Wisconsin Department of Commerce Newsletter
April 2006
WI Innovates Overview

Approximately 500 Wisconsin business owners, CEOs and entrepreneurs who manufacture and sell everything from hamburgers to horseradish, motorcycles to microscopes gathered at the Midwest Airlines Center in Milwaukee on March 28-29 for the first-ever "Wisconsin Innovates! Business Best Practices" conference, presented by Governor Doyle, the Department of Commerce and the Wisconsin Innovative Network (WIN). Sponsors included M & I Bank, Foley & Lardner, Virchow & Krause, MG & E, Alliant Energy, Public Service, a WPS Resources Company and WE Energies.

Internationally renowned author Tom Peters was the keynote speaker at the conference, bringing his cautionary tale of "Innovate or die" to Wisconsin. Peters' message was echoed by representatives from a number of highly successful businesses, who volunteered their time to share some of their secrets to success in an ever-increasingly competitive world market.

WI Innovates! Photo Gallery

Over the course of the two-day event, there were over 20 panels and speakers covering such topics as: "Driving Growth through Innovation," "Health Care Solutions: Find Out What Others are Doing to Control Costs" and "Small Business Survival: Copy Lessons Learned from Big Business." Participants attending the sessions had ample opportunity for question and answer sessions with some of Wisconsin's top industry leaders.

Following are some snapshots from some representative sessions:

Entrepreneurs: How they grew their business from the ground up.
Craig Culver, of Culver Franchising System, Inc., Richard Burke, of Trek Bicycle Corporation, and Michael Cudahy, Marquette Electronics, Inc., agreed that raising capital and continually changing the business to meet evolving market demands were two principal challenges facing entrepreneurs today.

All three raised start-up capital from their savings and families. They stressed the importance of a long-term relationship with a banker. To build that relationship, all three agreed, you must be honest with your banker at all times and tell him in advance when bad news is coming.

To keep abreast of markets, you need a steady stream of new ideas. How do you get those new ideas? All three stressed creating an environment that encourages creativity and innovation and does not discourage mistakes. Culver takes ideas from his competitors and listens closely to his franchisees to find out what's working and what's not. Cudahy believes in knowing your market and giving the market what it wants. Burke believes in giving the market what it wants and in continuously improving current products and services.

Ariens Company Uses Lean Manufacturing for a Competitive Edge
What does it take to compete in the global economy? Institute lean manufacturing to cut costs and eliminate waste, adopt the Kaizen continuous improvement process, recruit and retain the best employees, and build a culture of success, according to Dan Ariens, president of Ariens Manufacturing, Brillion.

In the six years since he has incorporated lean manufacturing, his company has enjoyed a 17-percent increase in overall productivity and quadrupled inventory turns. He noted that since 1977, the company has been able to triple sales while using the same square footage.

The switch to lean manufacturing has also helped this 77-year-old company fulfill its vision - Passionate people…Astounded customers---and remain true to its core values: Be Honest…Be Fair…Keep commitments…Respect the individual…Encourage intellectual curiosity

Ariens recently undertook the challenge of competing with a China-based producer for the manufacture of a six-part spindle. The cost of production at Ariens was $30.74 per unit; the cost from China was $19.30. After Kaizen, the Brillion plant could produce the spindle at $16.30/unit and deliver it in 1.1 week, as opposed to seven weeks from the China producer.

Ariens noted that there are six principal types of waste: overproduction, waiting, transport, extra processing, inventory and defects. He believes in spending time on the shop floor to see what's going rather than relying on the reports of subordinates. In most cases, you can find the answer to a productivity problem by visually inspecting that area of production process.

While some companies are content with a Kaizen event per quarter, his company has up to six such events per week. He has dedicated two percent of his workforce to full-time Kaizen work.

"When confronted by a low quote from a China producer, managers move production offshore," Ariens said. "But leaders compete by driving production back through the stateside plant, using Kaizen to motivate and involve employees in the retention of their jobs and the continuing success of the company."

Corporate Values Drive Insurance Business
Ameriprise President Kenneth Ciak is the first to acknowledge that "We sell a product (insurance) no one wants to buy - it's more fun to buy a Harley!" Yet in spite of the fact that they are a full-service insurance company with no agents and virtually no advertising (aside from the current blitz to build awareness of the company's name change from American Express to the spun off Ameriprise), the company has grown from 24 employees in 1987 to 1,000 today with over $750,000,000 in underwriting.

How did they do it? Ciak says that in a nutshell it's their employees. The company has an open door policy and a philosophy of having "one class" of employees. The vast majority of them spend all day on the phone assisting customers, which can mean that each one handles between 60 and 100 calls per day. Making sure that they hire – and retain - "emotionally intelligent" individuals who are up to the challenge is crucial to the company's success. "We can't afford to have people on the phone that are argumentative."

Ciak explains that while most companies have core values, "They are only words – they don't become real until people bring them to life." Enron, for example, had its values "hanging on the walls," but did not practice what it preached. At Ameriprise, says Ciak, company values are instilled from day one. "We spend an inordinate amount of time on integrity," he explains, adding that they continually stress the importance of client satisfaction, excellent communication skills and respect for all clients.

At the end of the day, says Ciak, "We have to make money, but in a certain way. If (our) people don't stick around, we're done."

Boca Burgers at Culver's?
When Craig Culver, founder and CEO of Culver Franchising System, Inc., opened his first restaurant 22 years ago in Sauk City with his wife Leah and parents Ruth and George as partners, he recalls that "I didn't want it to be McDonald's." Though he says that he will always be grateful for the training he received as an employee of the fast food giant, he envisioned something different - a self-service/sit down restaurant that served fresh, never frozen, burgers and frozen custard.

"I didn't know what a niche was 22 years ago," he explains, but found that his restaurant was indeed that. "It was a great niche," says Culver, "between McDonalds and (TGIF) Fridays."

The "point of difference" (a crucial component in any business) he had to offer was the custard. While Milwaukeeans knew what frozen custard was a la Kopps, Gilles, etc., the rest of the state was clueless about the dense, flavorful product. It was unique – unique enough that two decades later Culver's is on track to open its 400th restaurant by the end of next year.

However, as Culver acknowledges, the road to world restaurant domination has not always been as smooth as the custard he sells. Increased competition, changing customer tastes and demographics all play a part in keeping the franchiser on its toes. "The environment is changing," says Culver, "and we have to continue to change – to dream, be visionaries, to look outside of the box."

For a time, the trend was bigger – hence the introduction of the jumbo butter burger. Today, a larger salad selection, smaller portion sundaes and shakes and more chicken, turkey and fish offerings reflect public tastes. Says Culver, while it's "hard to give up a double cheeseburger," he envisions a time when "Boca Burgers©" may make an appearance on Culver's menu. And while smoke-free is a trend taking off in the restaurant business, Culver chuckles that "We've been smoke-free forever – or at least since my mother quit smoking" and she decreed that the chain would follow suit.

Along with anticipating what their customers will order at the drive-thru window, in addition to adhering to core principles of hospitality, keeping a leg up on the competition, consumer trends and the notion that a good job isn't good enough any more the restaurant franchising business must take into account a myriad of behind the scenes issues such as rising interest rates, changing technology, property and construction costs – no small headaches.

However, Culver notes that his company is "in it for the long haul." When people ask him how it feels to be a success, he says, "I don't like to think about it. If you think you are – you're probably on the way down. You're only as good as the day before."

-- Tony Hozeny, Barbro McGinn

The newsletter is issued electronically every other month.

Please send comments or questions to Barbro McGinn, editor.

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