the first session in Indianapolis he told Class I that he looked around the country for the someone on the lunatic fringe so that he could be perceived as middle of the road. As expected, it drew a big laugh. But then Ken grew serious and told the group of one hundred and nineteen that although many in the class would not see the importance of this class today, it may be the most important one for them as economic developers if they planned to stay in the profession more than five years.

Six years later, Ken's words ring true....not because of anything I had to say that day or since, but because Ken knew that all of society is transforming. Let me say this again. Society is transforming. It is not just changing. One can add to or subtract from what has always been done and call it change, and be right. But the kind of change we are in the early stages of experiencing is more than reforming (doing more of the same more efficiently with a little twist here and there), it is transforming ( changing the very assumptions of what we do and why we do it ).

There is no greater example of this than in the world of business, although governance and education will soon begin the dance. Look at how business has been transformed in the last decade:

Globalization has increased the scope of trade and the need for capital. . Computerization, robotization, and telecommunications has increased productivity through systemic automation at the same time that the labor force has been redefined. . The requirements for "knowledge labor" demands a higher skill level. There is a shortage of skills. This would have been a prescription for inflation in a traditional economy. In a Knowledge Economy "knowledge labor" can be accessed anywhere in the world....thus redefining the assumptions which cause inflation in any national economy.

As hierarchies reduce in size through downsizing, interconnected webs of entrepreneurs and small companies emerge to link work and income opportunities in totally new ways.

As we move to a "web world" of organizing work, play, and learning throughout the whole society, the role of traditional players of an economy is forced to rethink what gives value to society and to retool their individual and organizational concepts of how value is provided.

"A growing need to work closely, cooperatively and collaboratively with customers suppliers, partners, and other allies will become the defining factor of enterprise innovation. Meeting this challenge will raise new challenges of trust, security, and openness, particularly when it comes to sharing intellectual capital and other forms of corporate know-how."
  Jeff Papows - Enterprise.com

So what does it mean to prepare your state and community for a Knowledge Economy? Is there a model we can use? What are the standard steps that will be appropriate for all local communities?

These appear to be three good questions. However, questions two and three have an assumption that is no longer appropriate in an interconnected economy. There is no standard approach in a society which has so many choices. Where innovation is the key, thinking with a traditional model as one's guide will lead to out of date decisions, for, as you benchmark against the best practice in your industry, a competitor has changed the game. Just ask Bill Gates about game changing...who, if he hadn't made the decision in 1995 to bet Microsoft's future on the Internet, would have been a short term business memory maintaining the future in stand alone computers. In a future where the Internet defines the market, competition becomes real time....and real time economies have no history.

Look at the financial markets. Twenty years ago there were no derivatives to reduce risk. And yet the economists who developed and applied the concept with a computer model to lower financial risk in a real time economy, brought Long Term Capital Management to bankruptcy and the credit market to its knees when the global economy operated differently than all historical data and models had predicted. The Internet connects the world in a global economy.

"The Russian meltdown has revealed certain flaws in the international banking system which has been previously disregarded. In addition to their exposure on their own balance sheets, banks engage in swaps, forward transactions and derivative trades among each other and with their clients. These transactions do not show up in the balance sheets of the banks"
  George Soros -- The Crisis of Global Capitalism

Look at consumer goods. Twenty years ago Wal Mart was an innovator. Its use of technology to connect the value chain ( suppliers, manufacturers, stores and customers ) catapulted it ahead of Sears and Roebucks and others, and allowed retailing to be redefined as a system of fast technological resupply, discount pricing for all products, and electronic customer voting. Today, Wal Mart realizes that Amazon.com and other Internet sites are redefining the future or retailing again for the 21st century as a transformation occurs from product centric one way retailing to customer centric interactive retailing. The Internet permits the customer to make the decision about what products are to be produced.

Look at any aspect of business or the community....it is transforming. And, as a result of the use of the Internet and other technology, not only does the pace of change increase exponentially, but the very nature of the structure of the economy, learning, and governance is changing.

You ask, so what? How does that affect me? I'm an economic developer and we recruit jobs for our states and communities. That's the way it's been and that's the way it always will be. The only difference is that we will have to shift our focus of recruitment to companies with a more highly skilled labor force. This, in turn, means that we have to work with the schools to develop better "school to work" programs....and according to Billy Joel "so it goes."

I wish it were going to be that easy. As hard as it is to do a good job of recruitment, economic developers are facing more of the same and more that is different at the same time. As Yogi Berra once said, "the future isn't what it once was." Although no one can predict the future in a time of such change and increasing complexity, a basic strategy can be evolved over time if trends are considered.

I will suggest that as an economic developer, one will have to become a split personality. At the same time that an economic developer continues to work to recruit jobs and improve a community's educational system, there will be a need to work differently to help create new capacities for a new economy - a knowledge economy. And it will require an economic developer to get involved with all aspects of community development as a team player.....sometimes involved with a direct decision to be made when sitting an industrial park....sometimes as a patient player on a "21st century learning team" who helps evolve a concept of a Futures Institute by asking appropriate questions in the early stages of considering how to develop interest in local citizens to think about issues within a "futures context."

"Not that competition is vanishing. In fact it is intensifying. But competition as most of us have routinely thought of it is dead___ and any business manager who doesn't recognize this threatened"
  James Moore -- The Death of Competition

The focus of recruitment in the future will still emphasize goals, tasks, mission statements and benchmarking. Any community prepared for the future will need to optimize their labor force for more highly developed technical skills, improve their local educational system for increased competencies, and lobby their governing bodies for local and state incentives. In this sense, the needs will be the same as before, just faster and better.

However, while recruitment of jobs will still be important ( although less so than before ), there is a parallel trend that has become apparent in the last five years that will be of increasing importance......that of preparing the psychology and infrastructure of a community for a Knowledge Economy.

Lets take the second need first. Infrastructure has always been seen as important. But the meaning of traditional infrastructure has been roads, sewer, water, electricity, buildings.......anything that supported the needs of an industrial economy. Although physical roads will still be important, new roads will need to be build.....electronic roads. For the infrastructure of a Knowledge Economy is a structure that supports the flow of information and ideas. Value and wealth will be created through the mind, and less so through physical work. Thus the need to prepare local communities to support intellectual services of all kinds.

As direct labor jobs lessen in number due to the advent of automated systems affecting manufacturing and services which use roboticization, computerization and the application of telecommunications, "income opportunities" will have to be created. And the creation of income opportunities in the 21st century will require all workers to become competent in the concepts, methods and techniques of e-commerce and e-business. Thus, creating infrastructure in a knowledge economy will shift the emphasis from roads, industrial parks and utilities to providing connections to computer servers, training in telecommunications, and classes in "thinking for innovations."

"While the Web was conceived in 1989 as a scientific data-sharing tool, the commercial browser software that appeared in the beginning of 1993 provided the first inkling that far more could be accomplished here. And as a serious field of endeavor, Web commerce came into being in 1995, the year Netscape's stock went public in a "bit bang," if you will, that ignited interest and sparked new forms of economic life around the world"
  Evan Schwartz -- Digital Darwinism

This shift in emphasis to electronic infrastructure will also shift the role of the economic developer from industrial recruiter to one of broadened community development. In the past, the need was to attract capital assets. Although still important to the economic life of a community in the 21st century, the value of physical assets will diminish in importance compared to human assets. It is very possible that a key role in the life of a 21 century will be to recruit talented thinkers who know how to create new ideas.

New innovations will provide the opportunity for new products and services. The people who are able to think about ideas will become more important to the economy of a local community. Capital will flow to the areas of the country that provide an environment for creative thinking. That is why Business Week identified economic "hot spots" several years ago as those local and regional areas that were associated with research universities, where companies thrived in spite of a mini-recession in many parts of the country.

If intellectual capital is a key to economic success in a Knowledge Economy, the infrastructure of the future must include access to the Internet, a community environment which values the creation of new ideas, and an overall emphasis on quality of life.....and quality of life must reflect both physical beauty, but also human criteria such as low crime rates, an emphasis on education and learning, people who care about each other and are interdependent, and with decreasing rates of teen age pregnancy, illiteracy, and family violence.

For me, adding the financial markets dimension to politics, culture and national security was like putting on a new pair of glasses and suddenly looking at the world in 4-D. I saw news stories that I would never have recognized as news stories before. I saw causal chains of events that I never would have identified before. I saw invisible hands and handcuffs impeding leaders and nations from doing things I never imagined before.

I believe that this new system of globalization constitutes a fundamental new state of affairs, and the only way to see it, understand it and explain it is by arbitraging all six dimensions. It is the interaction of all of them together that is really the defining feature of today.

“ If I am wrong about this world, that will be apparent soon enough. But if I am not wrong, there are a lot of people who are going to have to go back to school"
  Tom Friedman -- The Lexus and the Olive Tree

If an "aha" moment has just occurred, you are ready for the next step in thinking about the role of an economic developer for the 21st century. What if your business and community leaders really do not value time spent talking about ideas? What if there is little knowledge in how to talk in groups using the many new services found on the Internet? What if the labor force is not skilled in how to be innovative?......and the list goes on.

If you use traditional thinking, you will recognize this and say to yourself that these needs fit into the area of education and technology in the community, and so you will let the community college and the Bell System take care of these needs of the community.

The economic developer of the 21st century will not be able to have this luxury, for in the Knowledge Economy of the future, all needs and actions will be interconnected. We are moving to a "seamless" society and world where we will not have the ability to compartmentalize functions. This will require all community leaders to interact as team members to help create and develop new "capacities for transformation." If that means facilitating a meeting of business and community college associates to learn how to connect different trends leading to thinking about issues within a "futures context," then that will be a role of the economic developer. If that means working with your Chamber of Commerce president to create a network of small businesses to learn how to utilize the Internet, so be it. If you work with a local university and high tech business to recruit a recent prize winning biologist and her family to the area, then you are on your way to success in the 21st century. Oh, and by the way, the state department of commerce recruiter called to remind you that she has someone interested in locating twenty software jobs in your area because of the quality of life since your community was just selected as the eighteenth most desirable place to live in villages under 25000.

The point is that the economic developer of the 21st century will wear many hats, and more and more of these hats will focus on building capacities that will help the community transform itself to the skills and knowledge required to be vital in the 21st century.

So what are these "capacities for transformation?" What can be done to prepare for a Knowledge Economy. Our work with the evolving national Communities of the Future network has identified five areas of importance. Let's look at needs and then potential actions that can be taken.

Every economic developer will need to become a champion of providing fiber and other wired and wireless ways to provide information directly to offices and homes in your local areas ( Of course, when it is considered that by 2040 50% of all people will work in their homes, office and home blend into one ).

ACTION: Become a facilitator of a community network team which is composed of technicians, educators and community leaders. Set a strategy to get have the community totally wired within five years.

Don't leave it up to the educators to create an intellectual environment for how to think about innovation. Always remember that educators are evaluated based on how well their students score on standardized tests. In a world of transformative change, thinking in standard ways is death to innovative thinking. Many educators resist change and many do not. You need to propel people to be open to change to maintain competitiveness in a global, interconnected, real time economy. It is important for you to be seen as a champion of intellectual thinking in your community. It may be that communities which use more Tylenol per capita than others will be at the top of the competitive pyramid in the future. With physical work, your muscles ache.....with mental work, your head hurts because new connections are being made in your brain as you learn how to think at a deeper level and understand how to make connections among factors that used to seem to have no relationship.

ACTION: Work in partnership with educators and other groups to develop many ways to help people see the importance of thinking and being creative. Establish a "local 21st century think tank" and work initially with fifteen people at the time in networks of volunteers to help them understand how the society is changing and what will be necessary to prepare for a Knowledge Economy.

A new concept of leadership is developing as communities are realizing how important it is to work together, to promote diversity in thinking, and to care about helping each other succeed. There will be a new emphasis in building relationships as well as meeting deadlines and doing tasks. Traditional leadership emphasized action and was judged on tangible outcomes. Although this will still be an important criteria for leadership in times of crisis or related to short term projects, leadership will also begin to be judged by how well people in a community get along together and whether new ideas are introduced and supported by many different groups in a community. As Stan Davis and Christopher Myers say in their book BLUR, the future of business will be built around the ideas of speed, interconnections and intangibles ( of ideas and people ).

ACTION: Partner with your chamber of commerce and local community college to create a program to develop process leaders. This can either be integrated as additional sessions to an existing leadership program or be established as a new program of coaching for the alumni of such programs.

Although our work with COTF calls the previous capacities the "big three", two other capacities will become increasingly important to nurture a positive culture which enhances the growth of the Knowledge Economy in the 21st century in any local community.

Councils for the Common Good are groups of people who get together to think of innovations that can be introduced which will benefit all citizens, organizations and businesses in a community. Whereas the objective of a "21st century think tank" is to get people to think differently, a "council for the common good" introduces new specific ways to improve the common good. As an example, what if the local car dealer actively recruited citizens in a mill village to buy new cars. Today, only a few could afford a new car. But what if a Council for the Common Good introduced a partnership idea which would have the local United Way create a "local currency" in conjunction with the economic development authority and the chamber of commerce. Residents in the mill village would volunteer their time in the community and be given local currency based on their time and achievements. The local car dealer would accept this local currency as partial payment ( with regular currency used up to a base amount per month, say $150 ). Then the local dealer would send the local currency to the United Way (or elsewhere ) and get 90% of the face amount in reimbursement from the UW in dollars. These dollars would come from a pot of money set up specifically for this effort from more affluent citizens in the community, and be written off as a taxable gift to the UW. An example of innovation which lets everyone win and enhances the economy of the local community by increasing purchasing power from residents of a lower socio-economic area.

The final capacity is focused on a partnership with local government to build capacity within the community to increase the quality and efficiency of local decision making. Within two decades, the electronic infrastructure will allow neighborhoods as well as entire communities to connect in a collective way to 1) identify key issues 2) determine the factors related to key issues 3) develop teams of people to build strategies to resolve key issues. One of the great challenges of the future is to reconnect citizens to their democracy through innovations of involvement in decision making beyond traditional input to elected officials as the only mechanism. The Electronic Republic will be slow in developing. Communities that recognize the importance of this to their social and economic well being will be ahead of the game. Often economies are held back because citizens are not willing to have their taxes pay for needed infrastructure.

"A new political system is taking shape in the United States. As we approach the twenty-first century, America is turning into an electronic republic, a democratic system that is vastly increasing the people's day to day influence on the decisions of state"
  Lawrence Grossman -- Electronic Republic

If you are comfortable with these "out of the box ideas" and see a broadening of the role of the economic developer as appropriate, you will be able to make the transition in transformation. If not, you still need to struggle to understand the impact of all societal trends on the traditional role of the economic developer. Remember, one can be right in some ways, and yet not be fully prepared. One can be the best at what traditionally has been done, and it will not be enough when significant change occurs from one day to the next. One can recruit jobs in the short run and still miss the mark of economic development for the long run in a society that is increasingly fast-paced, interconnected and complex. For unless one recognizes that the needs of economic development in a Knowledge Economy are different from the needs of economic development in a traditional Industrial Economy, one will not be able to ask the right questions. And in a society constantly changing, the right question will always be more important that the wrong action hastily conceived because it has always been done that way.