• WisBusiness

Monday, August 29, 2011

An idea for developing new sustainable technologies


By Ken Harwood
What if each state were to partner with educational institutions, their DNR's, the federal government, and independent agencies (like the Nature Conservancy) to set aside a parcel of land (say 500+ acres per state) as a living laboratory for advanced energy conservation and green technology research. The idea would be to create entire communities that are completely "off the grid". A school, company or individual would receive a small parcel of land for free (and tax free) to develop a residence or other facility that is self, or community sustainable. These small "land grants" would be based on proposals for a project that would be built and maintained as permanent structures or projects by an institution, company, or individual.

The entire community would have no access to outside electricity, natural gas or other utilities or services. No gasoline powered vehicles or construction equipment (including cars - except carbon free). All carbon-based or non-green power and fuel usage would stop at the boundary of the community. Only institutions, companies, or individuals committed to an on-site project would have any say in the development of the community so that once the land grants are made the community becomes self governing as long as the "off the grid" proviso remains intact. The community would not be subject to outside taxes, fees or the resulting services provided by local governments. (An exception would be made for health and major emergencies – ambulance service and major fires for example).

Eventually the community would have to deal with issues that can not be solved on an individual site or by a single project. These include power generation and distribution, retail, communication, employment, waste disposal, roads and transportation, land use, public facilities, trash and recycling, taxes or utility fees, parks, governance, public safety, and the thousands of other issues that every community must deal with. They would of course remain under federal, state and local statutes, but would need to address many issues as an independent community.

As our 50-plus "experiments" evolve each community would eventually become a tourist destination so outsiders could explore a sustainable community functioning completely off the grid. Tourism could even become a revenue source for some of these communities. Media would no doubt take an interest in the projects and provide coverage that would attract corporate attention. I am guessing that companies like NEW Holland, Mercedes-Benz, Honda, GM, Hyundai, VW, Mazda, Ford, Caterpillar and other would be quick to bring electric or hydrogen powered vehicles to the communities. Of course GE, Siemens, Vestas, Acciona, and other wind companies would be very interested power generation and distribution. This list would grow exponentially as solar power producers as well as bio-digestion, geothermal, and other companies bid to participate and be seen as a solution to our energy problems. This list will not stop -- think of: insulation, windows, building materials, power tools, sewage treatment, electronics, water delivery and purification, refrigeration, cooking, foods, pets, livestock, gardening.... Clearly my one-page mantra will abbreviate this list long before I run out potential problems or partners to solve them.

There are so many questions to answer. Communication for example, is using a powered cell tower or internet provider not in the community fair? What about radio or tv signals? How does this differ from materials manufactured off site and then used for homes, businesses or projects in the community? Do we bring our trash to the "border" and pay someone to haul it away or do we deal with it internally?

By allowing the communities to address all of these issues without outside influence, additional funding, or specific mandates, we could learn from the attempts to establish next generation power and other services, as well as governance. By having 50-plus separate communities we would see several different solutions to everyday problems. By not funding the individual projects we would see the true economics of the various solutions. Communities could range from survivalist camps to ultra tech new urban cities and everything in between. The best of the ideas and technologies would quickly find their way into mainstream and others would be found to economically or otherwise unfeasible.

Well, there you have it, my one-page solution to the world's energy problems. Really though, I believe that with the right backing and support we could get some of the best minds in the world working on energy solutions with a very minimal investment. We poured billions into ethanol, only to see many of the projects fail and very little return on our investment, we invested little or nothing into Low-E glass and now it is a building standard seen by most developers as an investment. My suggestion is to grow solutions from needs and economic sustainability rather mandate them from our perceived notion of what the solution might be.

One of my favorite events is the U.S. Department of Energy Solar Decathlon. A program that challenges 20 collegiate teams to design, build, and operate solar-powered houses that are cost-effective, energy-efficient, and attractive. The winner of the competition is the team that best blends affordability, consumer appeal, and design excellence with optimal energy production and maximum efficiency. It is this year and open to the public from September 23 to October 2. This is also the problem with the event -- it is every two years for just one week. While the projects eventually are relocated they become isolated and only address limited issues. My idea just raises the bar a bit.

-- Harwood is an economic development professional in rural Wisconsin (executive director of Lafayette Development Corporation) and edits and publishes a newsletter focused on urban and economic development in the state (http://www.WisconsinDevelopment.com).

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Friday, August 26, 2011

What does federal health care reform mean for Wisconsin?


By Dennis G. Smith
According to the latest nationally available data from the Kaiser Family Foundation, 90 percent of people in Wisconsin have health insurance coverage. Only three states are doing better than Wisconsin in covering their citizens. We achieved this high level of coverage without resorting to controversial government mandates to purchase coverage, like the one included in the Patient Protection and Affordable Care Act (PPACA). Until now, little attention has been directed to the impact of PPACA on health insurance markets in Wisconsin.

In June 2009, President Obama visited Green Bay and promised three things to those who already have health insurance—the rising rates of health care costs would decline, the cost of insurance would be lower, and everyone could keep the health plan they have. Now, two years later, the outlook is quite different.

The impact of PPACA on those with insurance will differ based on factors such as income, age, family size, and where you get coverage. Analysis shows that 87 percent of individuals in the individual market, will see premiums that will be 41 percent higher under PPACA. These changes described here represent only the effect of the law. The changes in premiums do not include medical inflation, which is projected to continue to increase faster than wages each year. The changes in premiums also do not reflect other changes such as reinsurance and risk adjustment which may mitigate some of the cost increases. Many individuals will qualify for new generous public subsidies to help pay for the cost of coverage. But even after these new subsidies are provided, 59 percent of the individual market will experience an average premium increase of 31 percent.

Young people will be hit harder with premium increases than older individuals. Looking only at age, the total cost of coverage for an individual age 19-29 in the current individual market would be $1,631 ($1,229 for premium plus $402 for out-of-pocket expenses). With the changes of PPACA, total costs will increase by 34 percent for such an individual. However, if you are in the 55-64 age group, your costs will be about the same. Total expenses without PPACA would be $5,860 compared to $5,829 with PPACA.

A family of four that does not qualify for a subsidy can expect to face an increase in total costs of 28 percent due to PPACA, rising from $8,528 to $10,912. For those who are covered by the small employer group market, the average premium increase will be 15 percent.

The new subsidies do not lower the cost of insurance, they only shift the cost of who is paying. More than 46 percent of individuals that will receive new public assistance either through the subsidies or Medicaid already had coverage, meaning that billions of dollars that are spent will not buy any new coverage.

The majority of people in Wisconsin get their health insurance coverage through their employer. Employer sponsored insurance provides 57 percent of the coverage in Wisconsin, compared to 49 percent nationally. Without PPACA, employer sponsored coverage would grow by 8 percent. Those covered by large employers (more than 50 employees) would expand by 300,000 and those covered by small employers would increase by 30,000. Individuals covered by public insurance (principally Medicaid) would fall by 50,000 due to improvements in the economy. People covered by the individual market would stay steady at 180,000 covered lives.

With PPACA, the existing individual market will be nearly wiped out, shrinking from 180,000 individuals to just 30,000. Another 130,000 individuals will be added to the Medicaid program and 90,000 individuals will depend on new federal assistance to pay the cost of their health insurance. Those covered by employer sponsored insurance will experience both gains and losses. More than 150,000 individuals will lose coverage through their employers, while nearly the same amount will gain coverage through their employers, with an overall net decline of 10,000 in employer coverage. The small group market will be especially volatile with 285,000 people moving among the different options. Only 60,000 people are expected to remain in their current small group coverage.

The implementation of PPACA will bring both opportunities and threats. If you work for a large company that provides health insurance coverage, the impact of PPACA should be modest. But it will be a wild ride for everyone else.

-- Smith is secretary of the Wisconsin Department of Health Services.

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Thursday, August 25, 2011

GreenBiz: Kwik Trip becoming leader in green convenience


By Gregg Hoffmann
If you stop to gas up and get something to eat at a Kwik Trip store, pause to look around for a moment.

The signs might be somewhat inconspicuous, but you very likely could be standing in one of the “green” stores that is making La Crosse-based Kwik Trip a national leader in sustainable energy convenience stores.

“Many of our guests (how Kwik Trip refers to customers) probably don’t even see the initiatives that have been taken, but we believe they and the community as a whole are benefiting from them,” said David Ring, community relations coordinator for the company.

Roughly half of the convenience stores in the country that have qualified for the Leadership in Energy and Environmental Design certification of the U.S. Green Building Council are owned and operated by Kwik Trip.

The company has constructed 12 such stores and has 14 more in the planning stages. Changes to existing stores to make them more energy efficient also are on-going.

Kwik Trip spokespeople emphasize the greening of their stores is being done “because it is the right thing to do,” but also because it makes business sense.

“There’s certainly a balanced approach,” Ring said. “What makes sense for the environment, and is it cost effective?”

Leah Nicklaus Berlin, development coordinator for Kwik Trip, said most of the green initiatives have payback periods of five years or less. “Anything under five years is a no-brainer,” she said.

Initiatives are across the operations of the chain, following the vertically integrated structure of the company as a whole. Low-energy lighting, low-flow toilets and sinks and more efficient motors for coolers and other machinery in the stores cut energy use and save money.

Most of these efforts are planned to go into most, if not all, Kwik Trip stores, and there are more than 400 of those and counting. In Iowa, Kwik Trip operates as Kwik Star.

Kwik Trip has started to recapture water from its car washes and reuse it through a reverse osmosis process. That, along with the changes in sinks and toilets, projects to save 4.7 million gallons of water a year.

“That’s the equivalent of washing 87,000 cars or filling 316 backyard swimming pools,” Ring said.

LED (light-emitting diode) lighting has already shown savings. Canopy lights in new stores save about $3,946 per year. Changes to coolers and freezers are saving $375,291 per year across the stores.

Berlin said energy management systems, which can be monitored from the La Crosse headquarters, are being installed in many stores. “That allows a monitoring of energy efficiency throughout the company,” she said.

Other initiatives include skylights and additional windows for day lighting, heat recovery water heaters, refrigeration waste heat recovery, using more concrete than asphalt in lots to allow for less lighting and heat, and recycling efforts.

Berlin said making new stores energy efficient might add as much as 10 percent to building costs, but the payback more than makes up for that extra cost.

Discussions on greening of the chain started about three to five years ago, according to Berlin. “We felt it was the right approach for our customers and the community as a whole,” she said. “But, we also felt it has to make sense from a business standpoint. It has to be cost effective.”

Ring said some initiatives are in very early stages. For example, 14 stores in Wisconsin, eight in Minnesota and three in Iowa have electric car re-charging stations. The chain also is offering ethanol blends, biodiesel and natural gas at some of its stores and plans to increase those.

“As the market for those alternative sources develop, we plan on adapting,” Ring said.

Kwik Trip also prepares most of its own food for its stores. It maintains its own food safety department, headed by Dr. Jay Ellingson and including company experts and medical people from the Marshfield Clinic. A food inspector is headquartered in that department.

Under the Nature’s Touch brand, Kwik Trip offers milk in a bag/pitcher and orange juice in pouches. The result is a 95 percent reduction in compacted volume in landfills and a 75 percent reduction in package weight.

The company also is participating in the local food movement as much as possible. Sour cream, cottage cheese and French onion dip are bought from the Westby Creamery, southeast of La Crosse.

Eggs come from the Reedsburg Egg Company. Milk and cheese are supplied in large part by local and regional farmers, as are potatoes and onions. Carrots come from a supplier in Rochester, Minnesota.

“We see the local food movement very much as part of the overall sustainability initiatives we have undertaken,” Ring said.

Kwik Trip is exploring some possible tax incentives in Minnesota and elsewhere for green development, but to this point has taken the initiatives primarily on its own.

“We have worked with Focus on Energy and other programs, but for the most part have undertaken this on our own when it is economically viable,” Berlin said. “Innovation is a big part of our business approach. We want to be out in front of new technology in these areas.”

Ring said marketing research shows that more people, especially younger people, consider the environment and energy efficiency when making decisions on where they shop.

“We like to stay up and ahead of trends like this whenever possible,” Ring said. “Mostly though, this fits into an integrated approach we take in the company. We want to demonstrate we care about our guests, community and the environment. We feel we are doing the right thing. These initiatives also are proving to be good business practices.”

-- Hoffmann has written many columns and features for WisPolitics.com and WisBusiness.com over the years. He will write the GreenBiz column monthly.

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Women investors are slowly changing the face of venture and angel capital


By Tom Still
Toni Sikes delivered more than 100 investment pitches on behalf of early stage companies – including her own – to venture capitalists over the course of a dozen years. During that time, Sikes recalled, she met two women venture capitalists, one in New York and the other in Seattle.

“All the others were men,” said the Madison-based entrepreneur. Today, Sikes is just another one of the boys.

Well, not exactly, but Sikes is a venture capitalist in a woman-led firm – still an uncommon sight in a world dominated by the most alpha of alpha males.

That world is changing in ways that are subtly affecting private equity investment patterns in Wisconsin and beyond. For some emerging companies, especially those with women in positions of leadership, that may provide a slight edge in the ever-competitive arenas of venture and angel capital.

Sikes is a partner in Calumet Venture Fund, a three-year-old Wisconsin-based venture capital firm. It was one of only a handful of women-owned firms among 462 active venture capital firms in the United States in 2010, according to the National Venture Capital Association. No more than 7 percent of the general partners in those firms are women, according to industry estimates.

It’s why women VCs such as Sikes still stand out when they enter a boardroom.

Calumet’s other partners include Judy Owen, a veteran entrepreneur and investor with ties to California’s Silicon Valley, and Tim Williams, who brings similar credentials to the firm. Together, they are scouting for deals in tech sectors such as software, eCommerce, online marketing and mobile technologies.

Like virtually all young venture firms, Calumet turns down far more deals than it ever finances. Still, its portfolio already includes one company – CraftEdu – with a woman co-founder. It’s among the signs that women investors are less cautious than previously believed, especially when they’re not the only woman at the table. A recent study from the University of New Hampshire Center for Venture Research revealed that stereotypes about gender affect the investment decision-making of women, even among successful women. It relied on a sample of data from 183 angel investment groups collected over six years.

When an angel investment group had a small percentage of women, researchers found, the group was more cautious about investing. However, when women comprised more than 10 percent of the investment group, their presence led to increased investments.

“At first the results were counterintuitive, since previous research on women investing, in general, shows women to be more cautious investors,” said UNH’s Jeffrey Sohl. “However, our research indicates that when the number of women in an angel group increases, so does their investment activity as angel investors.”

Chalk it up to what psychologists call “stereotype threat.” As Sohl explained, “When there are few women in an angel group, the stereotype of cautious investing is accentuated. As the number of women increases, there is less of a stereotype – there are more women so they are more recognized for their ability as investors and less because of their gender.”

Illuminate Ventures, a San Francisco venture firm founded and led by a woman, recently released a study that tends to reinforce that theory. It concluded that venture firms with at least one woman partner are 70 percent more likely to invest in a female-owned company – and not because of any “pink” bias. That same study concluded that women-owned startups make more efficient use of capital, fail less often and tend to provide greater returns over time.

Sikes and Owen are not alone in Wisconsin. Teresa Esser is managing director of Silicon Pastures, an angel network, and a partner in Capital Midwest Fund, an emerging fund in Milwaukee. Phenomenelle Angels in Madison is an early stage fund that invests primarily in women-owned businesses in the Midwest. Four of its five top managers are women, including managing director Lauren Flanagan. Women Angels LLC, a group of women investors in Milwaukee, Miami and Chicago, is led by entrepreneur Barbara Boxer.

There are prominent national examples, as well. Golden Seeds is a 190-member angel network and fund made up mostly of women investors. Springboard Enterprises isn’t a fund, but it has helped 400 women-led companies raise more than $5 billion in private equity in 11 years.

Wisconsin has a small but noticeable head start with its cadre of women angels and venture capitalists. While having more women investors may not help Wisconsin create and attract more venture capital, it may help put those dollars to work faster, closer to home and in the right companies.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Thursday, August 18, 2011

New operational model will better serve Wisconsin DNR


By Cathy Stepp
Smart CEOs go to their employees for ideas on improving their business’ edge. The people doing the work done know where the roadblocks and slowdowns are.

It’s no different with government.

That’s why when I became Secretary of this agency, I went to our committed staff to find ways to improve DNR and to better support the needs of the people and business in the state while striving for more than minimal environmental compliance. The response was remarkable! The ideas I got showed a pattern of having to jump through hoops and scramble under bureaucratic fences to do jobs. No vehicles available to do inspections. Hundreds of pages of paperwork with no practical use. Workload imbalance. Service centers too often closed to the public.

The collective ideas pointed toward a new operating flexibility paradigm loosely called an enterprise agency.

The concept is simple. We fix what isn’t working for the citizens of the state and encourage what is. DNR is given more autonomy to hire employees and to purchase the tools needed to get work done efficiently. In return, DNR commits to ramped up goals: Improved service to our customers – such as developing simplified permit applications with clear requirements and predictable timelines. We streamline our operations and strive for utmost efficiency with our operational resources, including opening more service center hours and having vehicles to do our jobs. We maintain and enhance Wisconsin’s commitment to environmental excellence.

Using technology better will help. For example, we intend to use the Web to process and track permit applications and manage data. When DNR was created in 1967, punch cards were the computer tool of choice and the Internet didn’t exist. Our plan should unravel the decades of cobbled together and overlapping paper processes that are hobbling both our staff and businesses of the state.

Being designated as the state’s first enterprise agency is a signal of Gov. Walker’s confidence in DNR. But we have to perform. Wisconsin demands a clean environment, and nothing in our pilot allows DNR to back away from environmental standards. Indeed, by freeing our staff from redundant paperwork and obstacles, we hope to work with the public for even better environmental performance in Wisconsin and to plan for actions that will prevent natural resources damage from happening. We will put our staff out in the field working with the public to collaborate and assist, and to concentrate on this agency’s important mission.

The Wisconsin DNR enterprise agency concept is about creating efficiencies that save time and money for us and for you. It’s better customer service with less bureaucracy.

Environmentalists and the business community are keeping an eye on changes in DNR – and I welcome it. With this flexibility and quality of our employees, DNR will deliver. Watch us succeed.

-- Stepp is secretary of the state Department of Natural Resources.

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Wednesday, August 17, 2011

For Wisconsin biotech firms, a perfect storm of financial challenges


By Tom Still
If you didn’t know that Exact Sciences was on the verge of a breakthrough in the war against cancer, you might conclude it’s a company on the ropes.

The Madison-based firm reported earlier this month that it lost about $6.6 million in the latest quarter and about $11 million for the first six months of 2011, numbers that could signal trouble for most publically traded companies of its size.

But for Exact Sciences, which moved to Wisconsin from Boston about three years ago under the leadership of president Kevin Conroy, the losses represent a common rite of passage for biotechnology companies – especially those savvy enough to develop game-changing drugs or diagnostic tests.

That rite is preparing for clinical trials, and it’s a guaranteed drain on biotech company bank accounts.

Exact Sciences has begun clinical trials, a three-stage process required by the U.S. Food and Drug Administration, for its non-invasive test to screen for colorectal cancer. The test, called Cologuard, could revolutionize how people are tested for colorectal cancer, a slow-moving disease that can be treated and cured if detected early. The trials, which will involve 10,000 patients over the next year or so, began in June.

If the trials pass FDA muster for safety and results, Exact Sciences could begin marketing Cologuard and start recovering the $100 million invested in the company over time. The company would likely grow by leaps and bounds and become Wisconsin’s next biotech star. If the trials fail, well… a lot of investors would lose a carefully calculated bet.

Such is the life of a typical biotech company, especially one aspiring to create the next blockbuster drug or diagnostic test. It’s a risky proposition, fraught with regulatory peril, technological hurdles, management challenges and uncertain financial rewards – even if all goes well.

Over time, and against most odds, Wisconsin has become home to a cluster of biotech companies such as Exact Sciences. They’re drawn here, or grow up here, because the ideas generated by Wisconsin’s academic research institutions can compete with any in the world. There’s plenty of talent here, too, thanks to those same schools. Wisconsin also has a small but experienced corps of investors who have learned how to pick and nurture more winners than losers.

Even with those advantages, Wisconsin’s biotech industry is caught in something of a perfect storm. Some of those clouds are much like those looming over biotech firms in California or Massachusetts, such as federal patent backlogs that can hinder innovation and FDA regulations that compound the problem. At least one threat, however, is more acute in Wisconsin than in most other biotech states: Lack of venture capital.

More so than most emerging companies, those in the medical biotech space require lots of capital to move through the stages of discovery to delivery. The potential payoffs are enormous, however, because tech companies can produce hundreds of high-paying jobs over time. The average tech job in Wisconsin pays nearly twice the statewide per capita average.

The continued growth of Wisconsin’s biotechnology sector, which already supports about 25,000 jobs statewide, is why state legislators and Gov. Scott Walker are considering a program to dramatically increase the supply of venture capital here. Wisconsin has 1.83 percent of the nation’s population, 2.15 percent of the nations’ academic research and development spending and 2.11 percent of U.S. patent filings – but only one-half of 1 percent of the nation’s venture capital investments. A state plan that attracts three or four times its weight in private capital could narrow that capital gap.

Venture capital is invested across a mix of industry sectors, so it’s not just biotech that would benefit from a state-leveraged plan that pays back taxpayers over time. But biotech is a sector where large investments are often required.

“We’ll have about $200 million in capital needs altogether before we’re done, and there are others just like us” said Conroy, who was formerly president of Wisconsin’s Third Wave Technologies. “That’s why I would dispute anyone’s notion that we only need small amounts of venture capital here. You don’t have revenues without FDA (regulatory) approval, and winning that approval is a very expensive process.”

Wisconsin has an edge over many states when it comes to tech-based development, but that advantage will be lost unless promising companies can attract the investments they need to succeed. It’s time to secure Wisconsin’s head start and keep the state in the lead.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Wednesday, August 10, 2011

After the recalls: Time to get back to business on Wisconsin's economy


By Tom Still
The high-stakes fight for control of Wisconsin’s state Senate is over. The even higher stakes debate about securing the state’s economic future should resume now.

With Tuesday’s recall elections keeping Republicans in control of the Senate, albeit with a thin 17-16 margin, an opportunity exists in Madison to get back to the business of governing and rebuilding Wisconsin’s economy.

This is not a partisan issue. Or, at least, it shouldn’t be.

While the recall election season in Wisconsin isn’t officially over (two Democratic senators face challenges in Aug. 16 votes), it’s hard to imagine the citizens of Wisconsin are clamoring for more recall petitions, more out-of-state campaign contributions and more televised attack ads. It’s time to move on, even if both parties remain at odds over a multitude of issues.

One issue where there should be broad agreement is the need to create jobs and invigorate the Wisconsin economy. It’s an area in which Republicans and Democrats can work together, sharing credit where credit is due.

The challenges to the Wisconsin economy haven’t taken a hiatus while the recall drama played out. Here are some examples where policymakers can help provide the right climate and incentives for growth:

* Encouraging small business growth. According to EMSI, a nationally known economic modeling firm, Wisconsin has bounced along the bottom for “net new business formations” in recent years. Using federal statistics, EMSI concluded Wisconsin ranked between 34th and 50th among the 50 states between 2006 and 2009. Earlier in the decade, the state was actually outperforming most other states, ranking between 7th and 23rd in net new companies – but the bottom fell out in 2006. In 2010, a down year nationally for creating companies, Wisconsin ranked 17th among the 50 states, but that represented only 267 new firms. Small businesses create most jobs in the United States, so it follows that more startup companies translate to more jobs. State strategies that promote entrepreneurism can help.

* Creating and attracting more investment capital. A bill that would have created a venture capital program was on the Legislature’s “to-do” list before it adjourned in late June. Republicans and Democrats agree on the need to renew that idea in the fall session. Wisconsin has all the basics ingredients, except venture capital, to grow companies in technology and other high-growth sectors. Start-up companies need capital to grow and produce jobs. Carefully crafted incentives and a state-leveraged fund can build a source of capital – from within and outside the state.

* Building on our intellectual assets. Wisconsin ranks among the nation’s top quartile of states in attracting academic research and development, but not so when it comes to industrial R&D dollars. Wisconsin is 14th among the states in producing patents, but not as successful in turning that intellectual property into jobs. Wisconsin has a strong workforce in many ways, but not every worker has the skills to match emerging opportunities. In fact, Wisconsin still ranks below the U.S. average in the percentage of adults with college degrees. Encouraging the transfer of technology from the lab to the marketplace and helping companies find the workers they need are legitimate roles for the state.

* Expanding Wisconsin exports and attracting foreign direct investment. Manufacturing in Wisconsin is very much alive and even well, with nearly one in every six Wisconsin workers engaged in manufacturing. Agriculture is also thriving in most sectors. Who buys those goods and services? Increasingly, people in other nations. Wisconsin exports grew to $19.8 billion in 2010 and foreign direct investment – basically, private investments from abroad – are also expanding. Helping Wisconsin companies open business doors overseas is vital, especially in a state that cannot possibly consume everything it produces.

There’s a time for elections and a time for governing. The hopes for Wisconsin’s economy may well rest on one cycle ending and the other beginning anew.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Tuesday, August 2, 2011

With less federal funding likely, can Wisconsin attract more industry research?


By Tom Still
Even after the federal debt ceiling is raised, one thing is certain about federal spending over the next decade: There will be less of it than expected. To be precise, federal spending will drop by about $2.4 trillion from current estimates. That means a full range of programs, from social services to defense to academic research, are likely to feel the pinch.

For major research universities such as the UW-Madison, that could present a troubling scenario.

Year after year, the UW-Madison is among the nation's leaders in attracting "sponsored" research, meaning research sponsored by federal agencies, private foundations, industry and, in small amounts, state government. In fact, the UW-Madison has ranked among the nation's top five academic R&D powerhouses for more than 20 years running – with more than $1 billion in sponsored research from all sources in fiscal 2009, according to the National Science Foundation.

Because the UW-Madison has excelled over time at attracting merit-based grants from federal agencies such as the National Institutes of Health, it may become more vulnerable if federal research funding takes a hit. Perhaps the best research institutions will always do well under any circumstances, but it may also be a good time to start hedging some bets.

A recent report by the State Science and Technology Institute demonstrates why Wisconsin's major research institutions – which also include the Medical College of Wisconsin and the UW-Milwaukee – should encourage more industry sponsored research.

According to SSTI, Wisconsin is below-average in attracting industry R&D dollars to its major research institutions. The state's academic research institutions reported about $24.4 million in industry-sponsored R&D in fiscal 2009, which represented just 2 percent of total academic R&D spending in Wisconsin. There was about $1.23 billion in total academic R&D spending in Wisconsin in fiscal 2009, counting science, engineering and the humanities.

Wisconsin ranked 48th among the 50 states in its "share" of industry research spending as a percentage of the state's total academic R&D. It ranked 28th in actual dollars spent. In both categories, Wisconsin fell behind neighbors such as Illinois, Indiana, Michigan, Minnesota and even Iowa.

What do those states have in their academic institutions that Wisconsin lacks? Nothing, when it comes to sheer expertise and range of scientific disciplines. However, Wisconsin may lack a great deal when it comes to making a persuasive case to industry.

Commission after commission at the UW-Madison has urged that industry research should be handled differently than federal R&D contracts, at least in terms of barriers to entry and overall paperwork. But a one-size-fits-all approach has persisted, discouraging businesses that believe they need to make too many stops to get their work done.

"Business goes to where doing business is easily facilitated," said Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation, which is the intellectual property arm for the UW-Madison. "We haven't always done a good job of that at Wisconsin."

Other universities are figuring out better ways to enhance industry research, which only makes sense in an era when more companies are willing to contract for such services than keep them in-house.

The Ohio State University recently recruited a technology transfer director from the University of Utah to serve as vice president for commercialization. The University of Washington just recruited the University of Utah president as its new president – primarily because of his success at making connections with industry. At the University of Michigan, a decade-long push to improve industry R&D was featured in the Chronicle of Higher Education under the headline, "With federal support uncertain, university researchers look to industry."

There are signs of change at the UW-Madison, where Chancellor Biddy Martin recently resigned and Interim Chancellor David Ward is filling that role until a national search for her replacement can begin. The No. 2 leader at UW-Madison, Provost Paul DeLuca, recently stressed the need for the campus to better capitalize on the potential for increasing its industry research contracts. In fact, DeLuca has asked that an Office of Industrial Contracting be established by the UW-Madison.

Also on line through the Wisconsin Institutes for Discovery is the private Morgridge Institute for Research, which opened early this year. It offers industry options to conduct research near the campus, but in a private setting.

Wisconsin's major research institutions already conduct top-flight research, especially for federal agencies and private foundation that know and trust their work. It's now time to persuade private industry to do its R&D shopping here, too.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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