The Future of Eastern Kentucky

“What is the future of eastern Kentucky?” seems to be the hot debate in our region and across the entire state right now.  The debate has revolved primarily around the dynamic change in the coal industry and the effect that it is having on the coal severance tax revenue it generates for our local communities.


     It's time our eastern Kentucky business community became the leading voice in the debate about our future.  The debate has revolved around the future of the coal industry and coal severance tax revenues, but really comes down to a debate about economic development in eastern Kentucky.  Over two years ago, in a membership meeting of the Pike County Chamber of Commerce, our membership voted unanimously to transition into a regional chamber.  Our business leaders understand that an economy does not follow political lines and that the chamber does not exist to serve a political geography, but rather the business community within that political geography.  When they realized their business success depended on the success of the region, that’s when we took action and headed down this road of regionalism.  Our concern is primarily the economy, not local politics.  If we are going to debate economic development, we must begin by benchmarking ourselves against our competition.

    Who is our competition?  There are a total of 15 regional economic development organizations in the state of Kentucky recognized by the Cabinet for Economic Development.  In the last two and half years, 71% of the KY Cabinet for Economic Developments announcements of new or expanding industry, have been in a county served by one of these  6 regional economic development organizations in the attached table.  The cabinet made 781 announcements between January 2011 and July of 2013 with only 10 of those announcements in the service territory of our chamber.  Contrary to popular local belief, this is not the state’s fault.  It is our fault, for not dedicating a budget for economic development to create a system that can professionally handle the economic development process.  We must build our credibility as a professional organization that has comparative best practices to other regions within our state.

      For some reason our so called innovation of regionalism, although it has been the trend of successful economic development across the nation for decades, in eastern Kentucky has been confronted with a few  detractors and naysayers.  For example, in a meeting with InSite Consulting Group, a county judge-executive claimed that the chamber was breaking the law by getting involved in economic development.  Or when a county judge-executive spends time debating the programming of a local television station, rather than entering into serious dialogue with the local business community about the dire state of our future economy.  We will not let local politics and political turf wars hold us back any longer.

     We keep asking why is the economy not developing?  Why is it not diversified?  Does Ford build a car and then keep it in a warehouse waiting for someone to call and tell them they want a car?  Or do they invest in their dealerships that hire salesman, build websites, have signs, and know their product inside and out?  Right now our local tourism commissions in our eight counties have a combined budget of approximately $3 million, but we have not been able to earmark and commit money to a program of work for economic development, while our competitors have.  Visionary leadership from many individuals over the past 50 years has provided a solid foundation of transportation and infrastructure; the most expensive pieces of economic development, but a recent study by InSite Consulting group affirmed the belief that no dedicated program of work exists in our eight counties and that our properties and industrial parks need dire attention.  The study also affirmed our belief that our chamber’s regional expansion was a move in the right direction and actually, they recommended an expansion of our efforts by adding a team of economic development staff to our organization.  Their recommendation was an effort within our organization, driven by private industry, that would be fully staffed to be a champion for economic development and implement a brand of One East Kentucky.

     Back to our first question, What is the future of eastern Kentucky?  In the words of President Abraham Lincoln, the best way to predict the future, is to create it.  Our future is not static, nor is it set in stone.  Our future hinges on our ability to get in the game and compete; to be regionally strategic with our communities, and to have constructive passionate debate among our local leaders.  We are talking about private industry investing in a program of work that will employ a staff to recruit new industry, retain and expand our existing industry and nurture a climate of entrepreneurship; a professional champion for economic development that has as its chief mission, the future economy of eastern Kentucky.  The business community is uniting and no longer ascribes to the idea that we can aggressively wait for the phone to ring.

E-A-S-T, East! East! East!

One Eastern Kentucky was the theme of February.    The title of this blog refers to a battle cry that is often heard at sporting events, whether being used for the Cats, Cards or Bears.  Team work is something we in eastern Kentucky do well in the gymnasium, but have never been successful in moving to the local political arena.

In the past few weeks, we continued our push for unity in eastern Kentucky through our quarterly luncheon series, One Eastern Kentucky.  We united multiple chambers and elected officials together again to work toward a unified plan for Economic development in Eastern Kentucky.  This quarter’s luncheon featured Lt. Governor Jerry Abramson.  We also held the kickoff visit from InSite Consulting Group in partnership with AEP-KY Power.  The initial kickoff meeting with InSite involved participants, from the eight counties served by the chamber, assessing where we stand as a region.  One comment from Mr. Joel Thornbury particularly stood out in my mind.  He said, "We need to celebrate our successes.”  In a room full of political and business leaders, I believe we found hope, as it was referred to by Mr. Joe DePriest from Letcher County.  Hope that we can overcome the boundaries in eastern Kentucky that have held us back for generations.

In basketball, you play the sport 5-on-5.  When you pick your starting five, they have a myriad of skill sets that complement one another.  The essence of a team is to capitalize off of collective strengths to outweigh individual weaknesses.  That means you have a point guard who can handle the ball, while you have a center who can rebound the ball.  You have a shooting guard who can score from the perimeter and power forwards who can post up inside.  In eastern Kentucky, we have lots of strong players (counties) but no team.  We have counties with industrial parks and counties with developed retail.  We have counties with universities and counties with Community and Technical College campuses.  The problem we have is that we have been playing 1-on-1 amongst ourselves while our competition for recruiting industry has been playing as a team; areas such as northern Kentucky (three-county coalition) and Bowling Green (seven-county coalition).  Not only do they have a team, but they have a strategy. 

For generations, our strategy has been driven by internal competition. The reality is that we've been playing 1-on-1 amongst ourselves, or 1-on-5 against the competition, which doesn't mean we are losing, it means we are disqualified or not even in the game.  Back to Joel’s comment earlier, at the end of a high pressure game, it doesn't matter who hits the last three pointer or scores the most points, the entire team celebrates the victory; even the fans who only cheer from the stands join the celebration. The solution to what's next for the economy of eastern Kentucky will come from a united effort amongst the business community and elected officials to play as a team, buy into one vision, look past our county lines and be willing to chant: E-A-S-T, East! East! East!

The Risk of Doing Nothing

I was honored to recently serve on a panel with 5 other judges at the Alltech Innovation Competition at Alltech's international headquarters in Nicholasville, Kentucky.  Teams made up of MBA students from three universities, University of Kentucky, University of Louisville, and the University of Pikeville, competed through business plan presentations.  During opening remarks, Dr. Pearse Lyons, Founder and President of Alltech, gave a quick synopsis of how his company was started.  His story of American entrepreneurship began with the fact that he started his company with only $10,000.  His company is now quickly approaching $1 billion in annual revenue.  

     In his comments he made reference to potential lenders who during his business's early years turned him down for financing and it sparked an interesting thought.  Often times when we are presented with potential opportunities, we immediately turn our attention to the risks of making the offer or launching the new project.  Rarely ever do we weigh the risks of opting out or in effect, doing nothing.  Often times we see inaction as the safe road and feel the most secure knowing things will not change.  If you look on the books of those lenders who told Dr. Lyons no, you will not find the cost of that decision, but I am sure they would all admit the impact that decision had on their companies.  Economists call this an opportunity cost, which successful business leaders analyze everyday whether they understand the academic reasoning behind it or not.  If I invest my resources in one place, that removes my opportunity to invest it elsewhere and what is the cost in that?

     I believe successful entrepreneurship and even progress in general stems from just that; a different way of thinking that places greater emphasis on the risk of missing an opportunity, rather than failing while pursuing that opportunity.  When asked why they started their venture, I hear pretty consistently from entrepreneurs that they did not want to look back in ten years and wonder what if?  They could handle the reality of failure, but not the reality of not trying.  Successful leaders are willing to take on the risk of innovation and realize the only way you can really fail is by giving up.

     As I think back over the last couple of years and the many discussions and debates we've had with regards to our chamber expansion I am proud of the path we have taken.  We still have those who are hesitant to support, but we have more partners today than ever before.  We have more members today than ever before.  We are offering more programs and services to our members today than ever before.

     The leadership of the former Pike County Chamber of Commerce followed the character trait of many successful businesses, by refusing to accept the risk of doing nothing when opportunity arose.  When the risk of this new path looked us in the face, we knew the greatest risk lay in doing nothing.  We stepped forward not in the short-term best interests of our organization directly, but in the long term best interest of our membership and the businesses of eastern Kentucky.  Everyday our members put it all on the line.  You refuse to accept the status quo and are continually pushing the envelope.  In the spirit of great entrepreneurship, I believe your chamber is following suit.  In 2012, we accomplished things we were told could not be accomplished.  I still hear comments about the harsh reality that our region will never work together the way we envision, but our growth tells me otherwise.  As a reference to the great quote from Theodore Roosevelt, your chamber is “in the Arena”*.

     Here's to a great 2013 to each community, organization, partner and citizen of eastern Kentucky as I hope we can all look at the coming year with optimism, concentrating unified efforts on what can be created rather than what may be lost.  We will refuse to accept the risk of doing nothing and I pray you do the same.  God Bless.

     *"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat." 
Excerpt from the speech "Citizenship In A Republic" delivered at the Sorbonne, in Paris, France on 23 April, 1910  
 

Shopping Local is a 2-Way Street

     Growing the local retail and service industry is an integral part of our efforts to expand the economy of eastern Kentucky.  Not only does our chamber support local businesses, we are local businesses.  The challenge of a buy local campaign is that the customer is always right.  The challenge is determining why people choose to go elsewhere to shop.  There are reasons consumers do not shop local;  it is our responsibility as the business community to address and correct them.  I believe most of that falls into three categories:  price, product selection, and most of all, the experience.  People want to feel the experience of the Christmas season and by working together we are making great strides in moving our communities in the right direction.

     Our chamber serves a population of over 200,000 people and I believe our region has the population to support a serious retail industry.  It will take multiple partners working together to transform our region into a destination; bringing people in rather than people leaving for goods and services.  To generate economic activity and job growth you must do one of two things: either create a product or service that will bring money in from outside the region or redirect money that is being spent outside of the region, to being spent at home.
 
       Consider this, if 20,000 people from eastern Kentucky visited Lexington this Christmas and spent an average of $500, that is a $10 million investment in the economy of Lexington.  That investment is transferred from our economy to theirs; it is taken from our banks, our retailers, our service industry, and our economy as a whole.  Also, that generates ancillary tax revenue, including local occupational taxes and property taxes, used for Lexington schools, roads, infrastructure, and new developments, instead of our own.  The real issue is the statistic that says every dollar spent in a local economy turns over seven times.  That means your waiter at Red Lobster takes your dollar in the form of a paycheck and spends it somewhere else in Lexington; this happens approximately seven times.  That’s tough to measure.  But coming from a background as an independent retailer, our business had six employees and we all got paychecks that we used to buy cars locally, borrow money locally, buy homes locally, shop locally; with a big percentage of those dollars staying in the community.  My paycheck, my ability to own a home and provide for my wife and daughter, was your money spent here, instead of there. 

     In the words of Sam Walton, “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”  It is rare you will find a customer who will pay extra, to get a lower quality product, through a poor customer service experience just to shop local.  A true reversal will not only include consumers realizing the impact their spending has on their neighbor and themselves, but it will take a combination of retailers identifying the correct product selection, being competitive on prices (lower margins typically means more turnover, and if done just right, more bottom line), and partnering as a community to generate the Hallmark Channel Christmas experience (live nativities celebrating Jesus’ birth, visits from Santa, wreaths, lights, bows, Christmas plays, parades, hot chocolate, and if the stars align, a dusting of snow). 

     The idea of shopping locally has typically been an idea of good will.  But, we all know good will does not drive consumer behavior.  Buy local campaigns have existed for years but often accomplish very little.  Buying local has far reaching impacts on a community, and we are moving into a reality where the investment of our proverbial $10 million needs to be at home.  The spirit of Christmas revolves around Jesus’ words “It is more blessed to give than to receive”.  Buying local does not have to stop after Christmas and in fact, over the next year it will be more important than ever that we, as the community of eastern Kentucky, bind together and commit our support to one another

     As a member of the Chamber, you are encouraged to participate in the “Shop East Kentucky” initiative by submitting a customized coupon or promotion for local customers.  We believe that there is a serious misperception about what goods and services are available here in eastern Kentucky and that our members deliver quality goods, at competitive prices, while providing memorable experiences every day.  These coupons and promotions are available at www.shopeastky.com. We will continue to promote these coupons year round.

     We feel this provides our members the opportunity to cost effectively overcome two of the barriers preventing people from shopping locally, both price and product selection.  The primary goals of this initiative are to strengthen and grow the local economy and to spread the word about the great, affordable, but often unrecognized products and services our local community offers.  We are coming together as a business community, breaking down the barriers, and giving consumers the incentives they need to “Shop East Kentucky.”