Business leaders require a deeper understanding of the measures of place if they are to assess where best to run their businesses – as our Vibrant Economy Index can demonstrate.
Place has traditionally been a major factor in the success of organisations. But times change. Mid-sized companies today run global networks of offices. They manage disparate teams of workers in multiple locations. And they even have to divide functions across jurisdictions. Does location strategy still matter as technology and global markets open up new opportunities? It certainly does.
It’s still important for businesses to locate in areas where they can access the right customers, workforce, skills, transport and property despite changes in the business environment. All of these factors influence productivity, pay and reward packages, and profitability in the long run. This makes it important for you as business leaders to understand the dynamics of the locations you choose.
A better way to measure place
Our Vibrant Economy Index provides new insight in this regard. The index assesses six measures over a five-year period for local authority areas:
Dynamism and opportunity
Inclusion and equality
Health, wellbeing and happiness
Resilience and sustainability
Community, trust and belonging
In turn, each of these measures touch on some of the key questions that can affect your bottom line. For example, in terms of prosperity, what are the number and size of businesses for a given place? With regards to dynamism and opportunity, is the local economy innovative and entrepreneurial? In relation to inclusion and equality, what’s the average working wage? Where are sickness levels likely to be lowest? Are homes in the area affordable for employees? Is it a place that people want to move to and want to stay?
What can we learn from measuring place?
For boards seeking to understand the strengths and weaknesses of areas as a location for business, it can be a revelation to compare how different areas perform against the six measures.
For example, our index highlights a clear correlation between vibrant economies and places with a balance of skills. It underlines the need for businesses – whether they are looking to move or improve operations – to be clear what skills are absent or present in a place in order to build better pathways in the future.
Our index also demonstrates the importance of connectivity, revealing a ‘health and wellbeing halo’ around cities. People are living in healthier areas outside the city but travelling into the city to enjoy its prosperous economy. The lesson here is that businesses need to think beyond a specific location and take into account how they are affected by the surrounding areas.
Putting the purpose into place
Business leaders' understanding of place needs to go beyond considering conventional measures. This is especially so for those who recognise the case for adding social value and view it as intrinsic to delivering for investors, employees, suppliers and the community.
“CFOs are increasingly expected to drive and create value in addition to ensuring their finance functions are effective,” says Kabir Dhawan, our associate director in business consulting. “We have increasingly seen clients driving towards social purpose. CFOs now have access to the Vibrant Economy Index to help them look at adding value in more diverse ways for their stakeholders.
"Our index can be used by CFOs as a tool to introduce these concepts at a tactical level. They can use custom data that shows change over time. And they can focus on factors other than wealth creation or GDP when making decisions on location.”
Success powered by social contact
The idea of a business environment where place no longer matters, where dispersed groups of workers are connected by project management software, overlooks a key factor. Digital is still about people. Technology enables people to do a better job. But to achieve growth and development inside the business and in the local economy, people need to work together.
Mark Threlfall, Director of the Centre for Customised Executive Development at Cranfield School of Management, confirms that the social aspect of location is essential. “If you observe how people really learn in an organisation, we see the importance of participation," he says. "Research suggests that up to 90% of learning comes from being in a social context.
“It’s been said that the greatest competitive advantage is being able to learn faster than your competitors. “That means being open and amenable to learning, with a balanced approach that gives you a mechanism to grow and connect with others. Technology is important, but should be used judiciously; we need to move back towards a practical, social and participatory environment to learn.”
Place is also crucial to an organisation's culture and the social capital this builds within a company. Taking a company away from its context removes that social capital. “You have three ways to tap into that social capital and they all benefit from people being in the same place,” says Mark. These three ways feature:
Bridging – by reaching out to all parts of the group
Bonding – by connecting people to each other
Brokering – being in the right place at the right time to make connections that only benefit others
Mark adds: "This requires serendipity and synchronicity and it is where place really matters. You have to be there to make it happen.”
Connection is everything
Our Vibrant Economy Index is a fresh way of looking at place and can help organisations understand how improving communities and economies is good for business. While the idea of place may be commonly thought as of little significance, the opposite is true and the importance of connection is as crucial as ever.
Location remains vital to the wellbeing of the organisation. But how businesses build their location strategy has to change. The data that informs decisions about location must be rich enough to present a fair picture. As you consider the significance of place in the evolving business environment, our Vibrant Economy Index can contribute to a modern approach to analysing the value of a place.
The Vibrant Economy Index and the importance of location to modern business was a topic presented by Rob Turner at our Cranfield Breakfast series on 22 June 2018.
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