Midsize Companies Key to Economic Development

September 4, 2019

Kirk Neiswander – Personal Viewpoint: Crain’s Cleveland Business, September 1, 2019

The founder and president of Economic Development through Growing Enterprises, or EDGE, shares some of the important lessons the nonprofit organization has learned from working with midsize companies over the past 15 years.

Economic development undeniably has received a lot of attention as Northeast Ohio has tried to remove its stigma as just another Rust Belt region. A host of government-inspired or – funded programs were launched, and seeming countless ideas tried, to varying degrees of success.

Only one was created as a market-driven organization for middle-market companies. Only one was not designed to depend on government money or fundraising: EDGE.

Shorthand for Economic Development through Growing Enterprises, EDGE is a 15-year-old nonprofit organization whose mission is sustained by the midmarket businesses that benefit from and pay for its services. EDGE believes strongly that everything in a community is paid for (directly or indirectly) by businesses/organizations and their employees — by paying taxes, spending with local vendors, and making civic and philanthropic contributions.

Using that premise as a starting point, EDGE targeted a sizable segment of the market that was largely overlooked. The prevailing strategy 15 years ago was to focus on business creation/entrepreneurship and retaining/attracting larger companies. Largely ignored were midsize companies (with 25 or more employees) that weren’t easily identified and needed altogether different support than startups or large companies.

So, a membership model was created for midsize companies to come together to discuss various problems, issues and opportunities, much like a surrogate group of advisers. EDGE created events and programs for small groups of noncompetitive companies, based on industry, size or geographic location.

Northeast Ohio has now come to realize that existing midsize companies are key to effective economic development. Helping them grow is likely to make a larger, more significant impact, perhaps faster and with less risk than concentrating on startups or playing the often zero-sum game of attracting and losing larger companies.

Here are some of the important lessons EDGE has learned from working with midsize companies over the past 15 years:

  • CEOs of midsize companies appreciate academic-based initiatives, but with limited time, they want to talk with and learn from others who have faced similar challenges: What has worked in M&A growth initiatives? How to deal with organized labor? How to install effective and efficient ERP systems? What unforeseen liabilities and contingencies need to be confronted upfront?
  • CEOs also want to give their key managers similar exposure to practical lessons, as well as networking opportunities with peer managers in contemporary companies.
  • Many of the most successful new businesses created in Northeast Ohio have been launched by people employed at companies unable or unwilling to fund an idea for a new business conceived by the employee or one of the company’s customers. When the idea was rejected, the employee resigned and started a business based on that idea — sometimes even financed by the customer. Benefiting the community, a new business was born, and economic development was the result.
  • Looking through a different lens, EDGE identified hundreds of midsize companies in Northeast Ohio that were creating the most value for themselves, as well as the region. Companies were applauded for the highest aggregate combination of reported earnings and the taxable compensation paid to all their Northeast Ohio employees, as well as the highest growth rate of this metric. Many honorees told us this was the kind of award they wanted to win and be recognized for.
  • EDGE staff learned that Northeast Ohio companies that were actively managing innovation grew 30% more than those that were still growing their business but not focused on innovation initiatives. These midsize companies that were growing were also most interested in learning about the creative, meaningful ways other companies were giving back to the community.
  • Midsize companies that engaged EDGE Fellow summer interns were surprised by how fast students could get up to speed on their businesses and offer unbiased, productive information on new business ideas, new products/services, market research, data analytics, M&A research, etc. Millions of dollars in new revenue have been created by these EDGE student internship projects. The students gained practical experiences and meaningful relationships.

EDGE is currently working with more than 90 businesses in six different cohort groups, all with the intent of having them learn with and from each other so they can grow the value of their businesses.

Because EDGE successfully created a substantially self-funded model for economic development, a number of foundations have offered to help EDGE reach more midsize companies by creating cohorts across the region based on size, industry or geographic location. EDGE is working with Geauga County Growth Partnership and MAGNET to set up cohort groups of 10 to 15 midsize companies that will benefit from EDGE-created events, speakers, content and ideas on how to self-fund such activities.

EDGE welcomes all ideas on how to spur growth in midsize companies and is not trying to implement this strategy in a vacuum. More partners are welcome. If there are better ideas, we are listening.

The goal is to drive improved economic development for all of Northeast Ohio.

Neiswander is founder and president of EDGE.

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