ISTHMUS: WI tech leaders get little help from Wisconsin Manufacturers & Commerce

September 18, 2014
Marc Eisen
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This is a problem.

The state's most powerful business voice has conspicuously little contact with Wisconsin's rising technology industry.

Wisconsin Manufacturers & Commerce, which claims more than 3,500 businesses as members, brags that "the success of the WMC government relations team in projecting and accomplishing a proactive business agenda has been second to none."

Well, yeah. On the surface, WMC has never been stronger. The support WMC has thrown to small-government, pro-business Republicans has paid off big time, to say the obvious.

Wisconsin has a Republican governor, a Republican Assembly, a Republican Senate, a Republican-favoring Supreme Court and a Republican-dominated congressional delegation.

But critics say that WMC's success is mostly in pursuing a savvy political agenda -- not a savvy growth agenda. And the group's legislative wish list tilts heavily to helping Wisconsin's legacy manufacturers. The problem: These venerable corporate citizens usually burnish their bottom lines by adopting strategies that emphasize tax avoidance, lessened regulatory costs and dampened labor costs.

Do they add new jobs to the payroll? Not so much.

Wisconsin ranks 37th among the states in job creation, according to a recent comprehensive federal jobs tabulation. Democrats were quick to blame Gov. Scott Walker's leadership, but Wisconsin's ho-hum economic performance (except for a brief uptick in the 1990s) stretches back decades to the devastating 1981-82 recession and spans Republican and Democratic governors alike.

Once upon a time, the Wall Street Journal proclaimed Wisconsin's economy "the shining star of the Snowbelt." But that was in 1976, when the Midwest was still the industrial heartland and not "the Rust Belt" of the last 30-plus years.

'No interaction' with WMC

Tech is now the cutting edge of job growth, especially information technology in Dane County -- in other words, health software giant Epic and its ever-mounting workforce, currently at 7,400 and expected to soon hit 7,900.

"There's no question that the Madison area is increasingly the driver of the Wisconsin economy," Joel Kotkin, a well-known economic geographer, flat-out said at the annual conference of the Madison Regional Economic Partnership in May.

Kotkin's data showed overall job growth in the Madison area climbing 3.6% from 2008 to 2014, compared to a nationwide decline seen in our neighbors like Chicago and Milwaukee. In the science fields (the so-called STEM occupations), Madison's 6.9% growth in jobs between 2010 and 2013 trailed Silicon Valley's percentage hike (11.6%), but topped the percentage increases in New York, Los Angeles, Chicago and Minneapolis.

Fact is, Madison and Dane County are hot for jobs. Tech in general in Wisconsin, including the often dispiriting situation in Milwaukee, shows the green shoots of promising new growth.

To be sure, nobody is declaring victory and breaking into the happy dance. But there is a sense that Wisconsin's 21st-century economy is beginning to shape up around such companies as EpicGE HealthcareNordic ConsultingExact SciencesPromega and scads of "backpack" IT startups.

All this makes WMC's tenuous relationship to tech troublesome.

"I only know about WMC because their building is near my house," says Niko Skievaski, the cofounder of tech-focused100State and 100Health. "I walk by it and wonder: 'What the hell do they do?' I haven't heard of any of their representatives reaching out to entrepreneurs."

Skievaski's colleague in Milwaukee, Matt Cordio of Startup Milwaukee, says the same: "Nobody from there has ever reached out to us. I have no idea of what they really do."

Ditto Matt Younkle, a principal in the music storage service Murfie.com and a cofounder of Capitol Entrepreneurs, the influential tech-leaders group in Madison: "I've never been approached by WMC -- I don't know much about it."

And, yup, Forrest Woolworth, a cofounder of both PerBlue mobile gaming and Capitol Entrepreneurs, tells the same story. "WMC is pretty much in a whole different world from us," he says. "We've had no interaction with them good or bad."

Leading the charge

What's striking is how many of the same people who shrug their shoulders when WMC is mentioned do a fist bump for its local affiliate: the Greater Madison Chamber of Commerce and its president, Zach Brandon. The business group will hold its annual dinner Sept. 18 at Monona Terrace. The theme, reflecting Brandon's focus on modernizing the local economy, is "the future perfect." Steven Johnson, a science writer and host of the upcoming PBS series How We Got to Now, is the featured speaker.

"Zach has opened up the chamber to startups," says Younkle. "He's leading the charge. Murfie joined because of Zach."

"He's done a phenomenal job," says Scott Resnick, vice president of Hardin Design and Development and a downtown alder and mayoral candidate.

"The chamber has been passionate about showcasing new companies and positioning Madison as an innovative place to grow and start businesses," says Woolworth.

WMC's core problem, says Tom Hefty, the retired head of the old Blue Cross-Blue Shield United of Wisconsin, is that its agenda "is focused on the 1950s, when manufacturing dominated the Wisconsin job scene. There is no focus on the other industries -- financial services, information systems or even biotech."

He says the state needs to target high-wage, high-growth industries like information systems. Otherwise, Wisconsin job growth will come in building warehouses to serve the Chicago market, like the Amazon warehouse going up in Kenosha County. "Those are good jobs, but they're not great jobs," he says.

Hefty is an iconoclastic critic of Wisconsin's economic performance. He faults Democrats for lacking any pro-growth voices and says liberal Madison, the campus included, is still trapped in a '60s anti-business mindset. But WMC doesn't fare any better in his assessment. He served on its board from about 1987 to 1999.

"When I started in the business world, manufacturing was 35% to 40% of the Wisconsin economy, and now it's 15% to 20% and even less in the Madison and Milwaukee areas. Yet almost three-quarters of the WMC board is in manufacturing."

Hefty says of WMC's last 15 board chairs, he counts only two who weren't manufacturing executives. He calls WMC "big M, little C," because the voices of commerce have so little say in the manufacturing-dominated business group. Other states don't have chambers of commerce structured in this peculiar way, he says.

Yin and yang

Kurt Bauer, WMC's president, has heard all this before. He says that Hefty and like-minded critics are out of touch. That they don't understand how manufacturing has moved from oily shop floors to super-clean computer-driven work environments.

"High-tech and manufacturing are yin and yang," he says, challenging the claim that WMC doesn't get the tech economy. "It's not fair to build walls between different sectors of the economy."

Bauer notes how health care and manufacturing come together in Wisconsin's substantial stake in the production of medical devices.

Notably, GE Healthcare, which makes anesthesia and respiratory equipment, among other products, has 1,780 employees in Wisconsin, including 630 jobs at its Madison plant. Total statewide economic impact is put at $342 million annually.

What it comes down to, says Bauer, is that WMC is good at economic multitasking. The group's efforts on behalf of mining and manufacturing may draw the lion's share of news coverage, he acknowledges, "but we were also very involved in the venture capital package that passed last summer." He agrees that $25 million isn't a lot, "but it sends a signal."

The political reality, he says, is that a bigger package wasn't feasible. Too many lawmakers felt the state shouldn't be involved in venture capital at all. "Bottom line is that we just have to attract private venture capital," he says.

As for the frequent complaint that WMC has aligned itself with the Republican Party, Bauer insists, "WMC is not partisan one way or another. We support candidates who are pro-business." WMC's positions closely align with other chambers of commerce across the country, he adds.

"We want things that will create the business climate that will allow all sectors, including tech, to rise," he says.

Epic not a fan

Not everyone believes this. The common perception is that WMC and the Republican Party of Wisconsin are joined at the hip. That prompted Epic's failed effort to undermine WMC's power in 2008 by threatening to boycott companies that followed its agenda. WMC's support of Republicans didn't sit well with Epic's founder, Democrat-backing Judith Faulkner, and her fellow Epic executives.

Conservative firebrand Michelle Malkin has reported (using Sunlight Foundation data) that Epic employees donated nearly $1 million to candidates and political groups between 1995 and 2012 -- 82% to Democrats. (Contributions from Faulkner's husband are included.)

But in the tech world this is an aberration. Political giving is almost nonexistent among young tech executives, according to a five-year review of state campaign records by the Wisconsin Democracy Campaign, a watchdog group. In contrast, numerous execs at older tech companies like Johnson ControlsRockwell Automation, GE Healthcare and Fiserv gave heavily to Republicans. (Promega biotech founder Bill Linton gave to Democrats.)

But back to Epic. Bauer himself understands the importance of the company. He came to WMC in 2011 after heading the Wisconsin Banking Association, some three years after Epic called out the business group.

"Judy Faulkner is not a huge fan of WMC," Bauer concedes. "But I think WMC and much of Wisconsin can learn an awful lot from what Epic does."

Citing the state's unfavorable demographic forecast for its future workforce, Bauer praises Epic's record for recruiting bright young people from all over the country. "That's an important model for the rest of the state," he says.

Bauer says he's offered to meet with Faulkner in an effort to patch things up, but was turned down. He chalks up the rejection, in part, to Faulkner's practice of staying out of the limelight. (The company also refused to comment for this story.)

But think about it: Wisconsin's biggest and most powerful business group has failed to align itself with the star performer of the Wisconsin economy. Nor has it connected to the blossoming IT industry growing up around Epic.

This can't be good for Wisconsin.

Connecting the old and new

Brandon, of the Greater Madison Chamber of Commerce, has an interesting rap on generational change, saying in some ways it's been more disruptive to institutions than to industries. Young people don't trust institutions. Doesn't matter if it's trade associations, economic development groups, unions, political parties, community nonprofits or educational undertakings.

"Either you're going to adapt to this reality or" -- he pauses for a beat -- "you will go away."

Brandon is a former small businessman and Madison city council member. He served as deputy secretary of commerce in Democrat Jim Doyle's gubernatorial administration and later ran a venture capital trade group called the Wisconsin Angel Network.

He became chamber president in November 2012, succeeding Jennifer Alexander. "One of the challenges that I both liked and accepted was: How do you take an organization that is 100 years old, and has largely operated under that same model all those years, and make it relevant in today's economy?"

As he sees it, chambers typically operate as protectionist organizations, watching out for the interests of their members. "So you're either in or out. Good guy, bad guy. It's an easy distinction. But you can't grow an economy by drawing a bright line between those different businesses," he says.

Toni Sikes, a serial entrepreneur who chairs the Wisconsin Technology Council, praises Brandon's deftness in bringing the young techies into the traditional world of the chamber's leadership.

"He's done it in such a way that they've completely embraced entrepreneurialism," she says. "I know people on the chamber board, and they are so excited. They don't want to just support entrepreneurialism, they want it to be part of who they are.

"That's how we win," adds Sikes, whose own startup, CODAworx, is beginning to cause a stir in the architectural/design world.

So what has Brandon done to connect these two business worlds? Immersion, in a word.

The highlights include Brandon leading a busload of chamber board members and other Madison leaders last August to1871, Chicago's premier co-working space, and to Catapult Chicago, a tech startup facility. Just as important, the group met with J.B. Pritzker, the Chicago zillionaire investor/powerbroker. Pritzker then came to Madison this April to speak at the chamber's future-focused "neXXpo: Business in Fast Forward" conference; 750 people turned out to hear the Chicago business icon.

More recently, in June, Brandon spearheaded a chamber trip to Silicon Valley, bringing reps from five Wisconsin startups to make pitches to California venture capitalists, including the legendary Kleiner Perkins Caufield & Byers firm. A few years ago, they might not even have gotten in the door.

There have been other smaller but significant initiatives (purchase of the tech group Accelerate Madison and the launch of a meeting app called MADi) to tie the chamber into Madison's tech ecosystem. Brandon himself was tapped to be a mentor in the prestigious SXSW interactive conference in Austin.

And then there's the Epic upshot.

Earlier this year, after more than 35 years in business, Epic finally agreed to have one of its executives, chief administrative officer Steve Dickmann, serve on the Madison chamber's board of directors.

"That was one of my goals from day one on the job," says Brandon. "They are the key and vital ingredient to this economy. Now, having Epic in the room helping steer this economy -- that's a milestone."

For Brandon, embracing tech and serving as "the coupler" between the new and old economies is how the Madison chamber will prove its worth in the new century. Failing to do that, he warns, risks disruption and obsolescence.

It's not clear if WMC has grasped that fundamental lesson.

 

[Editor's Note: This report was corrected to reflect that Epic is already a member of the Greater Madison Chamber of Commerce, and one of its executives now serves on the group's board of directors.]

 
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