The Building Blocks of Innovation: Part 2 of Our Q&A with David Egner of the New Economy Initiative

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work in this new world, and the auto companies have not figured out how to work with suppliers. Before, everything was so interconnected that folks new each other by their first name and you could just get on the phone to Frank and place an order. Today you have to go through a system. There’s a lot of adjustments that have to be made.

It’s also going to be important to look at the services that need to surround the auto industry moving forward, like design and communications. You’ve got one of the largest concentrations of creatives in North America here because of the auto industry—designers and advertising people and architects, et cetera. You have one of the top schools of design in the world. The College for Creative Studies is here because of the auto industry. We’ve got to continue to use those assets in a way that is connected to the automakers, but also in a way that is looking to other industries.

X: You mentioned that the auto suppliers, obviously a huge sector in Detroit, is having trouble adjusting to the new way of doing business. Do you think that industry is going to continue to see downsizing and business failures?

DE: I think we are going through a natural weeding process right now. The suppliers who are not able to make those adjustments won’t be here a few years from now. The suppliers that are expecting their grandfathers’ auto industry to come back won’t be here a couple of years from now. Which is why I don’t think we have hit bottom yet in the area of the supplier market. I think 2010 will be a shakeout year for tier-two and tier-three suppliers in the auto industry. The ones who that are saying “For 40 years have been pulling 10 percent out of their revenues to sustain my lifestyle and I’m not about to stop doing that,” some of those folks have forgotten how to be entrepreneurs. We’re back to that issue of complacency and entitlement.

I think the shakeout will happen over the next several months. I’m basing that on what I’m hearing from our friends at the Urban Entrepreneur Partnership, who are working with minority suppliers right now. It comes down to the nimbleness of the institutions.

X: I’d like you to walk me through the three main funding areas for the New Economy Initiative—promoting a successful entrepreneurial ecosystem, capitalizing on existing regional assets, and building a more skilled and educated workforce—and give me an example in each area of a grant that you feel best exemplifies what you’re trying to accomplish.

DE: In the entrepreneurial ecosystem area, it’s obviously TechTown, which is getting $5 million from NEI over three years. About a year ago, they were helping about 60 businesses. Randal Charlton just sent me a PowerPoint, and in that time, according to the slide, they have had 2,580 people who attended intake events for entrepreneurs, and 1,444 of those people have enrolled in FastTrac programs, and 713 have graduated. TechTown now has 201 tenants who have created more than 400 new jobs in their Tech One space, and they are expanding into a second location. It’s still too early to get good evaluation data around all this; the question is, 713 graduates—so what? How many companies will they start, and how many jobs will those companies create? But so far, we are encouraged by the demand. And they purposely did not filter this to be only about high-tech companies. In this first round, we wanted this to be part of the intention of changing the culture and letting folks know that anybody can take charge of their own destiny. So there is a mix of lifestyle and high-tech companies and an incredible diversity in the people graduating, ethnically and culturally and in terms of college attainment.

We’re also throwing $5 million into a microloan fund for accelerators in the region, including TechTown. We’re trying to fund some of these businesses. No loan will be for over $50,000. I refer to this as “nudge money.” It’s pre-funding, in many cases. It’s just giving people the money to make a prototype or a proof-of-concept.

X: What about in the area of capitalizing on existing regional assets?

DE: The thing I’m watching with the greatest anticipation there is a series of grants we made to Michigan State University and the Detroit Regional Chamber [of Commerce], looking at transportation, distribution, and logistics, with the Canadian border as a key … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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