A second attitude problem is the tendency of community leaders to view business as a means of directly meeting social needs. For example, businesses interested in locating in Boston's inner city have been driven away by demands that they give community-based organizations control over their hiring and training, build playgrounds, and fund scholarships. Businesses exist primarily to earn profits for their owners. They are not, nor should they be, social-services providers. Such demands on business only serve to drive jobs and investment to more welcoming locations.
Instead of intimidating potential inner-city investors with their demands, community-based organizations and their leaders can work to improve the business climate in the inner city. They might, for instance, create referral networks to help companies screen potential employees, help educate the community to the needs of business, and facilitate commercial site development.
Lastly, inner-city companies themselves often harbor unhealthy attitudes to the extent that they have come to rely on subsidies and the absence of real competition to remain viable. Minority preference programs can breed complacency and undercut efforts to improve quality, reduce costs, and sell beyond the captive market. Changing those attitudes will require the replacement of subsidies that only preserve uneconomic businesses with mutually profitable business-to-business relationships. If minority purchasing preferences are useful in getting some inner-city businesses started, the terms of the preference must require those businesses to win a meaningful amount of nonmandate business within a reasonable period of time. Larger established companies should be mentoring smaller companies during this period to increase the probability of success. If the new companies can't succeed, they should be allowed to fail.
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Changing Responsibilities and Roles: The Private Sector
Building on the competitive advantages of the inner city while overcoming its competitive disadvantages will require the commitment and involvement of government, business, and the nonprofit sector. All three will have to abandon old ideas and practices to address the inner-city challenge from an economic perspective -- and the private sector must take the lead, motivated not by charity but by economic self-interest.
Entrepreneurs, managers, and investors, because they alone have profit-oriented motives and incentives, will seek out the best opportunities for creating wealth. The business community, however, must rethink its strategy and adopt new attitudes to succeed in the inner city. Most private-sector initiatives today -- contributions to inner-city social-service agencies or participation in preferential contracting programs -- are fueled by charitable motives. However well intended, they do not contribute much to building a sustainable inner-city economic base. The private sector will contribute more when it focuses on what it does best: creating wealth and building competitive businesses.
Six goals should guide private-sector initiatives:
1. Create and expand business activity in the inner city. The most important contribution a company can make in the inner city is simply to do business there. Inner cities hold untapped potential for building profitable businesses if companies seek out and seize the opportunities that build on the area's true advantages. Retailers, franchisers, and financial-services companies have immediate opportunities. Franchisers represent an especially attractive model for inner-city entrepreneurship because they provide a tested business concept, training, and support.
Controversy has surrounded the efforts of mainstream retailers -- ranging from supermarket chains to Wal-Mart to Walgreens -- to locate in inner cites. Many argue that outside firms do not benefit the inner city because they damage local merchants and siphon profits away from the community. Such arguments reflect the old failed model. Some small percentage of sales do leave the community, but the wages paid to inner-city residents and the lower cost of living that efficient businesses bring to inner-city residents more than compensate for the loss. And while some local merchants may suffer, the large retailers will generate additional foot traffic for new and existing locally owned businesses.
2. Tailor operating practices to meet inner-city needs. Successful inner-city businesses have learned to tailor their products, services, and operating practices to the local market. Goldblatt's, for example, understands that its customers buy to meet immediate needs, and it has matched its merchandising to customers' buying habits. Unlike suburban retailers, which stock a large selection of winter coats in the fall, Goldblatt's shows its winter coats in the winter. One way companies improve their understanding of the inner-city market is to build relationships in the community and hire locally. Neighborhood employees build loyalty from neighborhood customers and help stores customize their product offerings.
3. Deal with disadvantages creatively. Government is not the only group responsible for minimizing the disadvantages of doing business in the inner city. Some companies have pioneered creative tactics for dealing with, for instance, security issues. MetroTech, a back-office-operations complex in Brooklyn, serves financial firms in the nearby Wall Street area. While MetroTech is located in a high-poverty and -crime area, its developers created an 18-acre campus that could support 4 million to 8 million square feet of office space. Thus, they spread security costs among a large number of businesses, and tenants collectively pay only 33 cents a square foot for 24-hour security service. Furthermore, in such a large business complex, the perception of security, just as important as the reality, is also enhanced.
Transportation improvements added to the perception of security at MetroTech, especially for customers and employees who travel to and from the site. MetroTech enlisted the city governmen
