Wealth-Building Opportunities

Wealth-Building Opportunities: Gaps, Bottlenecks and Underutilized Resources

A WealthWorks value chain is dynamic, not static. A large part of its value as a tool for designing and implementing economic and community development efforts lies in that fact. The WealthWorks value chain, when well coordinated, becomes a communication and planning vehicle that surfaces and highlights information that can lead to more wealth-building opportunities.

How does that happen? The coordinator and core partners in a WealthWorks value chain regularly, either through formal meetings or a series of smaller exchanges, discover things happening (or not happening) in the value chain that present a barrier to be tackled or offer an idea for an entrepreneurial venture.

WealthWorks views these as wealth-building opportunities—that is, opportunities to grow stocks of the eight capitals, strengthen regional ownership or control of that capital, and improve livelihoods for people in the region. Wealth-building opportunities become evident as you map the value chain and identify its gaps, bottlenecks and underutilized resources.

Wealth-building opportunities become evident as you map the value chain and identify its gaps, bottlenecks and underutilized resources.

A gap is a missing process or function that is essential to produce the goods or services at the core of your value chain.

In the tomato soup value chain, this kind of gap might be the lack of a transportation business that can move the soup from the processor’s kitchens to the local schools and other buyers. If your value chain fills that gap, for example, by working with a small group of laid-off bus drivers to set up a small transport business, you have started a locally owned business, created jobs, increased incomes and tax revenues, and set up a firm that might help you achieve greater scale by taking on more business later. Or if your buyers want tomato soup portioned out in 6.5 ounce packaging, and you can’t find a supplier for that size anywhere, your wealth-building opportunity might be to create a business that produces those containers, or to work with your existing packager in the value chain to innovate—adding to their profit and product line while you meet your buyer’s demands.

Gaps: A missing process or function represents both a gap in your value chain and an opportunity to fill it with a local supplier.

A bottleneck is something that prevents or restricts the value chain from operating smoothly or achieving scale, such as regulatory problems, missing skills, or inadequate financing. Returning to the tomato soup example, area schools may require GAP (Good Agricultural Practices) Certified products to be served to their students.

The tomato growers, however, may lack the proper training or practices to receive GAP certification, or may be unable to afford the cost of the certification process. Support partners—like the university agricultural extension service or a regional nonprofit— might be able to help with the training, while a state agency or community foundation might help with funding. Or the value chain coordinator might be able to negotiate a “group discount” for a collaborative of farmers that go through certification training and process together. Breaking through such bottlenecks leads to wealth-building results.

Similarly, a bottleneck—such as the inability of one partner to meet a requirement—is a problem awaiting a wealth-building solution.

Underutilized resources are resources currently available in the region that, for one reason or another, are not yet mobilized to full benefit within the value chain. In the case of tomato soup, this may be a small restaurant with a fantastic tomato soup recipe that goes overlooked by local processors. Or it could be land standing idle that might be used for growing tomatoes.

There are many ways to help value chains fill gaps, untangle bottlenecks or bring underutilized resources into productive use. The goal of a WealthWorks value chain is to address as many of these wealth-building opportunities as possible by using resources in the region. This “Can we do it here?” approach involves creative and strategic thinking. It is one facet of what makes this a WealthWorks value chain.

Underutilized resources: Potential partners who might enhance value chain activity but haven’t been included represent lost opportunities that can be seized for wealth building.

Always Ask the Wealth-Building Questions

As you recall from Module 1, in Wealthworks, wealth building is the goal of economic and community development. To that end, as you construct your value chain, it is essential to keep these three questions in mind:

How can the value chain be constructed so that it increases the quantity and/or quality of the eight capitals in our region, and does no harm to any of them?
How can the value chain expand local ownership and control over the region’s capital and assets?
How can the value chain be used to include more people, places, and firms on the economic margins in the action and the benefits?

These questions will guide the strategies used to construct the value chain and help shape its outcomes. The same questions can help you identify gaps, bottlenecks and underutilized resources. In short, bringing these three wealth-building questions to your WealthWorks value chain at any point in its development—from inception to maturity—will add insights and keep your wealth-building results growing.

Always leverage for scale

In the process of constructing any value chain, you will likely encounter a range of gaps, bottlenecks and underutilized resources. How should you prioritize which opportunities you address first— especially if your resources aren’t limitless?

The answer is to look for the leverage points. (See “Finding leverage points: A green housing example” below.) Leverage points are particular gaps, bottlenecks or underutilized resources that, if addressed, are the “difference that will make the most difference” to increase the scale of wealth-building impact in your region.

Remember: The goal of the WealthWorks value chain is not simply delivering a product to market. It is doing so in ways that help build wealth that sticks to the region, and that delivers better livelihoods for more people, places and firms in the region. Leverage points help unleash wealth-building impact. With creative and strategic thinking about finding and wielding leverage points, your WealthWorks value chain can become a wealth-building engine for your region.

Finding Leverage Points: A Green Housing Example

In Kentucky, a group of builders, contractors, and home buyers came together to develop a green-housing value chain that would help families save on energy bills. As the group mapped the value chain, an important leverage point was revealed in the housing appraisal process.

“Green” homes cost more to build. But local appraisers—who help determine how much a bank is willing to loan—did not recognize the economic benefits of green housing, and so it was not captured in their valuations. As a result, the bank would not approve mortgages for amounts needed to buy houses with green construction. Without mortgage approval, low-income families couldn’t afford the higher quality, environmentally sound housing.

The builders saw this bottleneck as an opportunity to leverage significant change. The value chain partners invested in training local appraisers about green construction practices. After training, local appraisers raised appraisal values for green homes, which in turn meant lenders offered loans commensurate with the home’s true market value. Low-income families thus gained access to higher-quality homes with lower energy costs, improving their bottom lines. And the region had more incentive to increase green construction practices overall. This one strategic adaptation in the value chain leveraged big wealth-building potential.