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Monday, July 29, 2013

Tom Still: How is the Wisconsin economy doing? It depends on who asks and answers

By Tom Still
As the nation's "joyless recovery" limps along, the question for many people in Wisconsin is how the state stacks up to others.

Based on a range of rankings and indicators, the answer is a definite ... who the heck really knows?

There's a reason why economics is half-seriously called "the dismal science." Precision often rests on interpreting data based on estimates, projections and measures rooted in a subjective analysis. That doesn't mean the answers are wrong, but they can be varied and reflective of different starting points.

That's why Wisconsin can show up well in some state-by-state rankings of economic activity and competitiveness – and not so favorably in others. Here are some recent examples on the plus side:

* CEO Magazine ranked Wisconsin 17th best for business in a survey published in May 2013. That's up from 43rd in 2009. It's a survey based mostly on the perceptions of chief executives, which matter because they're decision-makers.

* Site Selection magazine's 2012 rankings placed the state 13th among the 50 states, its highest ranking since 1998. That's based on surveys of corporate site selectors.

* CNBC recently released a competitiveness survey that ranked Wisconsin 22nd based on 51 measures, which were grouped in 10 broad categories. The state's top rankings were 13th in education, 17th in infrastructure, 19th in quality of life and 19th in technology and innovation. On the low end, Wisconsin scored 40th in workforce, 34th in economy, and 28th in cost of doing business and cost of living.

* Beacon Hill Institute's annual state competitiveness report ranked Wisconsin 18th, up about four places from three prior years.

* The American Legislative Exchange Council's 2013 "ALEC-Laffer State Economic Competiveness Index" placed Wisconsin 15th best among the states, up sharply from three prior years. But the state's economic performance was mired at 41st, up only slightly from recent years.

Here are rankings with Wisconsin at or near the bottom half of the class:

* The Tax Foundation's "2013 State Business Tax Climate Index" ranked Wisconsin 43rd based on 100 tax variables that can affect competitiveness. That's on par with other recent years.

* In its "Best States for Business," Forbes magazine ranked Wisconsin 42nd in late 2012. Its worst marks were for growth prospects and labor supply (also reflected in the CNBC rankings).

* The Small Business & Entrepreneurship Council ranked the state 27th in its 2012 index.

* A study sponsored by the U.S. Chamber of Commerce, "Enterprising States: Getting Down to Small Business," ranked Wisconsin's business climate 39th overall.

* The Milken Institute ranked Wisconsin 15th in its biennial State Technology and Science Index, with the lowest score – 38th – tied to how well policymakers leverage tech-based assets into economic performance. Perhaps that will change in time with the recent passage of an early stage capital bill.

Another mixed indicator comes from a source much closer to home. The state Department of Revenue reports the Wisconsin economy will rebound to pre-recession levels by the end of 2014. However, economic growth still lags the national average. The tax agency predicted the state will add about 31,000 jobs through 2013 and another 40,000 next year. Counting jobs produced in 2011 and 2012, that's still short of the goal of 250,000 new jobs by 2015 set by Gov. Scott Walker.

So, how are we doing? Business perceptions of Wisconsin are changing, but the reality of recovery on a par with the nation is lagging. If it's any comfort, that conclusion is consistent with history. Economists may not agree on much, but decades of data confirms the state slips into recession later than the nation – and emerges later, as well. Even a "dismal science" has its certainties.

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


Monday, July 22, 2013

Tom Still: As global marketplace grows, so do opportunities –and a few risks – for U.S. companies

By Tom Still
MILWAUKEE – Simple demographics should tell U.S. business owners all they need to know about the size of the opportunity: About 95 percent of the world's population lives outside the United States and a rising percentage of those people are "middle class" consumers.

Less obvious to many business owners, especially smaller firms and startups, is how to efficiently and safely break into that global marketplace.

Understanding how to do business overseas was the topic of a July 18 Wisconsin Innovation Network meeting in Milwaukee, where a veteran of more than 25 years of global business development walked through the basics of getting through international doors – and resources that can help while you're knocking.

Mark Rhoda-Reis, who leads market development efforts in the Americas and Europe for the Wisconsin Economic Development Corp., described how companies in Wisconsin can work with his agency to gain access to sales in emerging markets. Those pathways range from taking part in trade missions and trade shows to gaining business intelligence through a network that spans 36 countries.

Among the resources available through WEDC, Rhoda-Reis said, are grant programs for small- to mid-sized companies to cover some of the costs related to developing an export strategy and growing sales over time.

While Wisconsin's exports have been steadily climbing in recent years – it hit a record $23 billion in 2012 – there are still plenty of companies that could be exporting goods and services but have yet to do so. Why? Rhoda-Reis believes a combination of routine business pressures in existing markets, awareness of market potential overseas and fear of the unknown – languages, red tape and economic espionage – are primary barriers.

The dangers of economic espionage were evident in a case, reported on the same day as the WIN meeting, involving a firm with offices in Middleton. Federal prosecutors say clean energy software developed in Wisconsin was stolen over the Internet by a Serbian man accused of being bribed to supply the trade secrets to a Chinese wind turbine manufacturer.

Economic espionage and cyber-theft happen everywhere in a digital age, however, and Rhoda-Reis said he believes companies can take common-sense precautions to greatly reduce their risk of exposure.

"Doing international business does have additional administrative burden and should be factored in to the cost benefit analysis," he said. "For the large majority of companies, the scale tips in favor of a larger more diverse customer base, more robust and competitive products, greater long-term revenue."

Protective measures may include registering trademarks in key markets, filing international patents in markets where there may be strong global competitors, conducting reviews of potential sales and marketing partners, including intellectual property protection clauses in contracts, and generally seeking out international partners who have a vested interest in protecting your company's economic interests.

"Competitors, whether domestic or international are always looking for ways to find advantage either by reverse engineering, copying and improving your designs, obtaining trade secrets or supplier information," Rhoda-Reis said. "From personal experience, companies will gain far more in the way of competitive intelligence and product development benefits by being able to compete on a global level than the risk of competition from copies."

Byron Franz, a special agent for the FBI in Wisconsin, often alerts companies to simple steps that can better protect their trade secrets. Like Rhoda-Reis, he believes companies should pursue global opportunities "but do so with their eyes wide open."

When traveling abroad, Franz said, companies should travel with minimal digital information that could be lost or stolen. "Smart phones" are storehouses of data that can be valuable to cyber-thieves, he said, so consider carrying a dedicated phone abroad.

Franz said executive travel, online computer intrusions and insider data theft are leading sources of economic espionage, along with lax monitoring of corporate tours by foreign visitors and simple solicitations for information, which often target academic researchers.

As Franz noted, organizations such as the FBI, the U.S. Department of Commerce and WEDC have experts in place to help companies reduce their risks of doing business overseas. "There are people who can sit in the foxhole with you," he said.

That foxhole will get larger and more crowded as Wisconsin companies look to find ways to crack into a growing global marketplace.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal. To learn more about WEDC's export programs, visit http://inwisconsin.com.


Tuesday, July 16, 2013

Ben Brancel: State budget supports growing agriculture industry

By Ben Brancel
Wisconsin's agricultural industry continues to grow from our farmers markets to the international ports. When Governor Scott Walker signed the 2013-2015 budget he ensured that the Department of Agriculture, Trade and Consumer Protection (DATCP) would be able to maintain its core missions and work for the prosperity of Wisconsin's consumers, farmers and agribusinesses.

This budget will allow our food safety inspectors and partners to inspect more than 20,000 food-related businesses to ensure safe and wholesome food. Our staff will be able to continue to protect animal and plant health through routine inspections and respond to emergency situations. We will be able to meet our environmental obligations to safeguard our environment and protect consumers from fraudulent business practices.

Early last year, the Governor announced the Dairy 30x20 Initiative. This initiative was formed after numerous discussions with industry stakeholders on how best to support dairy farmers to be profitable and maintain our place as America's Dairyland. In this budget, the Governor maintained funding for farmer grants and added funding for processor grants. Now, we will collaborate with industry stakeholders again to best decide how these valuable dollars will make the biggest impact on processor investment. By producing and processing 30 billion pounds of milk by 2020, Wisconsin will be able to create additional jobs and grow our state's economy.

The best way for any of our agribusinesses to be successful is to understand the regulatory perimeters to work and build. This budget clarifies the way challenges will be handled with high capacity wells. Farms and plants will be able to work with the Department of Natural Resources to safely install pumping systems that will be good for our environment and make business growth possible.

The budget signing confirms the movement of the Tank and Petroleum Testing Program from the Department of Safety and Professional Services (DSPS) to DATCP. This move will increase efficiencies by improving our state's overall performance when it comes to inspecting our fueling stations. Inspectors from DSPS and DATCP will be cross-trained so one inspector can look at the quality of the fuel stored in Wisconsin tanks and measure the pump for accuracy. Previously, one inspector from DSPS would look at quality while one DATCP inspector would travel to the retail stop separately to check for accuracy.

Whether it's doing business or paying taxes, people want to know how and where their money is being spent. One thing this budget does is protect the integrity of our segregated funds making sure money paid into those funds is used the way they were intended. In this budget, monies have been realigned allowing the Agrichemical Management fund and the Agricultural Chemical Cleanup fund to be better used as originally planned. We're moving in the right direction so when farmers pay a fee or businesses pay a fee, they are used for the specified purpose.

This budget makes a commitment to Wisconsin's rural communities from education to workforce development to infrastructure. By making investments in the Department of Transportation, we will be able to move our agricultural products from our farms to the marketplace. The budget will support small businesses by offering tax relief. By investing additional money in rural medical education programs, there will be additional access to healthcare in rural areas.

At DATCP, this budget provides the framework for our staff to better serve Wisconsin agriculture and sets the state up for future success. Through our reforms, Wisconsinites will be able to move forward, building on opportunities that will lead to prosperity and true independence.

-- Brancel is the secretary of the Department of Agriculture, Trade and Consumer Protection.


Monday, July 15, 2013

Tom Still: North Woods innovation on display in companies old, new, large and small

By Tom Still
ASHLAND – C.G. Bretting Manufacturing has been bending metal on the shores of Lake Superior since 1890, but its global footprint in the paper converting industry defines the company's 21st century approach to innovation.

Entrepreneurs such as Bruce Bowers, Mirka Nelson and Mark Snow all represent new companies – or, in some cases, no company at all – but they're guided by the same innovative spirit that drives the big boys.

Welcome to the new North Woods, where efforts to redefine the economy involve companies large and small, as well as a broader community that understands the need to secure the region's long-term prosperity.

For many people in Wisconsin, the North Woods have become a frozen banana republic, with eco-terrorists and paramilitary guards roaming the forests of the Gogebic Iron Range within a half hour's drive of Ashland.

For those who live there, however, those headlines are a far cry from everyday life. Although residents are divided over the mine, they're also determined that the controversy surrounding it cannot become the North Woods' defining image.

That was evident during a recent visit to Ashland, where executives at family-owned firms such as Bretting, entrepreneurs who are just starting businesses, and leaders in the political and economic development communities seem aligned in their vision for the future.

"We are all very active and passionate about making our community a better place," read a welcome letter to the Wisconsin Technology Council board of directors from nine industry, education and local government leaders.

That was evident at Bretting, which makes custom machines – folders, rewinders and more – for paper companies that produce napkins, tissue paper and similar consumer products. The company's high-tech, lean manufacturing setting has enabled it to capture significant shares of the paper converting market in North America as well as globally, with 60 large paper firms counted among its customers.

Bretting's work force of 450 or so people has virtually no turnover outside retirements, in part because the company's leadership stresses innovation, teamwork and customer service as a matter of course. "This is our home," said president and chief executive officer David Bretting. "We have faith in the community and the people who live here."

At Wisconsin Indianhead Technical College in Ashland, a different brand of innovation was on display when a small group of entrepreneurs practiced their two-minute business plan "pitches" for a panel of judges. The Entrepreneurs' Edge event, organized by the Wisconsin Innovation Network's Lake Superior chapter, was a precursor for the larger Lake Superior Business and Technology Conference. That day-long event will be held Aug. 9, also at Indianhead Tech.

Presenters at the pitch practice reflected a range of ideas, mostly driven by hands-on experience.

Bowers is a musician who has built a lighting prototype for theater, music and studio settings where control and information surfaces must be well lit without spillover to performing or audience areas.

Nelson wants to build a recreational and observation tower – with a possible high-tech twist – to attract tourists as well as adventuresome athletes who may want to try climbing, repelling or "zip lines."

Snow is a Marine Corps veteran and radio professional who wants to syndicate regular programming for veterans and current military personnel.

Other ideas pitched at the event involved a more energy-efficient window for homes, bottled water from Ashland's aquifer, environmentally friendly marketing materials, custom iron artwork and the world's thinnest wood veneers, which can be used for everything from labels to box coverings.

Not all of those ideas are destined to be the next Google, but they're examples of Main Street entrepreneurism that can add economic value.

The Lake Superior region's economy will likely always rest on some traditional pillars – timber, transportation, tourism and taconite ore – but technology is becoming a fifth "T" in the lineup. It is imbedded in manufacturing companies such as Bretting and the ideas of entrepreneurs.

Don't be misled by the images of protesters and armed guards: The economy in Wisconsin's North Woods is becoming more diverse as the community works to keep its best people and ideas close to home.

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


Monday, July 8, 2013

Tom Still: Innovation takes place in all business sectors -- including some of Wisconsin’s largest

By Tom Still
The word "innovation" can mean different things to different people in business. For some, it implies technological innovation – the latest mobile application, life science discovery or nanotechnology breakthrough.

For others, it's about translating an idea, invention or process into goods and services that create value for customers.

The latter is a definition that can fit most of Wisconsin's leading sectors, from its most traditional to those only now emerging. So long as companies and people within existing sectors continue to innovate – either in evolutionary or revolutionary ways – economic growth is possible.

Meeting market needs through innovation is just as important for companies in some of Wisconsin's historic sectors – manufacturing, agriculture and financial services – as it is for emerging tech-based sectors. However, it may not come as easily or naturally for companies in larger sectors because they focus on executing existing ideas and business plans versus coming up with new ways to do things. Execution equates to profit for a mature business, sometimes to the exclusion of adjusting to change.

Inertia aside, recent studies and news reports show innovation is helping to reshape some of Wisconsin's largest business sectors. That's vital to the state's long-term recovery, not only from the Great Recession that began in 2008, but a much longer slide in manufacturing employment that began more than 13 years ago. A few examples:

Paper manufacturing: Wisconsin remains the nation's No. 1 paper-producing state, even though it has shed jobs by the thousands in recent years. While demand for printing, writing and coated paper has declined, however, the industry is shifting toward specialty paper and products driven by emerging markets.

As Wisconsin Paper Council President Jeff Landin wrote recently, "The paper industry isn't simply 8½-by-11 copy paper." Wisconsin's paper industry is producing medical supplies, food packaging, toilet tissue, napkins, labels, cardboard and a mix of other specialty papers. While slow to innovate as the Internet redefined how society uses paper, Wisconsin's paper industry appears to be repositioning itself. The Paper Council reports more than 30,000 industry employees earn $56,000 annually, on average, in wages and benefits.

Insurance: Wisconsin is 4th among the states in the number of insurance companies, with nearly 250 life, health and property-casualty insurers operating here. The impact is statewide, with major companies including American Family and WEA Trust in Madison, Northwestern Mutual in Milwaukee, Thrivent Financial in Appleton, Church Mutual in Merrill and Jewelers Mutual in Neenah.

A recent study by the Wisconsin Insurance Alliance showed 80,000 employees, up about 11 percent in the decade ending 2010, with averages wages of about $61,500 annually. Conditions ranging from insurance risks associated with climate change to the Affordable Healthcare Act to the demographics of an aging society have compelled the industry to innovate. Insurance companies regularly leverage technology – from "big data" to social media – to stay competitive and in tune with trends. They also tend to invest in market-leading sectors.

Agriculture: In an annual report issued earlier this year, farm economists connected with the University of Wisconsin System outlined a global challenge to the state's agricultural sector: Food, fiber and plant-based fuel must double within the next four decades to meet the needs of 9 billion people.

Global affluence will drive up protein demands, bio-based renewables will play a larger energy role, and innovation must meet challenges associated with land use, water consumption, food safety, animal health and more. "The next 40 years will be exciting for people engaged in agriculture, food, human health, nutrition, and all of the sciences connected," the report concluded. "We can rise to the occasion, and we will."

While agriculture is subject to the whims of commodity markets, land prices, weather and much more, the long-term prospects for Wisconsin are strong so long as innovation continues in its major sectors. The transformation of the cheese industry from a commodity approach to specialty cheeses and products is one example.

History shows the Wisconsin economy slips into recession after it begins nationally and emerges after recovery is well under way elsewhere. That pattern has continued in the wake of the Great Recession, but innovation in new and as well as old industries can help put the state on a more sustainable path.

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


Monday, July 1, 2013

Tom Still: How immigration reform will help keep talent in Wisconsin

By Tom Still
MADISON – Houssam Nassif is everything the "big data" marketplace in the United States and Wisconsin should want in an employee, but has trouble hiring.

He holds a doctorate in computer science from the UW-Madison with an emphasis in machine learning (think artificial intelligence), bioinformatics and statistics. Nassif has interned for companies such as Google and Cisco Systems, managed major databases, is fluent in three languages and even finds time to sail, explore caves and raise a family.

Unfortunately, he's not an American citizen.

Born in Lebanon and educated in Beirut and the United States, Nassif is a 30-something poster child for the immigration reform debate raging in Congress. His recent search for full-time employment in Wisconsin turned up dry, despite holding a degree from one of the nation's best computer science schools. He will soon move to the state of Washington to begin work for a major company there.

Nassif's search was complicated by the fact he needed to land with a company that could help him secure a federal work visa. Such a visa would allow him and his family to stay longer and eventually seek to become U.S. citizens.

"It was crucial," Nassif said of the work visa. "I stopped a few interviews because of the companies not being able to assist."

While Nassif will stay in the United States, it appears his talents are lost to Wisconsin – at least, for now. His predicament is symbolic of a larger issue: Wisconsin's inability to attract and retain more foreign-born workers, especially in skilled positions.

In a global economy, Wisconsin looks much less international than even its neighbors. Compared to Illinois, Minnesota and Michigan, Wisconsin has a smaller share of foreign-born population and total labor force, as well as fewer foreign-born business owners.

The gap is most glaring when it comes to keeping foreign-born workers with specific skills needed in a knowledge-based economy. The United States annually graduates about 40,000 foreign-born students with advanced degrees in science, technology, engineering or math, but only a fraction are allowed or encouraged to stay.

Eric Schmidt, the former CEO and chairman of Google, summarized it when he said: "Of all the crazy rules in our government, the craziest bar none is that we take the smartest people in the world, we bring them to America, we give them (doctoral degrees) in technical science, and we kick them out to go found great companies outside of America. This is madness."

It is madness that directly affects the American economy, which has historically depended on immigrants for labor – from manual to intellectual – and as a source of entrepreneurism. Immigrants founded Google, Intel, eBay, Sun Microsystems, Yahoo!, Hotmail, PayPal, U.S. Steel, Dow Chemical, DuPont, Pfizer and Procter & Gamble Co., to name a few examples. One-quarter of American Nobel Prize winners since 1901 and 40 percent of the doctorate-level scientists working today in the United States are foreign-born.

Aren't immigrants taking jobs from native-born citizens? Not in the case of scientists, engineers and technicians, who remain in short supply nationally due to decades of decline in the production of American-born students in those fields.

"... There is no evidence that immigration has a negative impact on native employment," read a 2012 workforce report to Gov. Scott Walker, authored by former Bucyrus-Erie CEO Tim Sullivan. "There is evidence that immigration encourages U.S. natives to upgrade their skills through additional education or training. This would encourage native-born workers to shift into the middle class."

Sullivan noted that even if Wisconsin retrained every unemployed worker in the state and matched them with jobs, it would still fall short of filling the projected 925,000 jobs to be replaced or created by 2018. That's because the state's native-born, working-age population has peaked and will decline over time.

Solutions under consideration in Congress include granting permanent residency ("green cards") to foreign students who earn graduate degrees in science and technical fields and removing caps on the H-1B temporary high-skilled visa.

In Wisconsin, the state could recast the existing Education Tax Credit so that employers could use it to hire people from outside Wisconsin – whether they're from Indiana or India – and help cover their education.

As for Nassif, he said he "absolutely" would have stayed in Wisconsin if the right opportunity had emerged. So, he insists, would many others like him. As Wisconsin's members of Congress weigh how to vote on immigration reform in its final form, they should bear in mind that a prosperous state needs skilled workers from close to home and abroad.

-- 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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