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December 30, 2004

Measuring the Impact of OneCleveland: A Call for an Active Research Agenda

Call To Action

We need some help.

This is a public call through our blog to create an active research project to help measure and evaluate the impact of OneCleveland on the priorities of our community. As we move into 2005, OneCleveland hopes to ignite interest in this active research project to help transform OneCleveland from a conversation among technologists into a dialogue with community leaders and activists. Economic development, poverty alleviation, job creation, healthy cities, crime prevention, civic engagement and building of democratic institutions, compelling education for our K-12 schools, greater access to our museums and other cultural institutions are all candidates for this active research agenda. In today’s entry, I take time to focus on one dimension warranting more detailed study, namely, economic development.

OneCleveland in the Global Context

Earlier this month (Dec 8-12, 2004), OneCleveland and Case Western Reserve University had the honor of being invited to an international gathering on Public Sector Innovation and Technology co-hosted by the City of Stockholm held in conjunction with Nobel Week. Two hundred invitees from around the world including Presidents, Ministers, CEOs, community activists and technology leaders from six continents gathered to learn and share our experiences in leveraging technology to enable social transformation. The gathering was inspiring and included presentations from Nobel Laureates and other luminaries who explored topics as broad as leveraging technology to address education challenges in Ethiopia or in the Israeli - Palestinian conflict to the future of the public sector in a technology-enriched networked economy. One of the main recurring themes was measuring the impact of emerging, innovative, technology-informed initiatives on the national, regional, and local economy. That the Internet has had a substantial impact on the way business is conducted is incontrovertible. However, the extent to which information technologies have contributed to substantial cost savings, productivity, and efficiency increases for government, non-profits like hospitals, education and cultural institutions has not been measured beyond the macro-data level.

The Impact of Existing Regional Institutions

It has become fashionable to engage consultants to make the case for the impact of key institutions to regional economic vitality. Professional sports teams started the trend in the '90s. More recently universities, museums, and health care institutions have all engaged consultants to analyze and deliver a big dollar number to their impact to the region. In Cleveland, readers will recall the great debates over the Gateway development regarding downtown redevelopment and professional sports. Playhouse Square recently announced that it generates $43m a year in economic activity. A couple years ago the Cleveland Museum of Art declared that its annual impact to the region was $22.3m. The Cleveland Clinic and University Hospital systems are conservatively worth many billions a year in terms of regional economic impact. A month ago, Cleveland State University issued a study declaring its impact to be $254m on the regional economy. Armed with consultants' reports, press releases, and the appropriate civic booster club members our most important institutions do their utmost to help the weary and fatigued public understand their value to the quality of life of our region.

The Impact of Emerging Capacity Building Projects

What then about the impact of emerging efforts, the new institutions-in-the-making? OneCleveland, our region's technology platform for innovation and social transformation is one such important emerging initiative. It has become rather predictable that when meeting with regional foundations, civic leaders, and other important influencers in the community, there is a healthy dose of skepticism when asked how we intend to measure OneCleveland’s overall impact to our region. I usually respond that ultimately the most important, measure of OneCleveland’s overall impact is the extent to which it enhances the standard of living of all those who use it. Being an academic at heart and a student of the history of cities and technology, I have tried, with only limited success, to make the case that enhancing the standard of living is the way that the impact of other important innovations—such as the automobile and electricity—is judged, and that OneCleveland and the Internet is and should be no different.

The Evidence at 50,000 Feet

Since the Internet itself is such a recent phenomenon, and OneCleveland is in its very infancy it is not surprising that relatively few studies so far have examined its likely economic impact not to mention its impact on civic engagement. Parenthetically we should add that a OneNEO effort is in its final stages of gestation and I look forward to sharing more insights on this exciting development in the new year (end of parenthesis). Viewed from the vantage point of some of the best macro research (See Doms (2004) and Varian et al (2002)) the consensus seems to be that the Internet, at a minimum, could generate added productivity growth of at least .5 percent annually. It will come as little or no surprise to most readers of this blog that the Federal Reserve Bank of San Francisco concludes that "results from recent research indicate that the successful adoption of IT appears to have played a role in productivity growth… (Doms 2004)" More ambitious estimates suggest that the Net adds as much as 1.15 percent annually to our productivity rate. And productivity rates matter. A regional economy growing at 2.5% per year will double in 30 years. If our region’s productivity rate grows at 5% per year our region’s growth will double in 14 years. There is a .99 correlation between productivity (measured as non-farming output per hour) and gross domestic product. So, this begs the question if we are to arrest the underdevelopment of our region and turn it around, and actually accelerate our regional growth, more than half (52%) of all of our region’s potential productivity growth comes from technological change. Capital investment represents just under 40 percent of the region’s potential productivity growth and the quality of labor another 10 percent (U.S. Bureau of Labor Statistics for average from 1948-2001).

Enter the Skeptics

But, say our skeptical friends, 'technology spending is much more than spending on telecommunications and network equipment and, after all, that is the OneCleveland value proposition.' Well, first, OneCleveland is not an infrastructure play. OneCleveland is attempting to position itself as a platform for innovation and transformation enabled by unprecedented leveraging of advanced network infrastructure. Moreover, even it were "just" a network play, Varian et al note that of the 2699 company executives from the Dun & Bradstreet database of global businesses, the number one factor contributing to the benefits associated with the Internet economy were those who "spent a greater portion of their IT budget on communication and networking hardware than on other IT line items."

How much of an economic transformation is OneCleveland likely to produce in the regional economy? This is an important question because of the impact that OneCleveland will have on non-profit organizations, individuals, businesses, and the entire regional economy. Another important question which is posed to us on a frequent basis is what impact will OneCleveland have on the average citizen in Cleveland or the region? The truth is that OneCleveland will only be perceived of value after it touches each person in a way that sets off that “ah ha� epiphany.

However, the benefits of OneCleveland will accrue to the entire regional economy and will enable greater civic engagement. As more organizations, institutions, governments, and economic development firms use OneCleveland to cut costs, the growth rate of productivity for the whole regional economy will improve. Faster productivity growth improves living standards for average citizens in several ways:

* Through more rapid growth in real wages (which ultimately reflect productivity),
* Slower inflation (which also enhances real wages), and
* Through larger government surpluses, which leave room for tax cuts and/or added spending on social programs that improve quality of life

As regional economists have been telling us, the last point underscores the importance of productivity growth for economic policy making. For those who set city and regional governmental budget policy, projections of productivity growth are the most critical-albeit the most uncertain-element in long-range budget forecasting.

More at Stake than Just Greater Productivity Through Cutting Costs

Nonetheless, in principle, there are several reasons for believing that OneCleveland will in fact lead to productivity enhancements. As anyone who has experienced ultra broadband can attest, OneCleveland represents a new and highly powerful way to communicate information more rapidly, cheaply, and with greater flexibility. OneCleveland is taking us to the edge of the possible in terms of persistent high band width availability which in turn will create new, never before seen applications and services in the areas of health care, research, cultural experiences, education, and organizational efficiency. This should allow organizations employing OneCleveland infrastructure:

* To enhance the efficiency of producing and delivering goods and services (through enhanced cooperation among designers of new products and services in different locations, whether inside or outside the region);
* To enable new, next generation goods and services to be developed in the OneCleveland bubble providing both immediate value and productivity to our community and positioning new opportunities for entrepreneurship and new business development supporting markets near and far;
* To reduce the cost and improve the effectiveness of dealing with customers through augmented communications, enhanced self service offerings;
* To reduce their transaction costs of locating and purchasing required supplies (including labor)

A Call to Action: Re-dux -- Towards An Active Study of Emerging Digital Cities

The factors driving the financial impact of networked-based business solutions for government and the public sector institutions are really only one dimension of an active research agenda. There exist many other community priorities that are candidates for extensive, sustained, community engagement. The most common questions I receive from the dozens of emails, phone calls and reactions to presentations about OneCleveland is two fold; "what is the secret sauce?" and "how have you measured the impact?" These two questions constitute the foundation of the emerging study of the digital city of the 21st century.

The answer to the first question can only be answered by an active research agenda exploring, probing and ultimately articulating the emerging governance model for the digital city. We have unique opportunities in Cleveland to leverage world class research in this area. David Cooperrider's work in Appreciative Inquiry is world renown. We could work with the entire AI team at the Weatherhead School of Management to insert an ethnographic study of the building of the OneCleveland model as a potential reference architecture for governance of the digital city of the 21st century. The Maxine Goodman Levin College of Urban Affairs at Cleveland State University and the Center for Regional Economic Issues at Case could be engaged in this effort in both documenting and disseminating the findings of the DNA of the constitutional makeup of digital city of the future using OneCleveland and other nascent city-based activities in northeast Ohio.

The answer to the question of the impact of OneCleveland on our region could involve multi-disciplinary teams from all sectors of our community. The impact analysis should be informed by the community's priorities and could be funded, at least in part, by some of our Foundations. The impact study could be part of the curriculum in Law, Urban Studies, Non-Profit Studies, Engineering, Business, Management, Poverty Studies, and a host of Humanities and Social Science disciplines at our community colleges and universities. The impact study could also directly engage community members, schools, artists, community centers, churches and other religious institutions, city and regional council members and their staff. Imagine if we asked an organization like IDEO based in Palo Alto to take on the question of the "Impact of OneCleveland" as a design challenge. IDEO has designed, inspired and produced more award winning products than just about any other design firm in the world. Whether it was IDEO or any number of other creative consultants who might be involved, the question of the impact of our technology-enabled emerging platform of innovation and community transformation should itself be a project of community transformation and engagement.

Are you ready?

Posted by lsg8 at December 30, 2004 05:14 PM and tagged Bytes 

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