Panel II

A Differentiated Program: New Center Initiatives

Moderator:
Edward Breiner
Schramm, Inc.

Mr. Breiner introduced his perspective on the MEP in terms of personal experience. In 2000, he had left his position with a large manufacturer, Ingersoll-Rand, a Fortune 200 company, to a small, family-owned business, Schramm, Inc., a manufacturer of drilling rigs in Chester County, Pennsylvania.21 From then until 2004 he was charged with managing the transition of that business, including a leveraged buyout. He was coming from an environment accustomed to bringing in consultative resources to look at operations with fresh eyes, he said, but when he arrived at Schramm, he found a very different environment, in which outsiders were regarded as anathema. Fortunately, he said, he was introduced to people from the Delaware Valley Industrial Resource Center (DVIRC), the local MEP center, who understood his predicament.

Action was urgent, he said, because his new company had little profit and very low growth in sales. He needed help, and quickly found that the DVIRC consultants were able to help him set up several valuable initiatives, starting with some lean manufacturing principles and ultimately the hiring of a “lean expert.”

Mr. Breiner then, under their guidance, proceeded to strategic planning, bringing in a consultant on a quarterly basis to facilitate the process. “This allowed me to be a participant, rather than trying to herd the cats,” he said. Then about two years ago he was visited by an MEP marketing advisor from Proctor & Gamble who “taught us some ‘marketing physics’ in very powerful,

_______________

21Schramm, Inc., is notable for having developed the drilling rig responsible for helping rescue the 33 miners trapped for 69 days in the Copiapó copper mine in Chile in 2010.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 57
PROCEEDINGS 57 Panel II A Differentiated Program: New Center Initiatives Moderator: Edward Breiner Schramm, Inc. Mr. Breiner introduced his perspective on the MEP in terms of personal experience. In 2000, he had left his position with a large manufacturer, Ingersoll-Rand, a Fortune 200 company, to a small, family-owned business, Schramm, Inc., a manufacturer of drilling rigs in Chester County, Pennsylvania.21 From then until 2004 he was charged with managing the transition of that business, including a leveraged buyout. He was coming from an environment accustomed to bringing in consultative resources to look at operations with fresh eyes, he said, but when he arrived at Schramm, he found a very different environment, in which outsiders were regarded as anathema. Fortunately, he said, he was introduced to people from the Delaware Valley Industrial Resource Center (DVIRC), the local MEP center, who understood his predicament. Action was urgent, he said, because his new company had little profit and very low growth in sales. He needed help, and quickly found that the DVIRC consultants were able to help him set up several valuable initiatives, starting with some lean manufacturing principles and ultimately the hiring of a “lean expert.” Mr. Breiner then, under their guidance, proceeded to strategic planning, bringing in a consultant on a quarterly basis to facilitate the process. “This allowed me to be a participant, rather than trying to herd the cats,” he said. Then about two years ago he was visited by an MEP marketing advisor from Proctor & Gamble who “taught us some ‘marketing physics’ in very powerful, 21 Schramm, Inc., is notable for having developed the drilling rig responsible for helping rescue the 33 miners trapped for 69 days in the Copiapó copper mine in Chile in 2010.

OCR for page 57
58 STRENGTHENING AMERICAN MANUFACTURING clean language.” He learned how to demonstrate “why a customer should want your product and how to convince the marketplace that your product is differentiated from others.” Most recently, the DVIRC helped Schramm do a professional customer survey. “I hadn’t done a customer survey of that quality since my days at Ingersoll-Rand,” he said, “when we paid a group a very large sum of money. So, for MEP, I like the price and I like the service, and it’s very important to me personally and to our company. I might add that 50 to 70 percent of our product is shipped overseas.” With that Mr. Breiner introduced the panel and welcomed the first speaker. A DIFFERENTIATED PROGRAM: CMTC CENTER INITIATIVES James Watson California Manufacturing Technology Consulting Mr. Watson, who leads California Manufacturing Technology Consulting (CMTC), began with a sketch of manufacturing in California, where there are 44,000 manufacturers. These firms employ about 1.2 million workers. This number, he said, is down from 1.6 million at the beginning of the decade as the state lost companies to other states, including Nevada, Arizona, and especially Texas. Even so, California remains the ninth largest economy in the world and manufacturing will always be important in the state, which continues to have the largest concentration of manufacturers in the United States. He showed a map of the state that provided an approximate location of the state’s major industries. The southern part of the state is where the aerospace and defense industries are located; in the center is the food processing industry; in the north is the high technology industries; and in the desert is a growing renewable energy industry. The key part of the illustration, he added, were the palm trees in the sunshine. “For most of our manufacturers, the quality of life is the main reason they’re here. Without those palm trees, I’m not sure we’d have 44,000 manufacturers in the state today.” While there has been “very little job creation” in recent years, Mr. Watson said that the CMTC had made contributions to retaining jobs over the last couple of years, and for every job saved, about 2.5 non-manufacturing jobs were supported. “We think that in the years upcoming we’re going to see a little bit more job growth,” he predicted. “We’re already beginning to see some companies begin to hire, although it’s not yet on a broad base.” According to CMTC surveys for calendar year 2010, manufacturers had invested some $130 million in the last year. “That’s good for us,” he said. “I always like to see that because it means manufacturers are reinvesting in themselves, and the more they do that, the better they can compete and the more likely they are to stay in California.” The surveys had also revealed some $359

OCR for page 57
PROCEEDINGS 59 million in increased sales, which means “they are selling more than they were before. Our hope is that as sales increase, jobs will increase as well.” Client Satisfaction A final point from the survey was “a very high client satisfaction rating with our customers.” He said that this result had been recognized by the state, and that CMTC is being positioned as the “go-to organization” for anyone with manufacturing issues. In California, the state receives notification when a company is deciding to leave, and “we participate on red teams that to go out and try to keep those companies here.” In applying strategic priorities, Mr. Watson said, “the most important thing at our center is creating our own culture of innovation.” This was a difficult challenge for both the center and its customers. The CMTC has launched an internal program called Innovation Station to which all employees can contribute ideas. Those ideas are tracked, and the contributors are recognized when their ideas lead to improvements. He said he is hoping to take some of the best practices from the Innovation Station and disseminate them more widely, both internally and externally. Another goal is to expand the number of new customers. In calendar year 2010, more than 687 customers were surveyed, but “our penetration needs to improve.” The company is now focusing on new sales approaches, with an emphasis on partnering to reach more clients. “We can only reach so many customers alone,” he said. Increasing Market Share for California’s Small Manufacturers One sector drawing concern is food processing, a backbone of the state’s economy and the dominant activity for the middle of the state. “The food processing business for us was considered essentially bullet-proof,” Mr. Watson said. “I was amazed the other day when I went into the market and found a lot of fresh produce that did not come from California, and it was not seasonal. There were tomatoes from China. So we’re going to really focus on food processing, because it appears to be the next area that’s going to have a serious problem.” CMTC has been active in sales and marketing, but a primary focus is export. He said that he had worked in manufacturing, and like the previous speaker, had made his own mistake when he first tried to export manufactured products. He said that of small manufacturers, 80 percent of them do not export at all; of the 20 percent that do, most export to only Mexico and Canada. So his company will emphasize export even more vigorously because of the “big, big changes coming to manufacturing in California.” Many business models are beginning to change in terms of product mix, how products are manufactured, and where products are sold. This effort will include the emerging importance of “re-shoring,” or bringing jobs back to California. “A member of our board of directors recently brought jobs back to California,” he said, “because he did the

OCR for page 57
60 STRENGTHENING AMERICAN MANUFACTURING arithmetic on total cost of ownership, and found it was much more efficient for him to have products produced in California than in China or South America.” Mr. Watson said that an advantage for his company is its nonprofit status. It does charge for its services but its primary mission is not to maximize profit but to take care of its customers. “When a customer first meets us,” he said, “the first questions we hear are, ‘How long are you going to be around?’ and ‘What are you going to charge?’ We’ve been able to forge relationships with many of our customers that are beyond money. Our mission is all about making manufacturers more competitive, creating trust and building jobs.” CMTC’s Mission He described the CMTC’s revised mission, which is “to create solutions for manufacturing, growth, and profitability.” There is no point in growing, he said, without profit. We try to show customers how growth goes to the bottom line of the organization, which improves competitiveness and creates jobs. He drew a line between what customers focused on and what CMTC stakeholders focused on. Customers think about competitiveness, he said; they are not interested in adding jobs. Stakeholders, however, are interested in adding jobs. “And if we create a competitive environment and a firm sells more, they will hire more. Then we can take care of not only our customers, but federal and state stakeholders as well.” Mr. Watson said that CMTC tries to reach these multiple objectives by using a “comprehensive suite of services,” delivered both internally by staff and externally by 50 to 60 third-party providers throughout the service area. “We are essentially a one-stop shop, and when we work with a manufacturer, they don’t have to look anywhere else. We’ll help manufacturers strategically from where they are today to where they want to go tomorrow, and they don’t need to step outside of CMTC.” The CMTC distinguishes itself in many ways, said Mr. Watson. It emphasizes hands-on consulting. “We don’t do reports. We don’t leave them with a bunch of stuff to read. We work with them through facilitation and coaching with hands-on assistance on the plant floor or in the board room to help them take whatever action they need to take. And we’ll stay to make sure they sustain it as well.” Additionally, CMTC understands and promotes the value of the public/private partnership. “We use that because we probably have a relationship with most of the major community colleges in southern California. Most of the other business organizations, including SBA, are partners. We have probably the largest network of third-party providers that handle manufacturing in the state.” Another differentiator is that it focuses only on manufacturing. A number of other organizations advise small businesses, but “there’s a difference between small business and manufacturing.” Other organizations, he said, focus on every kind of business, from banks to fast-food companies. Because CMTC

OCR for page 57
PROCEEDINGS 61 is well known for its focus SMMs, it has been able to attract and construct a partner network to help with outreach and access to manufacturing. Tailoring Outreach to Small Manufacturers “This is a very difficult market to reach,” Mr. Watson said. SMMs can be late adopters, and as a result the amount of time it takes to find them and to convince them that they need to make a change means that we need a lot of partners to help us.” The company’s average field technician has 25 years of experience in manufacturing, as do many third-party associates. Several years ago, CMTC was becoming concerned that improvements the companies were making did not last. “There’s a lot of evidence that if you don’t have the culture in the right place, the minute the pressure is relieved it begins to revert to its previous state.” We began to train our consultants on change management. In promoting change, we concentrated on senior management, because we realized that unless the leadership understood the challenge and built a communication plan, there was little hope of success. “If they fail, they're going to wonder about our services; it will affect our client satisfaction rating, it will affect how we’re evaluated, and most of all, the company won’t sustain their improvements.” Mr. Watson spoke proudly about an export initiative that arose when the Port of Los Angeles came to them with a problem. The port is among the largest in the United States, and its problem was that despite a great deal of training and many workshops, they were unable to follow up and help small manufacturers improve their export capabilities. CMTC created the Export Exchange, a group of organizations in Southern California that can be deployed when needed to help a manufacturer. Previously, there had been export assistance for California firms, especially in Los Angeles, but it had focused on technical issues and tools, rather than strategic planning. “Without a plan,” he said, “all the techniques and tools are meaningless. The format of the seminars was in some cases running people off by telling them how difficult it was to export. The Export Exchange is not about how difficult it is, but how you have to develop a plan to export. We organized the workshop in a way that showed you how to succeed.” A Focus on Sustainability The CMTC tried a “layoff aversion” approach, beginning with a dozen Workforce Investment Boards (WIBs) of the Department of Labor. When CMTC found that manufacturing was not a top priority for some of the WIBs, it began a campaign advocating manufacturing. “We went to almost every WIB in our area and talked to them about the importance of manufacturing, and showed the number of manufacturers in their area and the number of jobs. We turned some of them around. Instead of going out and hiring more people to go out on the street as outreach, they moved money into a layoff aversion program, which

OCR for page 57
62 STRENGTHENING AMERICAN MANUFACTURING is basically saving jobs. We’re back in our second round with some of them, and they’re putting more money into layoff aversion instead of spending it on displaced workers. We did 126 projects. We saved or retained more than 2200 jobs, and we estimate that 400 of those were new jobs.” CMTC was also leading two sustainability initiatives, he said, including E3, which was described earlier by Mr. Kilmer. The first E3 project was scheduled to begin the following month, and the second is a state-mandated program of the public utilities commission called Continuous Energy Improvement (CEI). The objective of the CEI is to sustain energy improvements. We began looking at the food processing industry because they are high users of gas and electricity. Mr. Watson concluded with more general comments about the MEP. He considered the MEP a system, and CMTC is one part of a statewide system that also includes a second MEP Center in the northern part of the state called Manex. “But we are not a Southern California program,” he said. “We work together to represent the state of California, and we represent a national system.” He suggested that the system continue its collaboration with federal agencies, which are valuable to CMTC in being able to reach out to other organizations, secure funding, and help businesses. ‘Invigorating Manufacturing in California’ He also suggested a continued focus on innovation. He said that the Lt Governor’s state manufacturing improvement plan was called Invigorating Manufacturing in California, and a key guiding tenet was innovation. “The little bit of innovation we’ve done in our state has really, really helped the manufacturers,” he said. A second focus, he said, should be continued investment in new tools and capabilities, beginning with the supply chain. “Our manufacturers have to get things to market as quickly as possible, whether they’re existing products or new products.” A third objective he recommended was workforce development. “There is a retiring workforce. We need to develop the skill sets and skill ladders within the manufacturers themselves to bring in new people and train existing people to take over those jobs.” Next, Mr. Watson emphasized green and sustainable manufacturing. A common misperception was that green and sustainable manufacturing was done only by high-cost manufacturers. “That is not the case,” he said. “Our job is to talk about how producing green products, using green manufacturing techniques, is going to save you money, make you more competitive, and bring better products to market that people will want. Consumers will not pay a great deal more money for green products, but statistics say they will opt for green produced products if they don’t have to pay a premium.” Finally, Mr. Watson suggested that the MEP assist centers to integrate new initiatives. “This is all about pace and volume,” he said. “There are a lot of initiatives, and the challenge is how much and how fast can a center absorb new initiatives.” He said that by working together as a system and as centers, all

OCR for page 57
PROCEEDINGS 63 members will have access to the best practices. “The more we can share those best practices, the faster we can bring these initiatives to our customers and really take manufacturing back to where it needs to be for us to retain our leadership in the world.” THE CATALYST CONNECTION AND THE TECHNOLOGY- REGIONAL INNOVATION CLUSTER Petra Mitchell The Catalyst Connection Ms. Mitchell, the president and CEO of the Catalyst Connection, began with a “high-level overview” of her organization, a stand-alone, non-profit economic development organization in Pittsburgh and southwestern Pennsylvania. It was founded in 1988, and now has about 25 staff members. “I worry every day about keeping our staff happy and engaged. When they are happy and engaged, they’ll go the extra mile for the clients, and that will result in increased economic impact in our community.” Pennsylvania is unique, she said, in having seven MEPs that work together as an industrial resource network. Southwestern Pennsylvania has about 3,500 manufacturers, which employ more than 100,000 people. The area is also home to about 25 universities and colleges, including the University of Pittsburgh and Carnegie Mellon University and 120 corporate or federal R&D centers. The economy is diversified, with lower than average unemployment. This diversity, however, presents challenges for a small center like the Catalyst Connection that is trying to offer services to the entire manufacturing sector. Manufacturing is the Number One Sector in Pennsylvania The most important industry sectors, by 2008 gross state product, are manufacturing, real estate/rental leasing, and health care/social assistance. Manufacturing is the number one sector not only in her region, but in Pennsylvania as a whole. “Again,” Ms. Mitchell said, “that’s something we have to continue to remind various stakeholders and opinion leaders.” For her center, some 2010 economic impacts were $199 million in sales, $24 million in savings, $28 million in investment, and 1,071 jobs created or retained; those jobs contributed approximately $1.7 million in personal income taxes. She showed a picture of a small manufacturer in her region that was recently named an Ernst and Young Entrepreneur of the Year finalist. “We’re very proud of him. His company is located in a very rural area in Somerset County. We like to say is he’s employing 40 people locally and selling his products nationally and internationally. So small manufacturers can compete—even those from rural Pennsylvania.” The Catalyst Connection is a public/private partnership, and receives less than half of its funding from state and federal programs; the rest is

OCR for page 57
64 STRENGTHENING AMERICAN MANUFACTURING generated from fees, foundations, and other private sources. She calculated that $1.4 million in state investment has leveraged $3 million in additional funding. “The story in Pennsylvania,” she said, “is that our state funding has decreased by more than 60 percent since 2007. The good news is that we’re still here. I believe personally that we hit a low point in that funding and it will be increasing soon.” A Three-pronged Strategy—And Metrics to Evaluate the Results Ms. Mitchell said that her organization has a three-pronged strategy and metrics to evaluate the results. The first prong is to serve manufacturing clients by adapting operations to meet their needs. This requires investment in staff skills and professional development. The firm now has plans to launch a collaboration site where clients can meet with each other, with Catalyst, and with Catalyst’s partners. Second, the firm is actively engaging in supply chain and new business opportunities. These include exporting, technology commercialization, and opportunities from gas extraction from Marcellus shale. “We want to position ourselves as a key intermediary between small manufacturers and the Marcellus shale economic opportunities.” The third strategic element is the partnerships. “We’ve talked a lot about that,” she said, “but in Pennsylvania we’re living it.” Catalyst has been asked to partner with all of the state’s economic development organizations to secure its state funding, and was in fact developing a partnership “as we speak.” The partners allow the firm to pursue new funding opportunities, like those that had been mentioned earlier by others. Catalyst also helped companies work on lean manufacturing, quality standards, and a variety of business growth services to help companies find new customers, develop new products, and export products. It helped firms with talent management, which has led to involvement with the Manufacturing Skills Institute, community colleges, and universities. An emphasis among the services it offers is technology commercialization, which is currently funded by MEP through a competitive award. Regional Innovation Clusters Ms. Mitchell then turned to the firm’s T-RIC Initiative, or technology acceleration in Regional Innovation Clusters, run by both Ms. Mitchell and Connie Palucka. The objective is to develop a consortium of regional clusters focused on accelerating technology within the small manufacturers in the region. “Our focus is to really help somebody solve something,” she said. “In this particular program, that might be to develop an innovative new product based on a unique technology or unique IP that is developed within the company itself, with a university, or with a national laboratory.” Current T-RIC partners include the University of Pittsburgh, National Energy Technology Laboratory,

OCR for page 57
PROCEEDINGS 65 Innovation Works (a Ben Franklin Technology Partner), Pennsylvania Nanomaterials Commercialization Center, and AMTV, the Advanced Manufacturing Technology Ventures, LLC. AMTV is a for-profit partner that directs a program called First Link, which helps the DoD commercialize innovative first-responder technology. Now in its second year, the T-RIC consortium has initiated nine pilot projects and is supporting four university-based technologies judged to be patentable and well suited to a small manufacturer. T-RIC is helping to market those technologies, and had just completed a video describing one of them (a sensor system to detect bridge scour) and posted it on the University of Pittsburgh website. In September 2010, Catalyst hosted the first annual Energy, Technology, and Manufacturing Conference. It attracted more than 120 attendees, and it was the first opportunity for many of the small manufacturers from the region to meet with leading researchers and professors from universities and national labs. Finally, T-RIC helps develop tools and methods needed by small firms, including adaptation of the Innovation Engineering methods launched by MEP. “So we will be training ourselves in those materials,” she said, “and adding them to our portfolio to help our clients.” Making Use of the Gate Decision Method Early in the creation of T-RIC, Ms. Mitchell said, Catalyst designed a four-step product innovation process based on work begun at the center with Dr. Robert Cooper of McMaster University in 1999. The firm has become familiar with the gate decision method of product development, which is well aligned with the MEP system of engineering. The four stages of stage gate decision making are opportunity identification, business case development, development testing and planning, and production and commercialization. “We feel that it’s had great synergy with MEP and we are in full alignment with their system for innovation.” To illustrate this process, she mentioned a case study of technology acceleration for Cannon Boiler Works, a firm located just outside Pittsburgh. The area had once been a strong manufacturing center dominated by steel mills, but had lost its leadership as a manufacturer. Recently, however, new companies like Cannon had begun to move in and gain a toehold. For Cannon, a major break came when it was approached by the Gas Technology Institute to commercialize an advanced transport membrane condenser system to increase boiler efficiency, and the Catalyst staff, in partnership with the University of Pittsburgh and Ben Franklin, had worked with them through the process. Connie Palucka had been the company’s project manager and helped to develop both marketing and commercialization plans. The company is now receiving orders, she said, “and that was our goal. We need them to sell products for us to be successful.”

OCR for page 57
66 STRENGTHENING AMERICAN MANUFACTURING Creating a Common Purpose and Set of Goals A key element of success for every manufacturer visited by Catalyst, she said, is an innovative product idea. “The key is to help them move that idea forward—to bring the right technologies, product management skills, and financing.” T-RIC funding had helped to provide momentum. Ms. Mitchell closed with some thoughts on the MEP system. She said she was “very proud” of the system she had been part of for 17 years, and was proud of the federal agency collaborations that had given her organization recognition, visibility, and standing in the development community. Going forward, she suggested continued emphasis on impact data and evaluation metrics. She also called for cohesive, system-wide goals that can help achieve common purpose and direction. “We have many states, many centers, and many stakeholders,” she said. At present, the centers do most of their progress reports as individual centers. “If we can create one set of goals and a common purpose, we can report on our progress as a system. How are we doing? I think we should celebrate our successes, because there have been many over the years. I’m very proud of the work we do and I’d like to be able to celebrate it.” ENTERPRISE MINNESOTA’S STRATEGIC GROWTH PLAN Robert H. Kill Enterprise Minnesota Mr. Kill, like other speakers, emphasized the importance of manufacturing to Minnesota, which has more than 8,000 manufacturers that collectively create 15 percent of its jobs and 18 percent of its payroll. “I think that’s something that too often gets lost when you talk about manufacturing,” he said. “There’s too much discussion of low skills and low pay,” while the “jobs that we’re creating today are high-paying, better jobs than any other competitive industry. I think it’s time to step back and let people know that.” He said that his organization pays special attention to the small and mid-sized manufacturers (SMMs). “Employment at large manufactures,” he said, “define it how you like, is going down. It is the small and mid-sized firms which are the job creators. Our mantra for the last four years has been helping small and mid-sized manufacturing enterprises grow profitably.” Eight years ago Enterprise Minnesota endured a pivotal event when it lost its state funding. “I hate to say it publicly,” he said, “but it was the best thing that ever happened to us, because today we operate as a non-profit consulting organization. Helping manufactures grow profitably is the focus, and you can’t do that unless you’re growing profitably yourself.”

OCR for page 57
PROCEEDINGS 67 The Six Core Values The vision of Enterprise Minnesota is to be the voice of the state’s manufacturing industry. To do this, it supports an active “visibility campaign,” which he said was probably larger than any equivalent center. The message his organization tried to communicate, he said, was built around six core values: Be passionate about helping manufacturers grow their businesses. Be enterprising in our thinking, actions, and results. Demonstrate extraordinary professional integrity. Exude optimism. Treat all people with genuine respect. Focus on organizational over personal perspectives. Mr. Kill said the first was most important and included the stake holders, board members, employees, and every client or contact. Many consulting organizations use independent contractors, he said, whereas his firm uses only its own employees. “I think sometimes in consulting organizations you get wrapped up in your own goals over the organizational goals,” he said. “We have integrated these six core competencies right into our review process. For example, you might meet the numbers really well, but if you’re not following your core values, you probably won’t do very well in your review.” The firm has three key goals for the period 2012-2015, he said. The first is to be cash-flow positive, with 10 percent average compound annual growth, which he took “from my old days of running a business.” Last year the firm grew by 12 percent from the year before; during the depths of the recession it was flat for one year; and for the first four months of 2011 it was up 21 percent over the 12 percent. “Talking about how bad the economy is not allowed if you’re focused on helping manufacturers grow profitably.” Qualitative Measures of a Firm’s Leadership The second goal was to “set the standard within the MEP system for achieving significant client business results.” This included leading the Green- Lean initiative within the state and “dramatically” increasing the number of manufacturing clients served. Every two years does a review to update its goals, “and every two years people tell me this is too aggressive, so we just make it a little more aggressive.” The review uses both quantitative and qualitative measures. He said the quantitative measures were one of the most powerful selling points within the MEP system, but that the qualitative measures gave a better picture of the firm’s leadership and influence in its desire to be the voice of manufacturing for the state. The third goal is to “solidify our influence and recognition as the ‘de facto’ manufacturing resource.” This was done through the firm’s consulting,

OCR for page 57
68 STRENGTHENING AMERICAN MANUFACTURING connections to public and private stakeholders, and visibility initiatives that contribute to the success of the industry. The Value of Being Part of the MEP System Mr. Kill said that the firm keeps people focused on results by emphasizing profitable revenue growth and a balanced product mix. “It’s fun to talk about growth initiatives,” he said, “but if you haven’t invested in them, they’re just great ideas.” Measuring the impact in the way of the MEP system, he said, is one of the important distinctions separating it from other groups who offer consulting to SMMs. “You’ve got to grow clients and create true stake- holder value,” he said. This is reflected in the MEP rankings, which he called a very straightforward tool. “We are a part of the system, and we just look at our product mix. So many of those products came out of the fact that we are part of the MEP system.” He showed a consulting services roadmap the “looked busy,” because it included a mix of indicators for both business growth and operational excellence. Business growth activities included “idea engineering,” executive leadership, marketing, and product management. Operational excellence included a “Green-Lean” enterprise, quality management systems, human capital improvement, and supply chain solutions. In the category of business growth, he said, the firm’s approaches to product management and idea engineering came out of the MEP system. The firm developed the marketing and much of the executive leadership approaches on its own. “But the bottom line is,” he said, “that after four years, we could never have fulfilled the business services without being a part of the MEP system.” A Shift Toward Business Growth Services When the organization was established four years ago, Mr. Kill said, only about 5 percent of its services were aimed at business growth, the rest at operational excellence. Today, he said, more than half of its services were aimed at business growth. The firm was reducing its emphasis on such activities as lean manufacturing and quality management in favor of “idea engineering,” executive leadership, and other growth-enhancing activities. A simple focus on “lean-and-mean,” he said, would not bring the rate of growth that was needed for SMMs, and growth needed to be the primary objective. A year and a half ago, the organization was successful in winning a three-year MEP grant called Pathways to Business Growth. The objective of the project, he said, was “very simple”: to learn how to integrate the MEP services into “a true growth journey” for SMMs. The grant has allowed his firm to begin working with 30 companies to investigate the MEP process in depth: do the consultants really talk to the CEOs? What kinds of companies are best able to set out on a growth journey?

OCR for page 57
PROCEEDINGS 69 Dealing Directly with the CEO More broadly, he was most interested in what his firm had learned over the past four years in comparing operational excellence and business growth. The lessons, he said, were simple. At the operational level, about 80 percent of what the firm did was service delivery, and 20 percent was consultative. At the business growth level, however, this was reversed. The consultant could only be effective by having the confidence and competence to deal directly with the CEO, who was the expert best situated to effect change. So that more than 80 percent of the firm’s business growth activities were consultative, and a small fraction were related to service delivery. Mr. Kill used the analogy of bringing in an expert when tiling a bathroom. “I have the fingers to do the job myself. But if I bring in a professional, he’ll have done the job right, the first time, without cutting off a thumb. That’s the key to having a craftsman versus just the tools. It’s a dramatic shift in the culture.” He reviewed the shift toward consulting on business growth. Four years ago, he said, the proportion of the firm’s effort devoted to business growth- related activities was “a little sliver;” by last year it had approached 50 percent, and in 2011 it passed 50 percent - “even though it’s a 20 percent bigger pie. It’s also a much more profitable pie, for the clients and for us.” Support from Grants Mr. Kill reviewed the firm’s activities in terms of the kinds of grants it was able to raise. It does not receive direct operational funding from the state. As a stand-alone, fee-based 501(c)(3) corporation, it receives grants in two areas. Development grants are for new services, staff training, finding new clients, and engaging new partners that will be able to help finance the work. The second area, access grants, are used to accelerate growth initiatives, develop consultative activities, build the role of “trusted advisor,” and optimize partnerships with state, regional, and industry stakeholders. One such grant, the Growth Acceleration Program, was awarded six years ago and has been used by elected officials and CEOs who praise the program in helping them build the right strategy to invest in their companies. Finally, he said, the firm supports a continuous stream of monthly business events where CEOs speak about their experiences. During an upcoming presentation, he said, four CEOs were scheduled to speak: a fourth-generation CEO, a second-generation CEO, one that bought a company out of bankruptcy, and one that had just recently bought a company from a private equity firm. Mr. Kill said that his firm publishes the magazine Enterprise Minnesota six times a year, and each issue celebrates the success of six to eight manufacturing companies. The magazine has nearly 45,000 readers, most of them in Minnesota and across the MEP system.

OCR for page 57
70 STRENGTHENING AMERICAN MANUFACTURING ‘The System Does Work’ The “crown jewel” of the firm, Mr. Kill said, is the annual state of manufacturing survey. The current issue featured 15 focus groups and some 400 executives participating in public opinion strategies. In 2012, the firm has seven stakeholders, representing seven of the eight high-priority industries. The eighth is health care, but “it’s taken us awhile to get there because manufacturers are surveyed to death.” Even so, he said, their survey has received considerable attention and authority because of the trends it describes. The survey helps the firm reach clients that it could not reach on its own. The number of focus groups had increased from seven when they began four years ago to 20 this year. “We had to shut it off at 20, because so many organizations, including state colleges and universities, wanted to be part of it.” “After four years of more or less being on probation,” he said, “our impact on the bottom line, our investment leverage, and our impact on clients are all up substantially.” The jobs retained and created in the last four quarters were about 1800, up from 1300 in the previous four quarters, which was up from about 700 in the previous three quarters. “So,” Mr. Kill concluded, “the system does work.” He said it had many powerful advantages, with “the number one thing being that focus at the CEO level, focus on true business growth, allows us to grow profitably and to become a respected voice. To say we want to be the voice of manufacturing in this state is very hollow unless our clients support us, and they do.” OHIO MANUFACTURING EXTENSION PARTNERSHIP Beth Colbert Ohio Department of Development The Ohio Manufacturing Extension Partnership is a statewide MEP that is managed “from the top level,” said Ms. Colbert, which brings the benefit of a two to one match by the state, a portion that has increased over the last couple of years. She said that Ohio ranked fourth in the nation in manufacturing, although it is virtually tied with neighboring Pennsylvania. Ohio has about 20,000 to 25,000 manufacturers, and “what’s important here” is that 98 percent of those employ fewer than 500 workers and so meet the criteria for NIST/MEP services. The state has some large manufacturers, she said, but is primarily a supplier state. It ranks first in tier two and tier three companies, and in automotive suppliers. “So when the big guys go down,” she said, “we go down hard, too.” Prior to 2008, the MEP system in Ohio operated multiple independent centers. In 2009, as part of a new strategy for economic development, these were merged into a partnership with the Ohio Department of Development, bringing a new statewide perspective. “We were doing well as MEP centers, but the state

OCR for page 57
PROCEEDINGS 71 itself had some discontinuous services. We’re very rural in half of our state and very industrial along the I-71 corridor, so the I-71 corridor was getting most of the attention.” She said that the strategic plan “really sparked Ohio’s interest” because of its emphasis on continuous improvement, sustainability, workforce development, and technology advancement. At the same time, the Ohio Edison Technology Centers were brought into the partnership. The Edison Centers had been created in 1984 by the Ohio legislature as a $20 million program operated by the Department of Development. Its mission is to fund centers and incubators for innovation and technology advancement by linking universities and industries. With the strategic plan, the Centers were asked to align with “Key Vertical Industries,” as outlined by a Battelle study in 2008. These industries included: Advanced and alternative energy and environmental technology. Advanced materials. Aerospace and aviation. Agriculture and food processing. Biomedical research. Instruments, controls, and electronics. Motor vehicle and parts manufacturing. Each of the Edison Centers was charged with outlining its own goals and objectives related to: Advancing technology and deployment: linking technology and research from universities, private labs, and Ohio Third Frontier Investments to production and sales; Cluster development, networking, and education: Building supply chains, workforce, and networking opportunities in vertical industries; Manufacturing assistance: Deploying advanced manufacturing technologies, reducing costs, and enhancing new products and processes. The operation of the Ohio Edison/MEP centers continues to evolve,” she said, but we’re getting there.” With so many manufacturing suppliers in Ohio, the program divides them into three groups. These include (1) some 75 to 80 percent of all suppliers, who have little experience and can benefit from many forms general manufacturing assistance; (2) about 10 to 15 percent of all suppliers, which require more specialized assistance; and (3) about 5 to 10 percent of all suppliers, a small group of experienced SMMs that require “customized growth projects.” Ms. Colbert estimates that many firms in the first, largest group would benefit “almost immediately” from the basic programs and services of the MEP, such as cost improvement training, financial coaching, general business assistance and trade and marketing assistance. She said the MEP had found it

OCR for page 57
72 STRENGTHENING AMERICAN MANUFACTURING did not have to try to offer every service to everyone, but could work in partnership with free or low-cost services for very small manufacturers. Many of these are found among the 88 state colleges and community colleges in the state as well as local partners and economic development groups that provide business services and have access to financing through local banks. “These partners are a key part of our system,” she said. “They allow the Edison Technology Centers to focus on strengthening their technology expertise, making connections to universities, linking to large OEMs to build supply chains, and work on workforce development curricula with colleges. We estimate that we can work with 75 to 80 percent of our SMMs at the community or regional level by having partners and being an honest broker to those partners. Everyone has their own business model, so we really have to broker at that level to get companies ready for some real opportunity.” The second, more experienced group of SMMs would benefit from some technical assistance, she said, and this can be provided by the MEP in partnership with Edison Centers and universities. At the top of the system are another 5 to 10 percent of SMMs that are ready for accelerated growth. “Any time a manufacturer reaches this stage, either by growing up through our system or coming in through our incubators at the very top level, they are ready for a partnership with other economic development programs at the state level.” For them, the MEP provides customized growth projects that are created and executed by the Edison Centers. The Edison Centers will play an important role, including not only solving technical problems, but infusing new advanced technology into these companies. Subject matter tools may include assisted product design and development, and industry specific issues. Many of the manufacturers are suppliers to the auto industry, so that MAGNET is able to help expose firms to new technologies in welding and automotive research. “As we prepare and vet these companies for growth, we’re also going to help them financially, and this is where our Ohio Third Frontier program can play a big part.” Other business partners include MAGNET and TechSolve (both Ohio MEP Centers), the Small Business Development Centers, and JobsOhio, a public/private partnership ready to help companies with capital investment, supply chain opportunities, export, new markets, and new products. The MEP is continuously changing, she said, and it is strengthened by its partnerships with different federal agencies, such as the Small Business Administration. But she emphasized the value of having partners from Washington come to the state and see the challenges first-hand. “We love what you’re doing,” she concluded, “in helping us implement the MEP at the local level. But we still need some help here, and the more we can sit around the same table here in Ohio with our partners and collaborators, whether it’s DoE, MEP headquarters, SBA, or other agencies, the more progress we can make.”

OCR for page 57
PROCEEDINGS 73 DISCUSSION Mr. Breiner asked Mr. Kill of Minnesota what had been the effect of the state removing its funding from the state MEP. Mr. Hill said he had not been with MEP then, but that MEP had benefited from a plan for quickly finding other sources of financial support. The state had given the organization a grant $3 million at termination, and since then the EP had raised more than $2.5 million in grants develop 50/50 cost sharing agreements with companies under 100 employees. “So it’s actually been a more successful program,” he said, “than if we were getting direct funding.” Dr. Proenza made several comments about the presentations, saying that the four MEP centers had been very diverse, and represented a broad geographical region. He suggested that the diversity is a reflection of the context within which each of the centers operates. “It’s very clear that one size does not fit all MEPs, and that the nature of the manufacturing base of each state and region drives the kind of MEP program they need.” At the same time, he said, there was a great deal of similarity, and this seemed to be driven by the strategic approach that is “illustrative of how MEP is evolving, how each state deploys resources, and the context in which they operate.” He said he had also heard a great deal of pride from each of our discussants in their efforts—both in supporting the growth of the manufacturing sector, the acquisition of partners that allowed MEP to reach a far greater number of companies that it could reach alone, and what even the most rural regions are able to accomplish. He ended by suggesting that “some clarity will probably be needed in terms of some of the metrics.” Many of the metrics focused on jobs, almost exclusively on those saved or retained within the companies. Other metrics would be valuable if they could measure “some very direct consequences in other companies that may result from the activity you do with one company.” He closed by asking Ms. Colbert how she was able to keep track of all of the reporting requirements in a state as big as Ohio. Ms. Colbert replied that her MEP does struggle with the reporting system, but “I wouldn’t trade it for the world.” Like her colleagues, she said, the third-party survey and the metrics it gathered “are really the catalyst for maintaining and growing our program. Our partners had experience in reporting and help us a great deal.” Dr. Singerman observed that the MEP programs in California seemed to be relatively small, engaging about 700 firms out of a universe of some 30,000. Mr. Watson agreed that he would like to, over time, double the penetration from about a 2 percent engagement rate to about 4 percent. He said that the California Manufacturing Technology Consulting MEP would be doing this in two ways. “First, expanding our partnerships is helping us get out and do more. Instead of one-on-ones, we’re doing a lot more collaborative activities with manufacturers. And second, by improving the value to the state, so the state will assist with funding.” He said that this required proving the value of the MEP to the state, “which we’re doing right now. With their contribution, it will

OCR for page 57
74 STRENGTHENING AMERICAN MANUFACTURING allow us to do additional outreach, which will take us closer to the 4 percent level.” Dr. Wessner asked the MEP representatives what they needed going forward, and whether there has been any outreach to foundations. Ms. Mitchell of the Catalyst Connection said that she is definitely collaborating with foundations. She had just received half a million dollars from the R.K. Mellon Foundation to expand the T-RIC program, with a focus on technologies related to the Marcellus Shale activity. “So that’s our starting point, and we hope to build on that.” Bob Hershey, an engineer, asked to what extent the MEPs were able to do collaborative work with several companies at once on a project they’re all interested in. Mr. Watson said they had just such a partnership that same day with seven companies wanting to export. “They’re going through one day a month for the next three months to develop their export plan. The other way that we can increase your penetration is by putting manufacturers in the same room who are interested in the same things and then generate impact from that. As we expand our number of customers, the idea of ‘group delivery’ is at the top of our list.” Ms. Mitchell said that in addition to exporting technologies, her group does open-enrollment training for many companies. The most popular are those that discuss lean certification and leadership certification. ” And we’re getting ready to launch an online tool which will facilitate cooperation between companies and providers, and between the companies themselves.”