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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.

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