Enterprise Minnesota Magazine March 2013

There is a difference between sales and marketing. 18

Believe it!

GAP: A Government jobs

program that works - and has the numbers to prove it.

Helping Manufacturing Enterprises Grow Profitably

MARCH 2013

The World According to

Kirscht

How to maintain focus through economic uncertainty and the coming ‘regulatory cliff’

Amy Klobuchar Convenes Exporters at Enterprise Minnesota.

Tim mahoney A legislator who “gets” manufacturing. schaefer ventilation: Cooling the Cows of Riyadh.

Ron Kirscht President, Donnelly Custom Manufacturing

Enterprise Minnesota 310 4th Avenue S. Suite #7050 Minneapolis, MN 55415

David Meier: Create a Culture of Problem Solving.

www.enterpriseminnesota.org

NONPROFIT ORG U S POSTAGE PAID Slayton, MN PERMIT NO. 22

2013 Statewide Results - Release Event Enterprise Minnesota will roll out findings from its fifth annual State of Manufacturing速 poll, a statewide survey that includes hundreds of phone surveys and several focus groups with manufacturing executives across the state.

Attend the poll event and receive a book containing results, cross tabulations, analysis and transcripts of the focus groups.

Thursday, April 18, 2013 4:00 pm - 7:00 pm Please register now at www.enterpriseminnesota.org

contents MARCH 2013

Features 14 GAP’s Exponential Gains

How the state-funded Growth Acceleration Program brings promise and profit to Minnesota manufacturers and their communities.

18 What I’ve Learned: Strategy Before Tactics

Trade shows and advertising have their place, but not before savvy manufacturers develop a strategic focus and a proactive marketing mindset.

20 The Word According to Kirscht

The president of Donnelly Custom Manufacturing on how to maintain company focus through economic uncertainty and the impending ‘regulatory cliff.’

24 Cooling the Cows of Riyadh

Schaefer Ventilation’s Global Strategy brings it to the sophisticated 100,000-cow operations of Saudi Arabia.

28 We Have Had a Problem

One of America’s top ‘lean’ gurus shows how to make creative problem-solving a permanent part of your company’s culture.

photograph by PATRICK KELLY

Absolute Quality Manufacturing’s Executive Vice President Jeff Zoubek (left) and President and General Manager Duane Petersen share how GAP has transformed their company, page 14

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Visit the Enterprise Minnesota Web site for more details on what’s covered in the magazine at www.enterpriseminnesota.org.

in every issue:

Bob Kill:

Innovations:

Innovations:

Final Word:

Brainerd-based employers and educators encourage students to consider alternatives to the fouryear degree.

Page 2

Minnesota Twist Drill’s new oil recovery system will reduce landfill waste and yield an estimated $100,000 in annual savings.

Page 6

On the eve of its 65th year in business, MISCO Speaker Company’s lean efforts are helping sales grow faster than ever.

Page 12

Deborah Notermann explains how effective use of online trends is essential for driving sales growth and brand awareness.

Page 32

ENTERPRISE MINNESOTA MARCH 2013 1

bob kill

The NextKill Generation Bob

A Brainerd-based collaboration between employers and educators encourages students to consider alternatives to the four-year degree.

While elected U.S. officials stress the need to cultivate and attract more skilled workers to help U.S. manufacturers grow the American economy, we all know that workforce development is a distinctly local issue. A recent event coproduced by the Brainerd Lakes Chamber of Commerce and Central Lakes College shows that in Minnesota, we are making progress.

The Bridges Career Exploration Day has become an Bob Kill is president and CEO of Enterprise Minnesota. annual event in which more than 2,000 Brainerd-area students from 23 high schools spend a full day learning about their employment options after graduation. This event is not the typical take-your-kid-to-work occasion. It provides substantive, roll-up-your-sleeves exposure to real world career options. Students learn about career options, what they can expect to earn, and what kind of training they need to prepare.

Several aspects of this program deserve our praise and should serve as an example for other communities.

Manufacturing is addressed as the serious career that it is, not just some fallback option for a segment of high school students. Students see how the pay, benefits and stability of manufacturing far exceed what they might expect in many other career paths.

A modern career in manufacturing requires training a sophisticated background in science, math and other STEM-related education and advanced technical education. Collateral literature at the event included this tantalizing statistic: Locally, 80 percent of our jobs require some additional post-secondary education. Only 20 percent require a four-year degree. This reflects an appreciation (still too rare) that manufacturing has long-since evolved from the dark, dirty, boring jobs of the ‘60s.

Students can see that employees at modern manufacturing facilities are productive and highly-skilled at applying innovation and technology in working environments that are high-tech, clean, and collaborative. And excelling in that environment requires exceptional expertise.

Schools exist for more than training. The participation of local high schools in the Bridges Career Exploration Day acknowledges their obligation to expose students to educational options that might not include a four-year college degree.

If teachers and counselors don’t recognize that manufacturing careers can be honorable, fulfilling and well-paying, then students are never going to see it.

Manufacturing matters to the community. Brainerd’s community-wide partnership demonstrated that manufacturing is essential for a vibrant local economy. Minnesota’s Department of Employment and Economic Development (DEED), each Minnesota manufacturing job supports 1.7 jobs elsewhere in the economy through supplier purchases and employee spending.

Helping Manufacturing Enterprises Grow Profitably Publisher Lynn K. Shelton

Editors Tom Mason tmason@mason-publicaffairs.com Andrea Lahouze andrea@mason-publicaffairs.com

Contributing Writers Roger Hurd David Meier Deborah Notermann Photographer Patrick Kelly Art Director Amy Bjellos

Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event jim.schottmuller@enterpriseminnesota.org, 612-455-4225 To pitch a story andrea@mason-publicaffairs.com

Enterprise Minnesota, Inc. 310 Fourth Ave. S., #7050 Minneapolis, MN 55415 612-373-2900 ©2013 Enterprise Minnesota ISSN#1060-8281.

All rights reserved. Reproduction encouraged after obtaining permission from Enterprise Minnesota magazine.

Additional magazines and reprints available for purchase.

Contact Lynet DaPra at 612-455-4202 or lynet.dapra@enterpriseminnesota.org.

Enterprise Minnesota magazine is published

by Enterprise Minnesota 310 Fourth Ave. S., #7050, Minneapolis, MN 55415 POSTMASTER: Send address changes to Enterprise Minnesota 310 Fourth Ave. S., #7050 Minneapolis, MN 55415

continued on page 7.

2 ENTERPRISE MINNESOTA MARCH 2013

Member, Minnesota Magazine & Publications Association

Printed with soy ink on recycled paper, at least 10 percent post-consumer waste fiber.

May 15

Lean Office: Beyond the Manufacturing Floor

June 12

Quality Management - ISO Processes Power Your Business Management System

June 26

GreenLean® - Eliminating Time & Energy Wastes to Cut Costs & Grow Business

September 18

The Value of Your Business - What Expert Buyers Are Looking For

October 17

Developing Leaders at All Levels of Your Company (TWI)

November 13

Creating a Business Strategy to Implement Your Company Vision

December 11

Solving Business Problems - A Practical “Failsafe” Approach

Advancing Innovance Innovance is one of the first 10 manufacturers to benefit from Pathways to Business Growth.

Innovance, a diverse manufacturer

photographS by PATRICK KELLY

INNOVATiONS

in Albert Lea, has grown to become a $70 million company with 360 full-time employees without ever having employed a marketing person. Or even a traditional sales staff.

“Our sales people are like project leaders, they develop projects, but they are not going out and looking for business,” says Mike Larson, the company’s president and CEO. “Most of our customers just come to us,” Larson adds. “We’ve had customers for 20 or 40 years.

When they have new projects, we get them. When they grow, we grow.”

But after enduring the recent recession, the company decided to help invigorate its strategic approach to business by participating in the Pathways to Business Growth service.

Pathways to Business Growth is one of 22 projects nationwide to receive funding from a $9.1 million Top photo, from left: Innovance Business Development Manager Doug Olson, Innovance Vice President program through NIST/MEP. Enterprise Minnesota of Manufacturing Randy Eggum, Innovance President and CEO Mike Larson, Panels Plus General Manager Roger Paul, and Almco Vice President of Sales and Marketing Larry Beavens. Bottom photo: received a $515,000 grant award to help make Min- Innovance President and CEO Mike Larson inspects a machined piece of molding. nesota a leader in manufacturing. The project goal is Innovance is an employee-owned holding company with to deliver a 20-to-1 return on investment for particifour separate but interrelated companies: pating companies.

• Almco manufactures vibratory deburring, washing and “Pathways to Business Growth will give participating metal finishing products; manufacturers the tools to find new markets, customers, • Panels Plus makes production machinery for the buildideas, and products,” said Bob Kill, Enterprise Minneing industry sota president and CEO, at the Pathways kickoff celebration. “We are eager to start the journey with our first 10 • Lou-Rich is a contract manufacturer, and companies and help them achieve long-term, sustainable • Exact Manufacturing produces aluminum extrusion products. growth.”

“The education alone was tremendous,” Larson says of Like other manufacturers in the first class of 10, InnoPathways training. “Our people have realized that we need vance took part in business assessment, strategic planning, to be more proactive in finding sales and finding the right innovation and idea mining services, organizational and type of sales.

Each of the business units has a much better leadership development, and marketing strategy. Through understanding of who is in the center of their bull’s-eye. its delivery of the Pathways service, Enterprise Minnesota They know who they are and how to reach them.” will establish industry-wide best practices for working with Larson says Pathways also gave his staff permission to be manufacturing companies, which will be shared with the discerning about new projects.

“It gave us the confidence rest of the country via NIST/MEP. to know that we don’t have to take on every project that Innovance fit the profile of a Pathways partner in several comes our way,” he says.

“We know that we can be selecways, according to Greg Thomas, an Enterprise Minnesota tive and proactive and grow our business faster and more business growth specialist. They had just finished strategic profitably. planning, they employed a solid leadership team, and they were financially stable. “We had a good idea of what they’re To learn more about Innovance, go to www.innovanceinc.com. good at and where they were heading,” Thomas says.

4 ENTERPRISE MINNESOTA MARCH 2013

rin tu ac s uf ct an Fa M

;ORS W\ ;W\\Sa]bO( Exports By the Numbers

Billion

The total value of Minnesota’s manufactured and non-manufactured exports.

18.4

Canada China

The percentage increase of Minnesota exports between 2010 and 2011, totaling $1.4 billion.

Japan Mexico Germany

Minnesota’s ďŹ ve leading export markets, from largest to smallest.

$

7.3%

Billion

The value of exports from Minnesota’s manufacturing sector alone.

g

20.3

$

Minnesota’s rank in the value of exports among all states, rising from 20th in 2010.

19th

According to most recent Minnesota Department of Employment and Economic Development data.

ENTERPRISE MINNESOTA MARCH 2013 5

INNOVATiONS

Global Search Reaps Green

Savings

Minnesota Twist Drill’s new oil recovery system will reduce landfill waste and yield an estimated $100,000 in annual savings.

For years, Minnesota Twist Drill

Plant Engineer Tim Ranta had been trying to solve an age-old problem in the drill bit manufacturing process: wasted oil. In production, drill bits are ground down in an oil bath to carry away chip debris and prevent the almost-immediate rusting that overtakes raw tool steel. The dirty oil is filtered through a central system, and the clean oil that comes out is reused.

But the steel grindings and oil byproduct, called “swarf” in the industry, is still about 30 percent oil by weight, and a process for recapturing that oil had remained elusive across the industry.

The swarf’s high oil content made it unusable for metal recyclers, leaving Minnesota Twist Drill no choice but to throw it away. But disposing of swarf isn’t easy. It contains hexavalent chromium, a compound that has been linked to a host of health conditions, including respiratory problems and certain cancers. As a result, Minnesota Twist Drill has long been required to dump all of its swarf—about one ton per day, including about 80 gallons of oil—into a sealed landfill. Rising oil costs have made this an increasingly costly undertaking.

But Ranta’s persistence has recently paid off. His search for a solution ended 8,000 miles away, at another drill bit manufacturer in New Zealand. The company’s engineer had designed a machine to process its own swarf, allowing it to re-use more oil in production. And because the processed swarf contained far less oil, the company could sell it to metal recyclers for a profit.

6 ENTERPRISE MINNESOTA MARCH 2013

photograph by PATRICK KELLY

Production Manager and Owner Al Lambert and Manufacturing Plant Engineer Tim Ranta load swarf into Minnesota Twist Drill’s new oil press, helping the company to save about 45 gallons of oil per day.

After discussions revealed little competition between the two companies, the New Zealand company agreed to make another swarf processing machine for Minnesota Twist Drill. Ranta says upper management was on board immediately.

“I just showed them the numbers,” he says. “I got the go-ahead to purchase it before I’d even finished my presentation.”

In operation since January, Minnesota Twist Drill’s new swarf press uses a metered loading system to load small amounts of swarf into a chamber, where a piston compresses it under extremely high force. The oil in the swarf is forced out through small drainage holes in the chamber and is then returned to the company’s central oil system, saving about 45 gallons of oil per day. Because the processed swarf is drier, around 9-10 percent oil by weight, Minnesota Twist Drill can sell it to metal recyclers instead of paying for landfill disposal. Early calculations estimate the machine will save the company an annual $100,000, allowing Minnesota Twist Drill to recoup its $150,000 investment in less than two years.

“Being able to know that we’re polluting less, spending less, and making more is one of the very rare win-win-win situations I’ve ever encountered,” Ranta says.

For more information about Minnesota Twist Drill, visit www.mntwistdrill.com.

The Next Generation

continued from page 2.

• Teachers in the Workplace enables educators to spend time in a manufacturing business to understand the application of areas they teach, discuss workplace realities, and the skills students need for success.

Action begins at home. This program developed from recognition that exposing students to a wide range of career options does not have to originate in some government grant. The Bridges Career Exportation Day is a locally-grown public-private partnership of local employers and educators who understand and have taken responsibility for local needs. Kudos to the local chamber for creating a model that other communities can (and should) follow.

Just as manufacturers continue to experience (wellfounded) heartburn over the fiscal and regulatory uncertainty that affect their ability to create and sustain jobs, the folks in Brainerd have given us some inspiring good news about who they will find to fill those jobs.

There are other parts of the program that deserve mention.

• Job shadows enable high school students to spend part of a day with a group or an individual at a company, observe workplace activities, discuss required education and disciplines, and find out what qualities are desired in potential employees.

• Local professionals are willing to make classroom presentations about their work and their industries.

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PHOTOGRAPH BY PATRICK KELLY

INNOVATIONS

On January 31, Enterprise Minnesota hosted Sen. Amy Klobuchar, Ken Hyatt of the U.S. Department of Commerce and four Minnesota manufacturing leaders. From left: Carlson Companies CEO Trudy Rautio, Enterprise Minnesota President and CEO Bob Kill, Sen. Amy Klobuchar, U.S. Department of Commerce Under Secretary for International Trade Kenneth Hyatt, and AGCO Vice President Mike Cully. Not pictured: Ikonics Vice President of International Sales Robert Banks.

Senator Amy Klobuchar Gains Export Input Enterprise Minnesota hosts Senator Amy Klobuchar to discuss manufacturing exports.

Minnesota manufacturers got a chance to brief Senator Amy Klobuchar and a high-level member of the Department of Commerce about U.S. exports policies during a February meeting at Enterprise Minnesota’s Minneapolis headquarters.

Klobuchar’s staff reached out to Enterprise Minnesota to gather a panel of top manufacturing executives from a diverse range of industries across the state. The goal was to have an open discussion about exports, and how the U.S. can make it easier for companies to grow and invest.

“Sen. Klobuchar does a great job of helping bring visibility to manufacturing’s value in Minnesota as a key provider of careers across our communities,” says Bob Kill, Enterprise Minnesota President and CEO. “We were very pleased to host Sen. Klobuchar and the other industry leaders. We’re interested not only in providing consulting to manufacturers, but also in connecting parties to help grow manufacturing in our state.”

Klobuchar has worked closely with Enterprise Minnesota to develop her relationships with manufacturers. Enterprise Minnesota regularly organizes tours of its client companies, which Klobuchar has frequently attended.

Klobuchar is a newly appointed member of the President’s Export Council, which advises the Obama Administration on policies and programs that affect U.S. trade performance, and ways to promote and increase U.S. exports.

It also provides a forum for discussing and resolving traderelated challenges among the country’s business, industrial, 8 ENTERPRISE MINNESOTA MARCH 2013

agricultural, labor, and government sectors. Current council members include nine U.S. legislators, 19 private sector business leaders and 17 administration members, as well as the heads of the United States Conference of Mayors and the National Governors Association.

“As we look at exports, we not only need to look at unfair trade barriers or things that countries are putting up, but we also have to look at how our own rules are affecting us,” Sen. Klobuchar stated in the meeting.

Kenneth Hyatt, deputy under secretary for international trade at the U.S. Department of Commerce, also attended the meeting. He used recent statistics to compare U.S. export activity with other first-world nations. Exports represented 14 percent of American GDP in 2012. That number jumps above 30 percent in Canada and China, and soars to nearly 50 percent in Germany. According to a recent European study, 80 percent of middle class buyers, representing a total of $22 trillion in buying power, will be located outside of the United States.

“So there is a tremendous amount of external opportunity,” Hyatt said. “Great progress has been made, but there is still a great distance to go.”

Top executives from Carlson Companies, Ikonics and AGCO offered a range of recommendations for advancement.

Carlson Companies CEO Trudy Rautio stressed the importance of a streamlined U.S. entry process for foreign visitors and workers, particularly those who come to the U.S. for vacation and for seasonal employment in the travel and tour-

PHOTOGRAPH BY PATRICK KELLY

Innovations

“

“As we look at exports, we not only need to look at unfair trade barriers or things that countries are putting up, but we also have to look at how our own rules are affecting us.”

ism industry. The hotel, restaurant and travel brands under Carlson Companies operate in more than 150 countries worldwide.

“I think the U.S. has the ability to create up to 500,000 new jobs and generate $60 billion in additional exports by recapturing the loss in international travel [that occurred after 9/11]. Reducing visa wait times and making coming to the U.S. more welcoming is critically important. We need a U.S.A. welcome experience for foreign visitors,” Rautio said.

Robert Banks, vice president of international sales at Ikonics, a Duluth-based imaging technologies manufacturer, recommended efforts to reduce the high cost of shipping overseas due to duty rates and required export documents and inspections. Ikonics sells internationally, and has shipped to 91 different countries. Banks says the company faces duty rates ranging from 6 percent to 60 percent, and that combined with inspection costs, they make it difficult to maintain competitiveness on an international scale.

”

SENATOR AMY KLOBUCHAR

Mike Cully, vice president of agricultural equipment manufacturing giant AGCO, agreed with Banks, adding that the U.S. corporate tax rate is also a concern. Cully recommended pursuing a more aggressive agenda of free trade agreements, particularly the Trans-Pacific Partnership, which would enhance trade between Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States.

“Where we have free trade agreements, we have a positive trade balance, meaning we’re exporting more than we’re bringing in, which benefits U.S. companies,” Cully said. He also voiced support for President Obama to receive trade promotion authority, in order to “aggressively pursue further free trade agreements around the world.”

To learn more about the President’s Export Council, go to http://trade.gov/pec/.

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ENTERPRISE MINNESOTA MARCH 2013 9

INNOVATiONS

Tougher Customers

Are Here to Stay A sneak preview of a 2013 State of Manufacturing® focus group reveals that customer demands during the recession have become the price of doing business.

During the economic downturn, customers were able to add increasing demands. Some wanted better pricing, more generous terms, quicker turnarounds, smaller lots. Have those relationships returned to normal or is there a new normal?

• We’ve seen manufacturers scale back on their manufacturing on the procurement side. And they rely heavily on us to help them with specification work. On the technology side, our business is up, but our phone call traffic is actually down. Email traffic is ridiculous. If people could text orders they would. They are using technology like I have never seen. That’s been the shift. Some of this might be due to demographics. Younger engineers, but very few people will ask for paper catalogs anymore. It is a PDF file. They are trying to be as efficient as they can.

It makes a big difference.

• A lot of people have demanded that their employees cut back on paper, too. The PDF transfer mechanism is a vital part of eliminating paper from the office.

• We’re in the service industry. We have 730 customers.

What’s happened with the recession was that their time-

lines got shorter, and so my timeline got shorter. We can’t talk about timeline and delivery, we have to talk about the value add. How much are we adding? A lot of purchasing agents do not sit down and do an analysis anymore. If they have a vendor that works, they stay with that vendor. Even if that means there is a better opportunity, they won’t switch.

• They don’t have the staff, now there is only one purchasing agent and that person is not going to go out and develop a new supplier or even think of a new supplier because that’s work and they don’t have time to do it.

• They say, ‘I know you are cheaper but I can’t put another vendor on my system.’

• The other part of the crunch is that customers aren’t holding much inventory. That drives down lead time. We used to say, ‘if we push, we could go from seven weeks

This is part of an edited transcript from one of 20 focus groups conducted throughout Minnesota as part of Enterprise Minnesota’s fifth-annual State of Manufacturing® survey research project. The full results will be reported in the next edition of Enterprise Minnesota magazine, and presented Thursday, April 18 at the Minneapolis Convention Center. To register to attend, visit www.stateofmanufacturing.com.

10 ENTERPRISE MINNESOTA MARCH 2013

to five weeks.’ Now they are now down to two weeks and sometimes they say, ‘can you do this over night?’ If we want to survive, we have to do it.

• There is a mutual co-dependence. The days of getting a blanket purchase order for something are long gone. They want you to carry inventory for them, and make sure that you can meet the lead time, even if it is unreasonable. But the commitment level is, “yeah, we think we’re going to order it.”

• It has become part of the culture. You are certainly taking more business risk.

• You forgot the most important part – at no value added. They want you to carry that inventory. If you want the business, you’ll do it. You are going to be expected to provide it when they want it. You have to have it available.

• That’s because if they are lucky enough to be making a consumer product, they go down to Bentonville, Arkansas and they are told that they have to cut their prices another 20 percent.

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• We just received our first blanket order ever.

• Frame it!

• Not to get into the politics of this, but it was because it is for gun work.

• Home Depot has invented something they call “consignment inventory.” We have to ship to their distribution center but we don’t get paid until they actually sell it.

• We’re doing something for a customer right now. They have given us a blanket purchase order for a year, but they’ll only take so much.

We have to hold the inventory at our facility and drop ship it to customers. But those are the kinds of demands you’ll get if you want the business. You have to weigh out the value add. Can you make money sitting on their inventory?

• This kind of relationship is here to stay. I don’t think any of them will ever go back.

• Why should they?

• They are in the driver’s seat.

• The only saving grace right now is very low interest rates. If interest rates start to climb, then you are going to see a train wreck.

• It proves to us around this table that if you are going to survive, then you have to get better.

• Having my own purchasing agent, I do force that person to go out and find better deals, suppliers that are willing to cut costs, do blanket orders. We make sure that we are getting the best deal and the best price because we are beat up on the other end for our products.

• This goes back to the fear of 2008. I can go back to a customer and say, ‘the more business you put with me, the lower your cost.’ They say, ‘what if you go out of business?’ Half of our industry went away.

What if that happens again? I will share my financials with them but they are so risk averse, they want to spread that risk, even though it costs them more.

To learn more about Enterprise Minnesota’s State of Manufacturing® annual survey research project, go to www.stateofmanufacturing.com.

Call Rob or Russ at Solution Dynamics, your local Microsoft NAV manufacturing experts at 952-854-1415 or sales@solutiondynamics.net

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Helping Manufacturing Enterprises Grow Profitably

Inside Enterprise Minnesota® magazine you will find in-depth information and unmatched insights into the latest innovations, business successes, and ingenious company leaders among Minnesota’s manufacturing community. y.

Water Heater

Daktronics Scores in Minnesota

ǚ

Waterous Surges into 125th Year

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Page 1 Printers’ TWI Success

Helping Manufacturing Enterprises Grow Profitably

AUGUST 2011

Blazing Trails to the

TOP

Women leaders in Minnesota’s manufacturing industry tell us how they got there, what it’s like to be a woman at the top in a historically male-dominated industry, and why women today can thrive within it.

Also:

With the recession fading, companies look to hire new talent. 18

Innovations

Traci and Lori Tapani, co-presid co-presidents of Machine Wyoming M

Contract manufacturer Lounique approach niq unique take a u h takes Rich 22 rting P Ranks to exporting. ǚ

Joins MNSHAR

Zierke Built

Triumphs with

ota’s How Enterprise Minnesota’s Business Problem Solving course energizes continuous improvement efforts. 26

ISO ǚ Dual Languag

e Training at

St. Paul Brass

www.enterpriseminnesota.org

The magazine reaches over 42,000 readers, including CEOs and additional key decision-makers.

Helping Manufac M turing Enterprise ses Grow Profitab ly SEPTEMBER B 2011

THE NE

W NORMA L New appro aches manufactur that will help ers prospe r

Also:

Toyota Way discusses the expert David Meier benefits of Practi Problem Solvin cal g 12 How strate gic thinking can refocu your operat s ion and target new customers 22 Seven tips to improve skills from your leadership the inside out 26

www.enterprise minnesota.org

>> Jim Schottmuller, Enterprise Minnesota Relationship Manager

>> jim.schottmuller@enterpriseminnesota.org >> 612.455.4225 >> www.enterpriseminnesota.org ENTERPRISE MINNESOTA MARCH 2013 11

INNOVATiONS

MISCO Speaker Company

Amplifies Growth On the eve of its 65th year in business, MISCO Speaker Company’s lean efforts are helping sales grow faster than ever.

Minneapolis-based manufacturer MISCO Speak-

12 ENTERPRISE MINNESOTA MARCH 2013

Photograph by Patrick Kelly

er Company may be nearing senior citizen status, but retirement is nowhere in sight.

“We’re forecasting a 15-20 percent sales growth this year.

I see us doubling or tripling over the next five to 10 years,” says MISCO President Dan Digre.

In the past 12 months, MISCO employees have torn down and rebuilt the company’s entire organizational structure, rewritten its job descriptions, corrected bottlenecks in its production processes and added four new people in management-level functions. The catalyst? International competition.

“Lean is essential for maintaining value,” Digre says. “It’s not enough to just say, ‘we’re an American company, buy from us.’ You still have to have a superior product, and you have to offer the benefits of high quality, competitive pricing and quick delivery.”

As one of just a few speaker manufacturers left in the U.S., MISCO is indeed a rarity. Founded in 1949 as Minneapolis Speaker Company, MISCO has grown from its radio and television speaker roots, establishing a reputation for providing custom audio solutions to a diverse array of industries. The company manufactures speakers for commercial jet cabins, medical equipment, and the gaming industry’s newest casino games, among many other applications. If you’ve ever attended a Carlos Santana concert or Cirque du Soleil production, you’ve heard MISCO’s pro-audio speakers in action.

Digre says focusing on custom work has differentiated the company from its largely international competition base. “Loudspeakers can be churned out by the bazillions by foreign companies, so we have to look at where we can apply knowledge towards solving audio problems for other companies,” he says.

But to keep its competitive edge, MISCO has turned to lean. First, company management assessed MISCO’s current organizational structure, and then rearranged it according to individual employees’ skills and strengths. Some employees have added responsibilities, and some have moved into new positions. MISCO has also added to its staff roster.

Next, the company worked to rewrite every job description in collaboration with employees.

“We looked at each business function and then sat down with the people who were in that function to determine whether the existing written descriptions were current,” Digre says.

MISCO Engineering Technician Chai Thao and President Dan Digre put the finishing touches on a MISCO custom speaker.

They also studied how processes flow within and between departments to identify bottlenecks. When they found engineers were spending too much time completing required documentation, they hired a document control person to ensure a smooth and efficient transition between engineering and manufacturing, leaving engineers more time to develop product. Discovery of additional bottlenecks has led to the addition of three more positions as well, including a new operations manager, sales manager and customer relations manager.

Next on MISCO’s lean horizon is ISO 9001 certification, which Digre anticipates will help the company to retain and grow its aerospace customer base. The aerospace industry is fast embracing ISO certification, and more and more aerospace companies are requiring it of their vendors. Digre says MISCO will work to ensure the certification process not only caters to its customers, but also builds upon the process improvements it has implemented to date. “We’re going to do it in a way that preserves what has made us successful thus far,” he says.

For more information about MISCO Speaker Company, go to www.miscospeakers.com.

Innovations

Innovations

PHOTOGRAPH COURTESY OF MINNESOTA HOUSE OF REPRESENTATIVES

QUESTIONS

with Representative Tim Mahoney Position: Minnesota State Representative for District 67A, Jobs and Economic Development Finance and Policy Committee Chair

You are one of the few tradesmen working in the legislature. Does that unique position give you a different perspective on job creation?

I think it does. I think I have a keener vision of trying to create jobs that make things. It’s important not just to the pipefitter in me, but also because I grew up on the East Side of St. Paul, where all the dads on the block worked at the whirlpool plant, or at 3M, or the Hamm’s Brewery. They all made things, and then came home and helped each other fix their cars or build their garages. That upbringing of watching them make things informs my perspective.

What is the value of formal training for jobs in manufacturing and similar sectors?

It really is important to have post-secondary training, whether it’s a 90-day CNC machine operator certification program or a master’s degree in mechanical engineering, because manufacturing today requires different and more specialized skill sets. It’s also important to remember that engineering doesn’t work without manufacturing, and vice versa. If you don’t have a person manufacturing what the engineer designed, then there is really no value there. And post-secondary training is crucial for the whole spectrum of manufacturing careers.

for the past 20-30 years. We’re now starting to realize the fact that you’ve got to make something if you’re going to sell something, and that making something requires highly specialized training. I think our MnSCU system, our university system, and our private training programs have all started to see that effective manufacturing training necessitates much more than a “one size fits all” approach.

What should be the legislative perspective on trying to help ensure a qualified workforce?

The legislative perspective should be that manufacturing is the backbone of our economy. Whether it’s making something or growing something or designing something, each part of manufacturing helps form a leg of the economic ship of state. As legislators, we have to look at how to encourage manufacturing, whether that’s through tax policy, government programs such as the Growth Acceleration Program, organizations like Enterprise Minnesota, or making a good infrastructure of roads, sewers and water. Our focus should be, how do we build a really good backbone of infrastructure, job training and job creation, every day we come up here? I would like to see it more, but we’re not there yet.

Do our educational institutions place a sufficient premium on training for manufacturing jobs?

I think they’re starting to understand its importance. We as a society have been focused on the humanities in education

To contact Representative Tim Mahoney, email rep.tim.mahoney@house.mn.

ENTERPRISE MINNESOTA MARCH 2013 13

GAP’s Exponential

Gains How the state-funded Growth Acceleration Program brings promise and profit to Minnesota manufacturers and their communities.

By Andrea Lahouze

Big things are happening for Wyoming Machine in the tiny town of Stacy, Minnesota. Since 2010, the precision sheet metal fabricator has broken through a growth plateau, added employees and improved profit margins.

Guided by top manufacturing gurus, the company has developed sophisticated plans for marketing and strategic growth management.

Company Co-Presidents (and sisters) Lori and Traci Tapani attribute much of their recent successes to the Growth Acceleration Program (GAP), a state-funded initiative administered by Enterprise Minnesota that offers consulting services to help manufacturers achieve continued growth. Launched in 2008, GAP provides matching grants of up to $1 for every $3 a manufacturer invests in business improvement activities.

The results for Wyoming Machine and other GAP participants have been nothing short of remarkable.

Wyoming Machine’s GAP-funded strategic growth and marketing plans have contributed to a 2 percent increase in margins and a 10 percent increase in sales revenue in 2012. The company has also added three new jobs within the past year.

In 2012 alone, 115 Minnesota manufacturing companies used GAP to create or retain 976 jobs, boost company sales by $44,030,379, and invest $18,132,500 in their plants and equipment.

“Clearly this is a program that works,” says Bob Kill, president and CEO of Enterprise Minnesota. “GAP shows how a small investment can produce huge results for manufacturers, their employees and Minnesota’s economy.”

The Tapanis had long considered using Enterprise Minnesota’s Strategic Growth Management service to create actionable, strategic plans to boost sales. But for their 5514 ENTERPRISE MINNESOTA MARCH 2013

employee company, it was expensive.

In the past, Lori Tapani says Wyoming Machine’s limited resource pool as a small business made it difficult to access comprehensive and strategic solutions to business challenges. “We felt like Strategic Growth Management would be beneficial, but to be honest, it is an enormous financial investment for a small company to make,” she says. “GAP financing made it easier for us to move forward.”

Strategic Growth Management enabled the company to dig deeply and take a holistic approach to achieving growth. Two Enterprise Minnesota consultants helped Wyoming Machine employees research 14 different topics related to their company’s current state, then prepare presentations on each topic. Topics included company structure and product flow, mission evaluation, and discovering how employees felt about their work and work environment, among others.

For their part, Lori and Traci arranged a series of faceto-face meetings with their clients to assess customers’ needs and wants. Traci Tapani says the conversations revealed striking commonalities among different customers.

Many customers said they valued shorter lead times and a vendor’s ability to be flexible and make changes quickly.

“We’re working with customers that are really innovative, so our ability to respond quickly when they have a new product is really important,” Lori Tapani says. “We realized that the way jobs go through our engineering department needed to be enhanced in order to meet our customers’ needs.”

When the topic presentations were finished, employees presented their findings to an audience of trusted outside advisers, including the company’s insurance agent, accountant, and other leaders in the business community.

photograph by PATRICK KELLY

Enterprise Minnesota President and CEO Bob Kill (second from right) testifies January 31 on GAP’s successes before the Minnesota House Jobs and Economic Development Finance and Policy Committee.

Their job was to listen to Wyoming Machine’s current state, and provide candid and constructive observations and insights.

In lieu of posing questions at the end of each presentation, audience members submitted each question or comment on Post-It notes, more than 600 in all. The next day, the notes were randomly posted on the walls of a meeting room, where they were sorted and categorized by the working group of Wyoming Machine employees to help define general areas where a company might develop strategic initiatives.

By the end of the meeting, the group had pinpointed eight strategic initiatives they wanted to pursue over the next three years. These include: articulating and demonstrating the company’s vision, mission and values; developing a team of accountable leaders; improving and sustaining critical processes within the company’s operation; recruiting and developing a workforce that is the “envy of the competition”; optimizing a sales structure and process; integrating and implementing technology to gain a competitive advantage; and improving the use of current engineering resources to ensure quality, increase profitability and drive growth.

Another important initiative was to define target markets, and develop a strategic marketing plan to reach customers within them.

“We wanted to be intentional about defining markets where we can show our differentiating value, and develop marketing strategies for each of those,” Lori Tapani says.

And as luck (or fate) would have it, GAP was again the vehicle that empowered Wyoming Machine to make and launch a comprehensive plan, this time through Enterprise Minnesota’s Proactive Marketing for Manufacturers service. The Tapanis and representatives from four additional companies met with Enterprise Minnesota consultants for four half-day sessions over three months.

The service helps companies to define strategic marketing plans, in part by looking at their own companies from a customer’s point of view. By researching both their competition and their customers, companies developed a clear understanding of how to deliver value based on what is important to their customers, and how they dif-

fer from their competition. They also pinpointed their target markets, in some cases, right down to individual companies.

“It’s one thing to say we’re going to do marketing in general, but Proactive Marketing for Manufacturers really focused our attention on who we like, why they like us, and how we can use that knowledge to be more strategic going forward,” Lori Tapani says. “We now have actual lists of specific companies as a result that we’re going to try to connect with.”

GAP funding has also enabled the Tapanis to connect with other industry leaders as members in two CEO Peer Councils, a set of Enterprise Minnesota-led CEO groups that meet monthly to discuss challenges and opportunities they face in their businesses, and to exchange advice and best practices for the benefit of all. The meetings are confidential to encourage open and frank conversations.

“It’s amazing what the other members can bring to you that is helpful in making decisions,” Lori Tapani says.

Without GAP funding, Lori Tapani says, “we would have been piece-mealing, working on a little bit of strategic planning, and a little bit of marketing, but not really working on anything in our operation.” Traci Tapani agrees, adding, “GAP has allowed us to set our direction and focus everyone’s efforts on where we are going as a company. We are driving down responsibilities and specific actions in the organization and getting more people involved in the activities needed to move our company toward our established goals.”

The Tapanis also say their GAP-related successes will benefit all of Stacy’s 1,500 citizens.

“Without the 55 people who come to work for us every day in Stacy, there is a good chance that the hardware store, the gas station, and a few other shops and restaurants would not be around,” Traci Tapani says.

“Manufacturing really matters, and anything that we can do to keep being vital and keep our companies growing and competitive so we can compete against the rest of the world matters. ... We took it really, really seriously knowing that we had had an opportunity to receive funding from the state to help our company be better.”

ENTERPRISE MINNESOTA MARCH 2013 15

Statewide Successes

photograph by PATRICK KELLY

percent of what they are today.”

Other companies used As it seeks another round GAP funding to raise of funding in the Minrevenues.

Minneapolisnesota legislature, one based Absolute Quality of GAPs interesting Manufacturing, which obstacles is that it seems makes custom wire hartoo good to be true. GAP nesses, cable assemblies participants must comand panel builds, has plete an independent and achieved $3 million in inconfidential survey, which creased sales, retained 20 measures sales increases, jobs and created 10 new cost improvements, capital jobs since its first GAPequipment expenditures, Rep. Keith Ellison (center) gets a firsthand look at Absolute Quality’s transformation funded initiative in 2009. on a company tour with Absolute Quality Executive Vice President Jeff Zoubek (left) and retained and created and President and General Manager Duane Petersen.

Executive Vice Presijobs. Since 2008, GAP has dent Jeff Zoubek says helped 245 manufacturers the Lean 101 initiative across the state. trained employees in the basic tenets and “language” of In 2012, hydraulic motors and gear boxes manufacturer lean, and showed them a range of lean tools they could use Von Ruden Manufacturing used GAP funding to achieve to reduce waste and improve processes at Absolute Quality.

ISO 9001:2008 certification. The certification process, One of those tools was Value Stream Mapping (VSM), which includes examining and standardizing processes, which helps companies identify waste by mapping out an helped Von Ruden to reap significant savings through efentire production process.

GAP funds enabled Absolute ficiency gains—enough to add a manufacturing engineer, Quality to work with Enterprise Minnesota throughout the a quality technician and a material planner to its staff.

VSM process, helping to analyze processes, then developed Von Ruden President Brandon Anderson was one of a layout to maximize the value of the company’s existing three manufacturing executives to petition Minnesota space and recent expansion into a 15,000-square-foot seclegislators’ continuation of GAP in a January 31 House tion of its building, which had previously been rented to a committee meeting. The legislators also heard testimony longtime tenant. from Wyoming Machine’s Traci Tapani and Floe InternaVSM has resulted in layout changes throughout Abtional Inc. President Don VanderMey. All three executives solute Quality’s production floor, from point-of-use said GAP made it possible for their companies to invest equipment storage and extra printers, copiers and email in business growth services that would have otherwise terminals, to a centralized receiving department and a new proved too costly. Enterprise Minnesota is seeking a $3 computerized system for tracking customer orders and million state investment grant to continue GAP through production efficiency.

President and General Manager 2015.

Duane Petersen says the new layout requires employees to “GAP is a tremendous resource for the Minnesota take 80 percent fewer steps, and has helped the company communities and employees that depend on the economic to avoid passing on recent materials cost increases to its security that these manufacturers provide,” Anderson told customers.

It also appeals to customers. legislators.

“Customers can see a spot for themselves when they In addition to growing its workforce, becoming ISOwalk into our plant now,” says Jason Zoubek, sales managcertified has also helped Von Ruden to grow sales of its er.

“Before, we were cramped. Now, we have a great plant new “live tool” product line for CNC lathes. The add-on layout that customers appreciate.” tools bring milling capabilities to lathes, enabling an operLike Wyoming Machine, Absolute Quality has also ator to do both turning and milling work on one machine. gained a comprehensive understanding of its ideal cusVon Ruden sells the tools to CNC lathe manufacturers, tomers, target market and competition with Enterprise most of which are based in European or Asian countries.

Minnesota’s Proactive Marketing for Manufacturers service.

Anderson says ISO certification gives those customers The 2012 training has inspired the recent launch of a new peace of mind, because they are typically unable to audit website and online advertising campaign, and the hiring Von Ruden’s quality process in person. The add-on tools of outside sales reps to increase the company’s visibility make up about 35 percent of the company’s annual sales. among potential clients.

Anderson anticipates that number will grow to 90 percent Growth and savings have enabled the company to add in future years. a handful of internal positions as well. A floor supervisor “Our target market is $60 million, and we’re just keeps tabs on production, more assembly workers increase under $4 million today. ISO certification really opens flow, and an electrical engineer brings more panel design our growth potential,” Anderson says. “Without GAP, knowledge to the company. our revenues in this new product line would be about 50 16 ENTERPRISE MINNESOTA MARCH 2013

Fueling GAP’s Future

GAP’s proven track record has bolstered continued support from legislators on both sides of the aisle. Representative Tim Mahoney, who serves as chair of the State

photograph by PATRICK KELLY

“Before, we could only make design suggestions for customers,” Jason Zoubek says. “Now, we can lay out an entire panel or cable assembly design and have confidence and expertise behind it. Our engineer can also travel to customers to evaluate and assist in their design process.”

For Floe International Inc., a dock and boat lift manufacturer “up north” in McGregor and Hoyt Lakes, lean training that Floe received with the GAP program was the lifeboat that kept them afloat through the recession. The company saw revenue drop to half its typical amount when the downturn hit. But 20 company employees were fresh from GAP-funded lean certification training, and had just transformed the production floor from a traditional batchand-queue structure to a series of lean work cells.

“There’s a pretty good chance that we wouldn’t be here if we hadn’t been engaged in that training,” says Floe International President Don VanderMey. Now, Floe isn’t just surviving. The company’s lean changes have reduced inventory from $5.5 million to $1.9 million, and its revenue per employee has more than doubled. Sales in 2012 also hit an all-time high, allowing Floe to build a 40,000 square foot addition, its largest manufacturing building expansion to date.

VanderMey credits lean training with cultivating a companywide “mindset” of continuous improvement, which he says will guide the company in its future growth. “Standardizing processes, having systems, and having training all stemmed from our lean training, and all of these things drive quality into the business.”

Traci Tapani and Lori Tapani, copresidents, Wyoming Machine

House Committee on Jobs and Economic Development Finance and Policy, says, “It’s easy to support something that works so well. And the best part is that it’s easy to document the program’s success.”

Representative Bob Gunther, who helped GAP receive initial funding, likens it to “a scholarship program that allows manufacturing companies to prosper and become more competitive in the marketplace. Enterprise Minnesota has done a tremendous job with this program, and clearly, our businesses are more competitive because of its efforts.”

Their support gives manufacturers across the state hope that it will receive renewed funding this year, so that more manufacturers can access the training they need to advance.

“Lean is a journey, and you’re never there,” Floe International’s VanderMey says. “If you want to be a worldclass manufacturer, then it’s imperative to make continued investments in your systems, operations and people.”

GAP: A Brief History The State of Minnesota launched GAP in 2008 to use highly targeted state funding to help manufacturers grow their way out of the recession.

The program has provided up to $1 of state money for every $3 a company would invest in growth strategies. Companies may request GAP funding for multiple projects, up to $50,000 per year, as long as no one project exceeds $25,000.

Since 2008, GAP funding has been awarded to 245 manufacturing companies across the state. In 2012, 115 Minnesota manufacturing companies used GAP to create or retain

976 jobs, boost company sales by $44,030,379, and invest $18,132,500 in their plants and equipment.

After GAP’s initial $750,000 funding, the Minnesota Legislature appropriated $1 million in new funding in 2009, despite a $4 billion budget shortfall. Enterprise Minnesota is currently seeking a $3 million state investment grant to continue GAP through 2015.

“A number of manufacturing executives said that they clearly would not have made the investments that they did without this small rebate

from the State of Minnesota,” said Enterprise Minnesota President and CEO Bob Kill, testifying before the House Jobs and Economic Development Finance and Policy Committee. He added that continued GAP funding will “help manufacturing companies leverage their own investment in their companies to grow their businesses and remain viable employers of good jobs for Minnesotans.”

To learn more about GAP, visit www.enterpriseminnesota.org/resources/ growth-acceleration-program.html.

ENTERPRISE MINNESOTA MARCH 2013 17

What I’ve Learned

Marketing

Strategy Before Tactics Trade shows and advertising have their place, but not before savvy manufacturers develop a strategic focus and a proactive marketing mindset.

By Roger Hurd Doing “marketing” is often viewed as finding tactics to dial up revenue. Can we use social media? Should we improve our website? How about advertising? Do we attend a trade show?

Tactics are important in marketing, it’s true, but first – it’s all about strategy. The process of researching and creating a Proactive Marketing for Manufacturers plan presents an opportunity to think deeply about your whole business strategy.

1. Think Strategy.

It is not just about t-shirts, logos, and tradeshows

A sales consultant once complained to me that clients would hire her to help stimulate sales, but her biggest obstacle would be at a very basic level: they often didn’t fully understand who they were selling to or why. Her challenge is hardly unique.

How to begin thinking about your market strategy? Consider how to optimize a strategic fit among: Our Customers: Why do we choose them? What do they really care about?

Our Company: What do we do exceptionally well? Why do customers choose us?

Our Competitors: What do our 18 ENTERPRISE MINNESOTA MARCH 2013

competitors promise and deliver?

How are we better?

Think of what you offer customers – products, services, experiences – and why they should buy from you. Articulating this three-way fit at a high level is a useful way to describe your current business model and it provides a basis for creating, evaluating and choosing new market strategies.

The approach sounds simple and obvious on the face of it. Of course, the devil is in the details – the strategic market fit may play out differently for every product or service you offer to every target market.

Key to this is being able to identify a specific target “bucket” of customers who have common concerns and priorities – and then match up your capabilities in a way that beats the competition.

Describing your chosen market strategy in this way makes all of those important tactical questions much easier to answer.

needed to optimize our strategic market fit.

Learning about customers and competitors requires conscious, focused and ongoing effort. After all, they keep changing like everyone else as they respond to pressures and opportunities in their environments. Taking our current assumptions about customers and competitors for granted, without checking them out, can be dangerous to one’s competitive health.

So how can you develop useful knowledge and insights about customers and competitors? Go online, talk to people (inside your company and out), use proprietary databases at the library, be a detective.

A company team recently brainstormed dozens of information sources and ideas for how to extract the knowledge they wanted. You can do it, too.

Try it!

And once you gain this precious knowledge, figure out how to capture and share it with your teams.

2. Look OUT!

3. Be Creative.

Typically we know our own company quite well, our customers fairly well, and our competitors not so well. And we often overestimate how fully we understand what our customers are up against and how they deal with it.

This means we had better look outside of our organization for the knowledge

Has anyone ever told you to “be spontaneous?” You can’t really do it. If you’re responding to the request, you’re not being spontaneous. The same can be said of “be creative.” It is not like there is a button you can push that will unleash a flood of creative ideas.

That said, strategic creativity is essential to Proactive Marketing for

Strategic market fit is a moving target

Develop new ways of thinking

4. Integrate Widely.

It takes a village

Market strategy must integrate with corporate strategy and with every functional area in the company.

A few examples: manufacturing capacity and throughput must be able to meet customers’ demands; engineering can create greater customer benefit in product design; quality and customer service ensure we fully deliver on our marketing promise to customers; and sales takes it to the street and reaps the rewards.

We need to manage costs and track margins so purchasing and finance have parts to play. Human resources engages in many ways, not the least of which is training and development.

The strategic marketing team should include representation from at least a few of these functions to gain their perspectives and to get a head start on integration. As market strategy and the marketing plan take shape,

they should be discussed with all department heads.

5. Plan and Act. Institutionalize the marketing mindset

Market strategy gives rise to goals – or vice versa – which beg for tactics and action plans to achieve those goals. All the best practices of planning and execution apply here, including measurable targets, quick cycles of plan/do/ check/act, timelines, accountability, resource allocation, infrastructure to monitor and sustain, and opportunities to review and refresh both the guiding plan and the underlying market strategy.

Capture the essence of this in a written plan. It needn’t be long and exhaustive – details can be filled in as part of execution. Communicate the plan throughout the organization so people know what is going on.

A challenge will be to maintain momentum despite the daily workplace demands. One response is to find more people to do the work. You never have as many resources as you want, but you always have more than you think. Find people you can engage to help move the plan forward and develop them as employees at the same time.

And now determine whether and how advertising, your website and trade shows will contribute to company success.

photograph by PATRICK KELLY

Manufacturers.

Recognizing that there is no recipe or plug and play method for generating creativity is the first step. There are many tools and exercises that can be helpful, yet we’ve learned that group creativity is enhanced when three conditions are present.

First, actively stimulate thinking rather than trying to brainstorm in a vacuum. Knowledge and insights gained from looking out – toward customers, competitors, suppliers, technology, etc. – can be brought into the room to prime the creativity pumps.

Second, increase the diversity of the team to include varied expertise, experience and thinking styles. Different people will bring different associations and see different connections among the ideas.

Third, as in traditional brainstorming, banish behavior that constrains ideas. “We’ve tried that before.” “The VP wouldn’t like it.” “Too hard to implement.”

Under these conditions, many bits of knowledge are available to diverse minds to be combined in new ways.

Together, they are a Petri dish for innovation.

Roger Hurd As one of Enterprise Minnesota’s Business Growth specialists, Roger Hurd provides marketing services that help small and medium-sized companies grow profitably. He specializes in business and market strategy development, innovation, research and analysis, leadership development, and action coaching for success. He is a Manufacturing Extension Partnership certified Growth Coach. Roger was founder and president of Knowledge Based Solutions and head of INFORM Research Service.

For more than 25 years he has provided customized consulting services to a wide range of clients including Fortune 500 companies, small firms and nonprofit organizations. Roger has an MBA with emphasis in decision science and strategic management from the Carlson School of Management at the University of Minnesota, a master’s degree in Library Science with focus on research, evaluation and statistics, and a bachelor’s degree in counseling psychology from Metropolitan State University.

Enterprise Minnesota’s Proactive Marketing for Manufacturers has already helped 29 client companies develop a strategic approach to grow their business. It helps them pinpoint their ideal target market, analyze their competition, and show how to differentiate their products in the marketplace.

ENTERPRISE MINNESOTA MARCH 2013 19

INTERVIEW

The World According to

Kirscht

The president of Donnelly Custom Manufacturing on how to maintain company focus through economic uncertainty and the impending ‘regulatory cliff.’

People who know Ron Kirscht

and his company, Donnelly Custom Manufacturing, invariably describe the operation with one word: focus.

“How Short Run is Done.” is emblazoned on Donnelly’s walls, on its collateral materials, the website and well into the psyches of every one of the 235 employees that work for this $31 million manufacturer. Keeping this focus on the greater complexities and higher margins of short run manufacturing has kept Donnelly profitably growing through the volatile economy.

We met Kirscht in a conference room in Donnelly’s Alexandria-based plant for a wide-ranging conversation about the company, the state of his industry, and the relationship between manufacturers and those who govern them. Particularly about those who govern them.

Ron Kirscht grew up thinking he would follow in his father’s footsteps running the family dairy farm in Monticello, but his father advised him there 20 ENTERPRISE MINNESOTA MARCH 2013

Ron Kirscht is president of Donnelly Custom Manufacturing, a $31 million Alexandria-based company with 235 employees.

“

would be a brighter future by going to college. He got an accounting degree from St. Cloud State, became a CPA and worked for Coopers & Lybrand, where he focused on privately owned manufacturers. After working his way through several local manufacturing firms, in 1991 he met Stan Donnelly, a St. Paul-based entrepreneur who had founded Donnelly Manufacturing in Alexandria, which at the time had grown to be a solid company with 60 employees. Kirscht moved with his wife, Julie, and their four preschool sons to Alexandria to be VP of operations. In early 2000, he was named president.

An accountant, really? You carry yourself more like an entrepreneurial engineer.

I’m not an engineer, but I understand mathematics and mechanics – cause and effect. Accounting gives you a conceptual framework to run a company, as opposed to one that is run by entrepreneurial energy.

Accounting has its own metrics. It is a process for thinking and reasoning. I had experience in financial accounting, but also cost and inventory accounting, so that provides a template to help graft underlying causes to business results and understanding costs, what’s fixed, what’s variable – where are you investing in the future versus where you’re simply incurring expenses.

I saw many companies as an auditor. I’d visit maybe 15 different entities over the course of a year. You see organizations and interact with people in different functional areas. You learn about the process flows and the interconnectedness of various functions. But you also learn about people and business cultures. It is good basic training for general business leadership and corporate governance.

Photograph BY PATRICK KELLY

Short run manufacturing seems to have served your company quite well. Was it always in the plan, or did it evolve?

When Stan (Donnelly) founded the business in 1984, he focused on short run, close tolerance parts. His vision

“People are sitting on the sidelines. Not because they are greedy or stupid, but because the level of uncertainty makes them question the timing of investment.”

”

was that it was an underserved market. Once we established a beachhead and became a profitable entity, he thought we’d migrate towards long run, because that’s what molders did to minimize mold changeovers which are traditionally view as a pain, a headache. But by the time we had gotten critical mass, we realized short-run, custom manufacturing was a vibrant and viable niche business. It had great potential and great customers with an ongoing renewal of engineering activity. We were also starting to see consumer products were increasingly being outsourced overseas.

Our customers tend to be leading industrial OEM companies. They typically range from $250 million to $8 billion in sales. A lot of them have global footprints that we support.

People who know Donnelly and your management style remark that “focus” is one of the symbols of your company brand. Is there a secret to how you accomplish that?

Dr. (W. Edwards) Deming talked about constancy of purpose. We deal with large and sophisticated industrial OEMs. We can’t be a general purpose molder; we need to be committed to a niche offering. Training is an underpinning of what we do and who we are in building the confidence, competence and commitment requisite for people to succeed in their jobs and for us to succeed as a company.

The constancy of purpose comes from the concept that we’re practical people. We don’t want to overthink things. Form follows function. If there is a fit, there’s a future. We constantly change and add pillars and systems to improve ourselves, but they always support the same premise that we’re going to set the standards for how short run is done, and in the process

create value for our customers.

Constancy and clarity of purpose literally build pride. It may not always be exciting on a day-to-day basis, but over time it is very compelling and fulfilling. We have a change-ready culture, but we don’t abuse it. When we put something in place it’s going to be in place for a long, long time.

People understand that and they commit to it.

We look at the same critical success factors and we approach them in the same way. We don’t have people who are winking and nodding, saying that’s what the old man is saying, but here’s how we’re really going to do it.

Competing agendas are wasteful.

For us, it distills down to: we know who we are; we know that our discipline of market leadership is in customer intimacy. We know that we set the standards in short run. Our mission statement is simple: to deliver good products on time. We have four stated values: treat others as the way you want to be treated, do your best, work as a team, and don’t be afraid to ask for help.

We keep perfecting things, but we don’t keep uprooting them. It’s not like we’re Total Quality Management today, or 6 Sigma tomorrow, and Lean the next. We don’t believe in gurus.

We try to deepen our understanding and utilize the insights we gain from experience to improve ourselves.

That’s how we get better.

One of the attributes that makes short run manufacturing less vulnerable to foreign competition is its intricate nature. What are the challenges of managing complexity?

Complexity in our industry is measured by how many presses you have.

How many different materials do you process? How many different molds?

The simplest in our industry would ENTERPRISE MINNESOTA MARCH 2013 21

“

“We make it hard to do business in America.

Regulations and laws appear more about concentrating money, power and control rather than improving opportunities.” be one mold, one machine, one material. Everything after that increases the complexity factor. The average complexity factor for the top 25 percent of companies in our industry with $30 million or more in sales is about 3 million. Our complexity factor is at 48 million. Because we mold 3,000 different active parts from 2,600 molds out of 500 different materials using 33 injection molding machines.

We meet that challenge by taking a process approach with things like our War Room. The war is against waste: wasted materials and time. Waste undermines our mission to deliver good parts on time. The final waste, one that you can’t readily measure but you know is there, is the waste of people’s belief systems in the organization. If you take out the things that drive waste and create late deliveries and quality issues, then you’ve supported and confirmed the belief of the people in your organization. It’s a test of leadership.

If your high-end processes are well conceived and aligned, your people proven and committed, you overcome complexity with precision.

You sometimes characterize the economy in terms of aeronautical flight.

What you want is lift and thrust so you can maintain or gain altitude. Having some agility in the air is good, too.

More and more what I see coming out of Washington, D.C., and frankly St. Paul, is not lift and thrust. It is weight and drag, in the form of higher taxes and expanded regulation. Everybody wants to tax the rich – and they want to define the rich as someone who makes more than they do. We’re putting too much weight and drag on our economy.

What about it makes you most nervous as a manufacturer?

22 ENTERPRISE MINNESOTA MARCH 2013

”

Our economic prospects are muted by uncertainty. Economic uncertainty, taxes, and the regulatory avalanche that is coming upon us, all repress entrepreneurship, investment and the creation of capital.

People are sitting on the sidelines.

Not because they are greedy or stupid, but because the level of uncertainty makes them question the timing of investment, especially for brick and mortar or capital equipment.

A lot of businesses are thinking; let’s try to wring out what we can with what we have. They say, I can be wrong if I should have been expanding, but if things go unfavorably in the economy, I don’t want to be wrong, having just taken out a mortgage on the building or borrowing on an expansion and finding myself long on debt and low on cash.

The one thing that could tempt you into taking on a mortgage or making a significant investment in capital equipment is that interest rates are very, very low. I would say artificially low.

During the recession a lot of manufacturers speculated that a new wave of regulations would constrain banking relationships for manufacturers. Were those fears well-founded?

As a result of TARP, the big banks – the big banks -- have an unfair competitive advantage over community banks. They probably have a 20 to 40 basis point advantage. That’s a bit of a challenge for community banks.

But those relationships are still good. Our approach is to keep them informed, project well, and don’t hold back. You always want to give them your best shot. Relationships are so important in banking. We never surprise our bankers. When we see that things are getting better or tougher, we always tell them before it happens,

so that we have a track record of being open, honest and right.

We heard a lot of folks talk about uncertainties about the “fiscal cliff” in Washington earlier this year. You talk about a “regulatory cliff” that may be even more insidious. What do you mean by that?

The regulatory cliff deals with the avalanche of new regulations that government is churning out. The Code of Federal Regulations has grown by leaps and bounds – and compliance is a pressing, albeit unreported challenge for business. Between OSHA, the EPA and the National Labor Relations Board, it seems that there are lot of pinch points and sharp edges for business people to navigate. And then there is the Affordable Care Act and Dodd-Frank, massive pieces of legislation that have been enacted but for which the rules are still being written.

We make it hard to do business in America. Right now regulations and laws appear to be more about concentrating power, money and control rather than improving opportunity, outcomes and conditions.

Look at energy. Everyone is tripping all over themselves to “invest” in alternative energies. But some of the government subsidies that go toward wind and solar are not only bad for the taxpayer; they are bad for those industries. They are not market solutions; they are political solutions.

What’s happened to the price of grain? What impact has that had on people who are using grains for dairy farming or for beef or hogs? The inputs have gone up. What’s happened to food prices? They’ve gone up. How does that help people who are living on the margins financially?

Energy drives our economy. The focus should be on making it affordable, available, and abundant. Right now the push on regulation is not about that.

We hear that America has 5 percent of the world’s population but we use 24 percent of the world’s energy. But I would argue that we are disproportionately efficient in our use of energy.

We produce over 30 percent of the global output. We are more efficient

in our use of energy for manufacturing and delivering goods and services relative to the world norm.

The funny thing is that we’re driving business out of the United States to other countries, where their use of energy to covert to products is often far less efficient. If we really cared about the globe, the world, we’d say pushing manufacturing out of the United States is generally bad for the world, for the air, for the water, for the climate, for the people. It is antithetical to the stated goal of environmental stewardship.

What’s your sense of how Minnesota’s state policies are affecting the prospects for manufacturing?

There is a steady drain in capital and intellect in the State of Minnesota. It is slowly and silently bleeding away – and it is not being recovered. I think we are squandering terrific advantages that we have had as a state. There is a dynamic, vibrant base of entrepreneurs and inventors and people that

are bold in taking steps and starting businesses with an idea and hard work.

That’s slipping away. Politicians will generally deny this, but I posit they are vested in their denials.

The State of Minnesota has lost its way. I know there is an annual hue and cry to throw money at education, but if you look at the reality, education is not underfunded, but is underperforming.

We keep this reflexive attitude towards education every year with renewed calls for more spending. I know at a national level, that the U.S. funding of the education system, relative to history, is at a very high level, but the results are slowly eroding.

We’re not getting what we’re paying for. I think there are some systemic and institutional issues driving that.

We don’t want to confront them so we can’t fix it. We use more spending as a means to score political points and assuage our sense that there is profound problem we cannot commit ourselves to understand and solve.

Given all this, what’s the outlook for manufacturing?

Small and mid-sized companies are generally more focused, nimble and agile. They can adapt more quickly.

The titanic hit the iceberg because it was a big ship with an undersized rudder and couldn’t turn in time. From that standpoint, as long as people keep their heads on a swivel and keep focusing on the objective and not solely problems, there are opportunities – even when there are tough days in the global economic arena.

There are always opportunities for companies that get outside the organization and think about what’s happening, to understand the external forces impacting them and the needs of the their customers, and strive to imagine what kinds of opportunities this will create. Generally, success isn’t based upon what is – it’s about what you make of what is.

ENTERPRISE MINNESOTA MARCH 2013 23

Exports

Cooling the Cows of Riyadh

In April 2012, Pete Lyle, vice president at Sauk Rapids-based Schaefer Ventilation Equipment, boarded a plane with Minnesota Congressman Keith Ellison and representatives of nine other Minnesota businesses that were interested in testing export possibilities in the cash-rich epicenter of Middle East economic markets. The trade mission, to Saudi Arabia, was sponsored by the Minnesota Trade Office and the U.S.-Saudi Arabian Business Council and was attended by a diverse cross section of Minnesota businesses, from a pottery dealer to a weapons training facility.

The invitation to Saudi Arabia had irresistibly pushed a couple key hot buttons in Schaefer’s fledgling efforts to shape its strategy to aggressively sell its dairy ventilation equipment to international customers. Market research had revealed that dairy farms in the hot deserts of the Middle East were rapidly transforming from tiny mom-and-pop operations into massive, sophisticated corporate processes designed to support modern food manufacturing companies.

The executives at Schaefer had already experienced a roller coaster of early success and frustration while trying to ship equipment to enthusiastic buyers amid the political turmoil amid Egypt’s Arab Spring revolution.

While the company sold the first sales 24 ENTERPRISE MINNESOTA MARCH 2013

Photograph BY PATRICK KELLY

Schaefer Ventilation’s Global Strategy brings it to the sophisticated 100,000cow operations of Saudi Arabia.

Pete Lyle is vice president of Schaefer Ventilation Equipment in Sauk Rapids.

of its new strategy into Cairo, future sales were cut off by the sudden and immediate change of regime. But even those modest achievements persuaded them that there was a lucrative potential market in the Middle East for Schaefer products. And Saudi Arabia, the cash-rich home to the world’s largest dairy operations, would provide a significant lever to that growth.

Over four days, under Ellison’s imprimatur, Lyle met with a who’s who of potential customers. An analyst

with U.S.-Saudi Arabian Business Council had arranged meetings with each, usually with Saudi upper management and with a couple visits directly on farms. Chief among them were representatives of the four major dairy operations.

“He (Ellison) opened the door to people that I would have had a hard time meeting on my own,” Lyle says now. “I’m certain that I wouldn’t have been received as quickly or as politely had I made the sales call on my own.”

The most productive early meeting was with managers at the Al Safi Dairy Company, the world’s largest dairy operation. With 100,000 cows, the Riyadh-based subsidiary of the French food giant Danone produces and delivers 300,000 tons of fresh dairy products each year through 30,000 retailers in 11 Middle East countries.

The Al Safi managers, Lyle says, were already favorably aware of Schaefer’s equipment and “were a willing early adopter. So we had a pretty substantial discussion.”

“The “aha!” moment for me was getting on these farms,” Lyle says, “knowing that they have a need for you and that you can actually serve them. That’s a pretty encouraging moment.”

The need for cooling equipment is well documented. Typical winter milk production for a Saudi Arabia cow, when average high temperatures are in the mid-80s, is 25 liters per day. But when these same cows are enduring the hot, dry heat of a Riyadh summer, with an average high temperature of 113 degrees, their production dips dramatically to four liters per day.

Clinical studies have demonstrated that cooling equipment can triple that production, to 15 liters per day.

“I knew immediately that this was the biggest market potential for our company in the short term,” Lyle says.

“This is our single largest opportunity.” Lyle estimates that a successful project could constitute up to 75 percent of Schaefer’s international sales.

Much of that will depend on the results of a clinical trial at Al Safi. In the trial, scheduled to begin next month, the company will test the output of its 100 top performing cows using equipment from Schaefer and equipment from a competitor.

There are two ways to cool a cow, Lyle says. One is called a “feedline soaking system,” that sprays water on directly on cows while they are eating and then run fans over the top of them to evaporate the water. The other, Schaefer’s new FlipLine technology, is a mister that cools the area directly around the cow.

If it works, which Lyle is confi-

The dry 113-degree average heat of a Riyadh summer reduces dairy output by a whopping 85 percent per cow. dent it will, production will increase.

Schaefer’s advantage, in this case, will be price. “We can do this at a lower cost than they might be paying.”

The Saudi Arabian connection has already shown promise in the industrial market. Schaefer’s distributor has sold 250 cooling fans to help cool the 3 million pilgrims who attend the annual Haj, a visit to Islam’s holiest site.

Schaefer Ventilation’s path to

the export market grew, paradoxically, from a position of weakness. The 61year old company had been founded to serve Stearns County dairy farmers with high-quality cooling devices and grew gradually and profitably. Its vertical product offerings expanded to include horticulture, greenhouses, industrial commercial applications and even a hospitality niche for tent cooling.

But in 2008, the bottom fell out of the company’s sales markets. The economic recession that rocked America’s manufacturers nationwide delivered an immediate, unexpected blow to the company.

“2009 never started,” says Neal Crocker, who started as the company’s CEO days before the crash. “I joined an entity that was reasonably healthy and then days within getting here, I thought, ‘don’t the phones ever ring?’”

The summer season never hit. Dealers that would typically order 10 or 20 fans would order nothing, or maybe just spare parts.

Instead of calculating new streams of strategic growth, Crocker’s earliest days with the company involved scrambling for survival. “We made a lot of tough choices,” he says. The company negotiated suspended interest payments with its bankers and deferred rent from its landlord. And there were layoffs. “We did all the

things we needed to do,” Crocker says.

But the new CEO was not content to sit and wait for market conditions to shape Schaefer’s future. The company, he says, “needed to have a story about our future.” He focused on initiatives that would kick-start growth once the economy recovered. Crocker fine-tuned his industrial commercial business, made some adjustments to his distribution model and invested modestly in products lines.

And he looked at exports. Enterprise Minnesota encouraged Schaefer and a couple of his managers to attend ExporTech in Minneapolis, a government program designed to help companies develop a strategic approach to exports. Sponsored by the U.S. Department of Commerce, ExporTech consists of three full-day sessions in which manufacturers can develop export plans with guidance from lawyers, export professionals and an array of other government-sponsored resources.

At the time, Schaefer had developed some “accidental” export contracts, in which foreign buyers had purchased equipment via contacts through domestic trade shows or through other referrals. ExporTech enabled Crocker to see that exports should be more strategic than merely waiting for the phone to ring, especially in a down market, and perhaps because of the down market.

“We became aware that there was lots of help out there,” Crocker says.

Under the guidance of ExporTech, Crocker and Lyle developed their strategic export plan. They selected target markets mostly in warm areas around the equator, in which heat would affect dairy and in countries that would not require much reengineering to accommodate regulations.

They knew that Schaefer would benefit from the increasing industrialENTERPRISE MINNESOTA MARCH 2013 25

Photograph BY PATRICK KELLY

Schaefer Ventilation Equipment CEO Neal Crocker stands next to one of the company’s massive industrial cooling fans.

ization of dairy operations worldwide.

They knew, too, that they would benefit from the overall reputation of the U.S. agricultural sector.

“In foreign markets, a technology from the U.S. is still king,” says Lyle.

Schaefer’s value proposition would be that its ventilation equipment is U.S. made, high quality and proven.

“If they are concerned about having a rugged, dependable product, they’ll choose us,” Lyle says. “If they are only interested in price we certainly face an uphill battle.”

Crocker had worked for large companies in which global trade was second nature. “It seems relatively easy in a company in which you have people who speak several languages. I had

26 ENTERPRISE MINNESOTA MARCH 2013

never participated in the transition from being a domestic supplier to an accomplished exporter,” he says.

Crocker and Lyle created a plan with a modest $100,000 first-year budget.

They also set out to target markets around the equator that would make their products more attractive, countries that would be less restrictive on imports regarding factors like UL certification or CE marks, and countries with voltages similar to those in the United States.

Crocker hired a young college graduate with fluency in Spanish to assist Lyle in making Latin American calls.

“Our current state was obvious, our end state was obvious – but the transition was not so obvious,” he says.

“�

“The most significant difference between and accidental exporter and an intentional exporter is distribution.�

The key was to build distribution networks. Schaefer needed people to sell directly into their markets but also to address maintenance challenges.

When a dairy cooling system breaks down, he says, cows can immediately go into distress. You have to have someone on the ground to address the issue. “The most significant difference between an accidental exporter and an intentional exporter is distribution,�

Crocker says. “Finding distributors is hard.� And you have to investigate them carefully, he adds, because “once you have them you usually have them for life.�

Schaefer gets leads from the Gold Key service at the U.S. Commercial Service, which for a modest fee will identify potential distributors. The company also depends on contacts and information from its own domestic network of other milk equipment companies that are going global.

Crocker expects his company to notch about 15 percent of his sales from international markets in the coming year. He believes 20 percent will feel like “critical mass,� and says he looks forward to the day the company reaches it, adding, “I don’t want to stop at that.�

For his part, Lyle continues to travel. And travel. He has set up an opportunity in Pakistan and is courting the large potential market in Turkey as well. “Every time I go, I’m learning, so there is still a lot of discovery,� he says. “We’re still discovering the needs of our customers. Our product in the U.S. will differ when we put it overseas. The barn styles, the management practices are slightly different. Learning about customers’ needs and processing or building a system based on those visits is something we still have to do in order to be successful.�

Neal Crocker,

Schaefer Ventilation Equipment

He also copes with the different cultures of doing business. “In America, when you make a proposal, generally speaking you get an answer in a reasonable amount of time, or you can follow up without insulting the buyer or the group you are presenting,� he says. “In Saudi Arabia, you can make a presentation, you can offer sales advice, but the decision doesn’t happen on your time, it happens on their time, which is fine. But culturally you have to be aware that you cannot press and that you can do only so much urging before you presumably start to tick someone off.� “You are always nervous when you enter a market at the first time, and you are meeting people for the first time,� he adds. “Once you are on the ground, you realize that people are good people, generally speaking, no matter wherever you go.�

He says that he travels with security in Pakistan, but it is probably unnecessary. “The people we deal with are entrepreneurs,� he says. “They care deeply about whatever industry they are involved in, whether it be dairy or shipbuilding, welding or industrial supply.

They are out to find good products.

The people that we deal with really care about their reputations.�

What Lyle finds most interesting, he says, is the hospitality, particularly in the Middle East. “They are warm people who embrace having guests,� he says. “You can’t imagine how well you are treated. The food is wonderful. People are welcoming. It sounds cheesy, but it is a powerful moment when you are invited into someone’s house.�

For more information about Schaefer Ventilation Equipment, go to www.schaeferfan.com.

“I enjoy being on a team that delivers exceptional advice to our clients, so they can experience successful M&A outcomes� ~ John Waldock, Consulting Services

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www.eideba illy. com ENTERPRISE MINNESOTA MARCH 2013 27

The Toyota Way Respect

Continuous Improvement

Challenge

Kaizen

We Have

for People

Genchi Genbutsu

Respect

Teamwork

Had a Problem

One of America’s top ‘lean’ gurus shows how to make creative problem-solving a permanent part of your company’s culture.

By David Meier I started working at Toyota in 1987. It took me

about 20 years to understand the answer to the question, “What is lean?” Finally, it occurred to me that lean is really nothing more than all of the people who work in your organization thinking about things in a certain way and improving your processes in a way that meets your needs and the needs of your customers. Lean is converting waste to value with an aim for long-term prosperity.

28 ENTERPRISE MINNESOTA MARCH 2013

Many people are hesitant to try the Toyota way of thinking because they feel their company is too different from Toyota. But the Toyota way of thinking actually has little to do with manufacturing; it has to do with problem solving, and developing a problem-solving mindset. In fact, I’ve tried for years to find a type of work situation where problem-solving thinking and lean concepts don’t apply. I’m still looking. Lean concepts apply in every work place! Lean tools and techniques may not apply to every work place.

David Meier, founder and president, Lean Associates, Inc.

Lean’s Challenges

Many other people have started the lean journey at their companies, but without great success. Most often, these companies fall into one of a series of challenges. In studying different companies’ lean journeys, I have found that the number-one challenge seems to be sustainability.

They accomplish a series of goals with great coaches and great leadership, but six months later, it goes away.

The second common challenge is lean’s failure to meet a company’s expectations. When a company tells me lean isn’t doing what they thought it would do, I ask them a question: “What did you expect?” to which they typically respond, “Well, we thought it was going to get better.” I then ask them, “What did you define as better?” In order to improve, you must define both your current and desired future states, so that you can close the gap between them and track your progress.

When you do begin to close the gap, remember to adapt lean concepts and tools to your unique business and problem. Lean tools like 5S, Kaizen events and kanban systems can be extremely effective. What people often miss, though, is the strategy part: how do these concepts and ideas apply to you and your situation?

You hear a lot about standardization in lean, for exam-

would mean a state of perfection. But as you advance in your lean journey, the gains and improvements get smaller, while the amount of effort required to achieve them increases exponentially.

Toyota’s Problem-Solving Mindset

The key to transcending all of these Photograph courtesy of David Meier challenges is problemsolving thinking. It’s about learning how to work through your processes methodically to improve them.

To practice problem-solving thinking, you first must clearly define the problem. At Toyota, people are fond of saying, “No standard, no problem.” What they mean is that if you don’t have any expected conditions, then there is no way you can have a problem. You might have frustra-

“We respect people by challenging them.” ple. If you go to Toyota, you will see tactically how they apply that concept. You can see how they’re using this idea of standardization and how they incorporate it into their daily processes. But you still have to back up one level. You have to consider how you are going to execute that concept in your process. People so frequently skip over the strategic part and go straight for the tool.

It’s okay to borrow ideas from others, but you still have to define how it makes sense to you, and how it will help you to get where you want to go.

A third common hurdle is a lack of buy-in or support when it comes to the lean journey. This is natural. At some point, each and every person will bump up against something in the lean process that doesn’t make sense on the surface. You have to dig deep to understand the underlying messages and mechanics.

Another challenge in lean is finding both the time and the money to do it. When times are good, you may have money to invest, but you don’t have time because you’re busy. When times aren’t good, you have the time, but not the money. This is a continuous challenge, but one that becomes less difficult as you become a more effective problem solver and are able to effect change more quickly and with fewer resources.

Finally, there is the challenge of diminishing returns.

There is no organization on the planet that is lean, because lean means continuously improving and being lean

tion, chaos or confusion, but it’s not a problem until you define expectations. So ask yourself what you’re trying to achieve, and then define where you are not doing that.

In this process, it’s imperative to view your processes from a different vantage point. This can be especially hard for leaders to do, but it is crucial. Step back, clear your mind, and let go of what you “know.” Allow yourself to see the true problem. Don’t evaluate or judge. Don’t think about fixing it right away. Just see it for what it is: your current condition.

This can be tricky. People often get confused about the difference between the problem itself, its root causes and its symptoms. Symptoms always occur after the problem.

Causes always come before the problem. But the confusing part is that every cause and every symptom could be defined as a problem, as well, because it’s a deviation from an expected condition.

You can think about it like you might think about an illness. The problem itself is the fever, because it’s a measureable deviation from an established standard. The underlying cause that led to the fever is an infection. And the symptoms are the result of the problem: achiness, weakness and fatigue. To fix the problem, you have to correct the root causes.

Once you’ve defined the problem, the even bigger question of who owns the problem comes into play. At Toyota, the answer is always, “we” have a problem. Not me, and not you. We. ENTERPRISE MINNESOTA MARCH 2013 29

This is a direct result of Toyota’s two fundamental pillars: continuous improvement and respect for people.

It sounds easy to respect people. But what does it actually mean? How will we know when we’ve achieved it? Usually, people say respect is “listening.”

But what does that sound like? We call it “active listening.” One way that I know if someone is not practicing active listening is if somebody answers my question before I finish it. Active listening usually includes a pause.

Toyota says, “We respect people by challenging them.” There are a few key components that come with that. First, if you are in the organization, then you are considered capable of solving problems. You might need some tools, ideas or support. But you have the capability.

Second, it is considered disrespectful to take away the privilege from people to solve their own problems. That’s the mindset. This explains why the Toyota leaders never gave me an answer when I asked them, “What should I do?” Their standard answer was always, “It depends.” I would ask them repeatedly, and one day I even presented two choices: A or B. But I could never get an answer, because it was considered a form of disrespect. It also explains why Toyota leaders often say, “Before we build cars, we build people.”

Leaders are Teachers • Talking to someone is NOT the same as them understanding or learning.

• Telling someone is NOT the same as teaching them.

Building People

When Toyota first came to Kentucky in 1980, Kentucky was ranked 49th out of 50 states in educational rank. You might wonder why they chose Kentucky. Mississippi was ranked 50th, and Toyota’s newest location is in Mississippi. Toyota does develop people. In Toyota’s mission statement, it says, “We will meet our challenging goals by engaging the talent and passion of people, who believe there is always a better way.” They don’t say that they want to make a lot of cars or make a lot of money. They say that if they build people, they’ll be able to make cars.

They know that if they focus on developing the people the financial results will follow. They take the raw material and they grow it.

They talk a lot about “learning by doing.” When I would do things at Toyota, the leaders would often ask why. I kept thinking I had done something wrong, because no matter what I tried, I kept getting more and more questions. It didn’t occur to me until much later that they weren’t challenging me in any way. Instead, they were trying to validate my thinking process. They only

way you can validate anybody’s thinking process is to ask questions about what they were thinking. What were the options, and why did you choose this one?

I also learned that there is no single right answer. There is no answer you can come upon that doesn’t have some negative consequence. There is no “ultimate” answer. I should have known, because “continuous improvement” means infinite improvement.

What Toyota strives for is to develop leaders to be teachers. The only way you can sustain in the long-term is if you can pass on what you’ve learned. They have the mindset that you have received this knowledge from your elders, and you can now pass it on to the next generation.

It is important to stress that telling someone is not the same as teaching them. I often hear leaders say, “Well, I told them several times what to do and they just don’t do it.” But telling someone isn’t equivalent to them learning or understanding. You know you’ve successfully taught someone if you get the expected outcome from the situation. Until the student learns, the teacher has not taught.

The tricky part in teaching others is that it’s not considered “helping” someone to do for them what they’re capable of doing for themselves. The expectation that you are capable remains, and so in order to teach, you must guide the person to the answer without giving it to them.

There are three relevant types of questions that you can ask someone in order to help them discover the solution to a problem they are facing. The first type is guiding questions. When someone is facing a challenge, you can ask, ‘Have you considered trying x?’ These types of ques-

“Lean’s hardest lesson to learn is the “repeat” part.”

30 ENTERPRISE MINNESOTA MARCH 2013

tions work to stimulate ideas for new possible solutions.

The second type is clarifying questions. A clarifying question might sound something like, ‘I’m not sure I understand. Can you show me? Let’s go have a look together.’ These questions give you a solid understanding of the situation at hand, and reinforce your role as a coach or teacher who is on their side.

Looking at a problem firsthand can allow you to see it more clearly. It also embraces an important Toyota philosophy called genchi genbutsu, which roughly translated means, “go and see for yourself.”

The third type is challenging questions, which can help someone to step back, evaluate and perhaps refine or add to their list of potential solutions.

When a person presents one solution, you can ask, ‘What other possibilities do you see here?’ People most often come up with the first workable answer and pursue it. But it’s important to explore several options before moving forward with one.

Is it difficult to help people without giving them the answer? Absolutely.

The key is to provide the appropriate challenges, support and acknowledge the successes, and then repeat.

Embracing the Continuum

Perhaps lean’s hardest lesson to learn is the “repeat” part—that it never ends.

Because even if you fix today’s problems, things will happen in the future that will cause new ones. At Toyota, there is always a simultaneous long-term and short-term view of objectives. In the short term, you’re always producing results and achieving established goals. But the long-term view also works towards those things by developing people to be leaders and teachers.

Toyota uses the terms problem-solving and PDCA (Plan Do Check Adjust) synonymously. But there is a slight distinction, and one that is helpful in maintaining a short-term and long-term view of your objectives. Problem-solving refers to a situation where a problem already exists and a solution is needed.

There are causal factors that exist already. Problem-solving is like archaeological exploration because you are going back in time to understand those causal factors and implement corrective actions to prevent them in the future.

When we practice PDCA, we are setting an expectation for a specific outcome in the future and deploying a strategy. We are trying to get to a place that we have not been in the past. In this case, there are no causal factors because nothing has happened yet. Instead, we are putting a plan in place to define what we need to do in order to arrive at a desired point.

One of the things I’ve had to let go of personally was this notion that I have to know everything up front, and that I have to have the perfect plan.

For years, I worked diligently to prepare and plan so well that nothing could possibly go wrong. But no sooner would I execute a plan than I would discover there was something that wasn’t working out the way I had anticipated.

The truth is, there is no perfect plan. But building a plan is an important step in getting where you want to go. If you decide to climb Mount Everest, you have to plan and prepare. You have to get your equipment ready. You have to get your team trained with the appropriate skills. Then, you start to do. As soon as you start to do, however, things will come up. That is when you have to evaluate, or “check” and find out why. Then you can adjust your plan and course of action. Then repeat.

David Meier is the founder and president of Lean Associates, Inc., and is the co-author with Jeffrey Liker of best-selling booksThe Toyota Way Fieldbook (McGrah-Hill, 2005) and Toyota Talent: Developing Your People the Toyota Way (McGraw-Hill, 2007).

David learned the Toyota Production System as one of the first leaders hired at Toyota’s Georgetown, Ky. location, where he worked in the plastic molding department. He received training and mentoring in Toyota Production System principles over a 10-year period in Kentucky and Japan.

As a trainer and speaker on launching and sustaining lean transformations, David has worked in North America, Russia, Europe, Brazil, and Asia for a variety of service and manufacturing industries. He currently helps companies implement lean principles through Lean Associates, Inc. ENTERPRISE MINNESOTA MARCH 2013 31

final word

How to ‘Net More Customers Effective use of online trends is essential for driving sales growth and brand awareness.

By Deborah Notermann Whether you’re selling a pen or fabricating the metal for the pen, you have likely been urged time and time

32 ENTERPRISE MINNESOTA MARCH 2013

Photograph Courtesy of Deborah Notermann

again to incorporate online tools into your marketing strategy. Historically, most manufacturers have asked why, and the answers haven’t compelled significant action– until now. A 2012 study conducted by Oracle found that 46 percent of manufacturers expected to invest in mobile websites and nearly 44 percent were investing in methods to leverage product content and data across digital channels. What has changed?

In the past, manufactures felt their products and sales cycles were too complex to be affected by online marketing trends. While that complexity still exists, it is clear those making purchasing decisions are looking online first. Currently, Google averages 90,000 monthly searches in the U.S. for metal fabricators and 50,000 monthly searches in the U.S. for plastic molding. Your products and services are invisible if they aren’t represented in online search results.

So, how do you aid in your own discovery? The key is an online marketing strategy with a fundamental focus on two key areas: your buyer and your content.

First, all the traditional elements of understanding your buyer are important, but added now are online behavioral elements. Enabling your buyer to develop a relationship with your brand requires an understanding of how they look for products and services such as yours online, why they would select your products and services to research, and ultimately, what will motivate them to develop a relationship with your brand. The good news is the interactive space provides excellent tools to help answer these questions and fine-tune your approach for the best result.

Second, implementing a content strategy with clear messaging that accounts for the uniqueness of the online decision maker is fundamental. Clear, consistent messaging across all media channels forms the root structure for your brand, and in turn, all of your marketing activities. Verify your online messaging is consistent with your offline message to maintain credibility and relevance. Further, remember the attention span online is very short. Create easily consumable chunks of content that work together to lead each prospect down the path of becoming a client. Remember, prospects and business stakeholders will search online for information regarding Deborah Notermann your products, services and company. The best way to ensure what they find reflects your brand messaging is to provide the content.

Page10 Senior Vice President Deborah It’s also essential to deliver all content in an accessible way. Many midNotermann has helped the 2005and smaller-sized manufacturers have brochure-type websites that offer founded company grow into one of the brief descriptions of their products and organizations, with more specific top 25 web design and development product information stashed in downloadable PDFs. PDFs pose two sigfirms in the Twin Cities, with a client nificant issues. First, search engines cannot index them, so the content will roster including Lawson, Thrivent and not help you be found. Second, potential customers are unlikely to take the Creative Memories. Throughout her extra steps necessary to retrieve the information. career, Deborah has remained most Content should be distributed in a way that guides the buyer through the passionate about organizational learning process. Too much information will cause the buyer to lose interdevelopment and learning about various est; but allowing the buyer to find relevant information easily will greatly business models, and has always improve sales. Remember, too, that consumers expect current web content. enjoyed working hand-in-hand with When your products change, your website should change, too. clients to improve their business and Finally, after launching your digital strategy, track your success. Powerful online marketing strategies. Prior to her analytics are available at low to no cost, and their effective use will allow you position at page10, Deborah co-founded to modify your strategy to reach the greatest number of buyers and provide consulting firm Page Inc. in 1997, serving the most optimal path toward sales growth. as its senior partner and principal.

To learn more about page10, go to www.page10.com.

ENTERPRISE DIRECTORY advertising section

Eide Bailly LLP

McGladrey

Eide Bailly is a full-service CPA and business advisory firm that serves more than 650 diverse manufacturing clients, ranging from food processors and household products to machinery, electronics and fabricated products. Our clients appreciate that we understand the complex issues they face and stay connected with them throughout the year. Using a team approach, clients benefit from seamless access to the services and resources they need to succeed.

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Solution Dynamics

U of M College of Continuing Education

We are focused on solving supply chain challenges for manufacturing and distribution companies while delivering real operational efficiencies through world-class, industry-specific, Microsoft business software.

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Saint Paul College

Future

Customized Training and Continuing Education provides quality, applied training at our site, your business, or online. We assist businesses and organizations throughout the metro area stay current and informed regarding best practices relevant to workplace and technical skills, leadership, organizational sustainability, and practical business solutions.

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Wipfli

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