The Entrepreneurial Urban Planner

By Ted Oberwager

Our recent class discussions around greenfield cities like King Abdullah Economic City and Masdar have illustrated the difficulties in executing hugely ambitious development undertakings. However, the issues experienced in each city have also highlighted the opportunities in applying core management concepts to the world of city planning. So what lessons can we draw from the failures experienced in each of these cities? I offer a few ideas:

1) Set clear goals. It is difficult to end up in the right place if you don’t know where you want to go. Whether it is GDP growth, cultural development, or improved living standards, be clear about your overarching goals.

2) Understand your own skills, capabilities, and resources. Every urban developer will have different strengths and resources. In KEAC, for example, the Saudi’s had abundant access to cheap energy. Developing an understanding of the competitive advantage created by these capabilities provides every urban planner with a deeper and more powerful toolkit.

3) Partner to fill in the gaps. No state or organization will have every available resource. Just as the Saudis have an abundance of cheap energy, they may not have the expertise in shipping or port development. It’s the classic theory of comparative advantage, and the earlier planners realize they can’t do it all, the better.

4) Start small. As it was pointed out in class, ‘minimum viable product’ could easily be employed in many urban developments. KEAC seemed to die by the breadth of its ambitions during the downturn. I believe that starting small is necessary in order to limit mistakes and make the most efficient use of limited resources.

5) Learn from mistakes. Mistakes are inevitable, and employing the “kaizen” approach that Henry wrote about in his blog entry must be the path forward. Flawless execution may be a fantasy, but continuous improvement can be a reality.

6) Finance conservatively. Capital is the lifeblood of urban development, and failure is 100% guaranteed when the coffers run dry. Given the importance of the developments in question, I would argue that planners give themselves as much runway as possible by financing conservatively, and maximizing funding when the capital markets are favorable.

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…as Professor Macomber pointed out, much of this can be thought of as an extension of the lessons learned in our entrepreneurships classes – and perhaps many of these could be deduced from the familiar graphics above. But just because these principles seem obvious, doesn’t mean that they are employed by all – and they should be. Food for thought.

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2 thoughts on “The Entrepreneurial Urban Planner

  1. I thought this was a very useful post–and I’m interested in why it might not happen, i.e. what are the impediments to the entrepreneurial urban planner? By way of response, I would posit the below stumbling blocks. Hopefully being aware of these likely stumbling blocks (and I’m sure others) as well as the principles you outlined will make success more likely for prospective planners and project sponsors.

    1. Set Clear Goals: I think the problem is all roads lead almost must lead to GDP growth in order for a city to be successful. So the goals should align with achieving GDP growth, for example by expanding residential areas adjacent to strong commercial centers with unsustainably high living costs, building a great museum to elevate a city from third or second to second or first tier, or through diversifying the economy away from single commodity exports.

    2. Understanding Competitive Advantage: I absolutely agree with this point, but would add the need to consider sustained competitive advantage. With respect to KAEC, certainly cheap energy is a key strength for Saudi Arabia, and not likely to disappear any time soon. But what does it mean to diversify away from the oil economy by using the oil economy? As I mentioned in class, I think there is a strong case for a new city in Saudi Arabia to be the most resource efficient, so oil can be sold, rather than resource intensive because it can afford to be. [See “What’s Your City’s Competitive Advantage” here – John M]

    3. Partnering: Partner for risk, not just knowledge. This goes hand in hand with conservative financing. It’s one thing to admit you don’t know everything and seek a partner, but if the developer is the only one with skin in the game, they may not get the most out of their partner.

    4. Start Small: I think there is a very, very fine line between minimum and viable for an MVP. KAEC may have been too ambitious, but PlanIT was certainly not ambitious enough. How small is just big enough to matter?

    5. Learn from Mistakes: And pivot. A lot of our discussion (and blog posts) have been about people. Just as with start-up products or companies, I think planners need to engage and solicit feedback from “first adopters” with respect to on-going development.

    6. Finance conservatively: Going back to partnering, part of conservative financing may be offloading the financing as soon as possible to partners or third parties.

  2. I really agree with Ted. It seems like KAEC was a classic case of a “fat startup” – they wanted to build everything perfectly in the beginning. The problem with this was that they actually needed to make sure that there was 1) demand for the project and 2) enough money to succeed. With regards to demand, the developers could have worked out building out smoke tests to gauge interest from businesses and then get pre-commitments for the Industrial Valley. It seemed like they had the right idea with the phasing of the project, but there was mis-execution in getting commitments. With regard to financing, the developers seemed to fail in allocating money to the priority areas of the project. The global financial crisis may have actually been a great wake up call because it forced prioritization of the different projects. It also forced the developers to consider options that they had never considered before, e.g. creating a joint venture for the port, selling land instead of ground leases. These are things that a scarcity of capital can actually make you consider. In marketing, we learned that no one will ever punish you for capturing your fair share of value if you are creating value. However, it seemed like the developers in this case were trying to capture value before creating any. Because these types of developments tend to have longer time-horizons than the startups we study in entrepreneurial finance, it does not mean that they should ignore the basic frameworks Ted laid out above.

    [See chain around Quick Fixes for KAEC – John M]

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