A new generation of business and civic leaders
aims to rebuild Milwaukee’s core competitiveness

ActionResponseToSchmidStory

By JOHN SCHMID
jschmid@journalsentinel.com

Posted: Dec. 6, 2004

Key People Listed:

  • Art Smith, Initiative for a Competitive Milwaukee.

  • President Chris Illman, Coakley-Tech

  • Norris & Associates Inc.

  • Porter, Boston’s Initiative for a Competitive Inner City

  • Anne Habiby, co-executive director in Boston for the Initiative for a Competitive Inner City

  • Midcities Investment Management

  • Manpower Inc.

  • Katherine M. Hudson, former chief executive of Milwaukee-based Brady Corp.

  • Rajan Shukla, program director at the initiative.

  • initiative general counsel and business development officer Christopher E. Ware

  • University of Wisconsin-Milwaukee and Marquette University have provided urban policy experts and are contouring curriculum into “advancement tracks

  • Robert E. Litan, vice president for research at the Kansas City-based Kauffman Foundation, launched a project in October to cultivate urban start-ups in Atlanta, Cincinnati, Cleveland, Jacksonville and Kansas City.

  • State Commerce Secretary Cory L. Nettles

  • The Brookings Institution in Washington

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Art Smith, who heads the Initiative for a Competitive Milwaukee….

Norris moved back and runs a 14-person consulting firm on the west side Norris & Associates Inc.

Coakley-Tech LLC, a 5-year-old, $12 million start-up, is one Milwaukee company willing to open its books and take a shot at the list.. President Chris Illman

Boston’s Initiative for a Competitive Inner City…Porter, 57, founded the Initiative for a Competitive Inner City. He has spent his career studying how nations, regions and corporations survive in an era of perpetual global competition. Porter was tenured at 26 as one of the youngest professors in Harvard’s history and has ties to the World Economic Forum, the prestigious body that hosts a summit of finance ministers and multinational chief executives each January in Davos, Switzerland. He travels perpetually.Anne Habiby, co-executive director in Boston for the Initiative for a Competitive Inner City, said Milwaukee stands apart from the nearly 20 other cities her group has worked with nationally. Milwaukee, she said, has rallied a broader spectrum of civic, academic, business and government leadership behind the framework. Other cities, by comparison, are looking at only pieces of the puzzle while Milwaukee is looking at the whole puzzle, she said.

“Milwaukee is very different,” Habiby said. “Based on where they are economically, they have to work a lot harder.”

The Milwaukee Initiative is coordinating efforts with venture capital fund managers to launch Midcities Investment Management, a privately managed fund that targets high-growth firms in Milwaukee’s urban core. Manpower Inc., a world leader in flexible labor markets, is lending researchers to map out a strategy to lure firms that offer back-office outsourcing services.

“I think you’d be surprised to find that there are some 5,000 businesses in the inner city of Milwaukee, employing 120,000 people,” said Katherine M. Hudson, former chief executive of Milwaukee-based Brady Corp. and one of the initiative’s most passionate backers.Hudson, who dramatically increased Brady’s global presence in the ‘90s, sees inner-city Milwaukee as a “a magnet for investment by foreign firms who are globalizing themselves.”

At the heart of the initiative is a recognition that the city’s place in the world economy continues to change rapidly. “We’re competing with Shanghai, we’re competing with Bangalore,” said Rajan Shukla, program director at the initiative.

“There’s tons of literature and research on how to start businesses in Third World countries. There’s very little on how to start and grow a business in the inner city,” said initiative general counsel and business development officer Christopher E. Ware.

Ware, 36, left Quarles & Brady, one of the city’s elite law firms, to work for the initiative.

The University of Wisconsin-Milwaukee and Marquette University have provided urban policy experts and are contouring curriculum into “advancement tracks.” Eager to breathe life back into unused urban land, for example, Marquette is training minority students to find a new life for old commercial real estate. Milwaukee Area Technical College wants to develop fast-track courses in construction management

Robert E. Litan, vice president for research at the Kansas City-based Kauffman Foundation, a policy think-tank that studies entrepreneurialism, says Milwaukee has found itself in a “vicious cycle” because it lacks an entrepreneurial tradition.

“The most important predictor is if someone in your family is an entrepreneur and if they have worked in the family business,” said Litan, one of the nation’s leading researchers on the character of American entrepreneurialism. “It’s not in your genes; it’s in your environment.” In Milwaukee, he said, “not enough kids grow up living in an entrepreneurial family. They are already behind the eight ball.”

State Commerce Secretary Cory L. Nettles said the city’s African-Americans made “a late crossover from the industrial to the professional economy.”

The Kauffman Foundation launched a project in October to cultivate urban start-ups in Atlanta, Cincinnati, Cleveland, Jacksonville and Kansas City. A small number of for-profit black venture capital firms have sprung into existence.

The Brookings Institution in Washington, shifting its attention from rates of social distress to rates of economic growth, is fine-tuning databanks that for the first time track consumer and economic growth trends in the nation’s inner cities.

Key Concepts:

The prospectus lists four sectors that hold the most promise in Milwaukee’s urban core: back-office service firms to support the region’s strong financial and insurance industries; health services, which feed off the city’s cluster of medical technology industries; manufacturing, a Milwaukee mainstay that still employs one in five central-city workers in the city; and construction, which can capitalize on a big slate of planned public-works projects.

persuade corporate America that Milwaukee boasts more untapped competitive advantages than many might guess. …

urban nexus of central locations, low transportation costs, cheap land and proximity to universities and the ideas they incubate…

Inc. magazine’s “Inner City 100″ - an annual ranking of high-growth companies based in distressed central cities. …

In the process, the city’s free-enterprise policy proponents are helping change the tone and tenor of the nation’s big-city urban renewal debate.

“What we’ve been doing for 50 years isn’t working,” said Art Smith, who heads the Initiative for a Competitive Milwaukee.

Smith’s organization is young, small and upbeat, like the companies it envisions amid the shuttered factories and storefront churches of the urban core. Rather than track the known deficits of the inner city - poverty, drugs and crime - the initiative aims to persuade corporate America that Milwaukee boasts more untapped competitive advantages than many might guess.

The initiative highlights an urban nexus of central locations, low transportation costs, cheap land and proximity to universities and the ideas they incubate. Initiative backers scorn zoning red tape and other regulations that handicap the industrial heart of the city in competition with sprawling business parks built on bulldozed farmland.

Just as boardroom elite aspire to the Fortune 500, Milwaukee’s nascent entrepreneurs strive for a listing in Inc. magazine’s “Inner City 100″ - an annual ranking of high-growth companies based in distressed central cities. The IC-100 carries prestige: Few firms can boast the red-hot growth rates that qualify for a listing.

Starting up companies

Coakley-Tech LLC, a 5-year-old, $12 million start-up, is one Milwaukee company willing to open its books and take a shot at the list. President Chris Illman feels at home in the “retro look” of a rehabbed industrial plant on the west side that churns out custom orders of DVDs, CDs and print-on-demand books…

Norris moved back and runs a 14-person consulting firm on the west side - Norris & Associates Inc.

“We have got to drive entrepreneurship; we have got to drive it in a major, major way,” said the 56-year-old African-American who runs his own travel agency. Before Smith became an entrepreneur, he began his career in Chicago at the McDonald’s Corp.

“What we’ve been doing for 50 years isn’t working,” said Art Smith, who heads the Initiative for a Competitive Milwaukee.

Smith’s organization is young, small and upbeat, like the companies it envisions amid the shuttered factories and storefront churches of the urban core. Rather than track the known deficits of the inner city - poverty, drugs and crime - the initiative aims to persuade corporate America that Milwaukee boasts more untapped competitive advantages than many might guess.

The initiative highlights an urban nexus of central locations, low transportation costs, cheap land and proximity to universities and the ideas they incubate. Initiative backers scorn zoning red tape and other regulations that handicap the industrial heart of the city in competition with sprawling business parks built on bulldozed farmland.

Just as boardroom elite aspire to the Fortune 500, Milwaukee’s nascent entrepreneurs strive for a listing in Inc. magazine’s “Inner City 100″ - an annual ranking of high-growth companies based in distressed central cities. The IC-100 carries prestige: Few firms can boast the red-hot growth rates that qualify for a listing.

Starting up companies

Coakley-Tech LLC, a 5-year-old, $12 million start-up, is one Milwaukee company willing to open its books and take a shot at the list. President Chris Illman feels at home in the “retro look” of a rehabbed industrial plant on the west side that churns out custom orders of DVDs, CDs and print-on-demand books. Illman holds down his labor costs: “We’re able to pay competitively, but at a proper inner city rate.”

Another urban entrepreneur, Rick Norris, said he is “trying to grow a company and leave a legacy.” Norris, 47, was “born and raised in the Hillside housing projects on welfare.” A high school math teacher helped him into Marquette University, where he earned a civil engineering degree in 1980.

But Norris needed to leave Milwaukee to experience firsthand a vibrant black entrepreneurial culture. His first job took him to Polytech Engineers Inc., a black firm in Cleveland, which opened his eyes to “an abundance of African-American entrepreneurs, which I’d never seen before.”

Norris moved back and runs a 14-person consulting firm on the west side - Norris & Associates Inc. “You rarely see old black wealth here,” he said. “When you go to other cities, you see the legacy of old black wealth continuing to perpetuate the culture of enterprise.”

Smith agreed. “We have got to drive entrepreneurship; we have got to drive it in a major, major way,” said the 56-year-old African-American who runs his own travel agency. Before Smith became an entrepreneur, he began his career in Chicago at the McDonald’s Corp., where he met one of his early mentors, Ray A. Kroc, who founded McDonald’s at age 53.

Aware that Milwaukee needs a come-from-behind strategy, initiative staffers have begun to assemble a new urban revitalization toolbox meant to catalyze the incubators of free enterprise, regardless of the entrepreneur’s race, while supporting existing companies in the urban core.

Experts from Boston’s Initiative for a Competitive Inner City, founded by one of Harvard’s leading economic theorists, have flown to Milwaukee to draft long-term strategies. Last year, they published a 60-page prospectus that maps out business opportunities. The prospectus lists four sectors that hold the most promise in Milwaukee’s urban core: back-office service firms to support the region’s strong financial and insurance industries; health services, which feed off the city’s cluster of medical technology industries; manufacturing, a Milwaukee mainstay that still employs one in five central-city workers in the city; and construction, which can capitalize on a big slate of planned public-works projects.

Local entrepreneur awards have emerged, in part to goad companies toward the national IC-100 rankings, as have local enterprise coaches who preach risk. The Milwaukee Initiative is coordinating efforts with venture capital fund managers to launch Midcities Investment Management, a privately managed fund that targets high-growth firms in Milwaukee’s urban core. Manpower Inc., a world leader in flexible labor markets, is lending researchers to map out a strategy to lure firms that offer back-office outsourcing services.

The University of Wisconsin-Milwaukee and Marquette University have provided urban policy experts and are contouring curriculum into “advancement tracks.” Eager to breathe life back into unused urban land, for example, Marquette is training minority students to find a new life for old commercial real estate. Milwaukee Area Technical College wants to develop fast-track courses in construction management.

Government is expected to take a back seat while the private sector takes the lead. “Anything else is going back to the old paradigm,” said Smith, a past president of the Public Policy Forum.

The initiative also has spent much of its initial energy conducting first-ever “competitive assessments” of the economic life that still ticks inside the city’s urban heart.

“I think you’d be surprised to find that there are some 5,000 businesses in the inner city of Milwaukee, employing 120,000 people,” said Katherine M. Hudson, former chief executive of Milwaukee-based Brady Corp. and one of the initiative’s most passionate backers.

The “competitive strategy” model of urban rebirth refuses to see the urban core in isolation from the regional Midwestern economy or the global economy.

Hudson, who dramatically increased Brady’s global presence in the ‘90s, sees inner-city Milwaukee as a “a magnet for investment by foreign firms who are globalizing themselves.”

“Consider the inner city as the final frontier for the U.S. in the age of globalization,” she said.

The percolation of profitable businesses remains more a vision than a reality. Even Smith, who runs the initiative, chose last year to move the headquarters for his travel-service firm out of the old Schlitz brewery complex, where he leased space in one of 11 ZIP codes used to define distressed urban areas. Keystone Travel purchased office property in suburban New Berlin. “I’m still committed to the city,” he said.

Competitor: The world

At the heart of the initiative is a recognition that the city’s place in the world economy continues to change rapidly. “We’re competing with Shanghai, we’re competing with Bangalore,” said Rajan Shukla, program director at the initiative.

“There’s tons of literature and research on how to start businesses in Third World countries. There’s very little on how to start and grow a business in the inner city,” said initiative general counsel and business development officer Christopher E. Ware.

Ware, 36, left Quarles & Brady, one of the city’s elite law firms, to work for the initiative.

The Milken Institute, an economic think tank in California, has begun referring to America’s urban centers as “domestic emerging markets,” just as the transition economies of eastern Europe and vast regions of Asia and Latin America are considered global emerging markets.

“We need to think of them as asset classes and investment targets and not as wastelands,” said Betsy Zeidman, director of the Center for Emerging Domestic Markets at Milken. Zeidman is watching Milwaukee as a bellwether of urban change. “You want to be in markets that no one else is in, or before they are saturated,” she said.

Nationally, 12.7 million jobs are within America’s inner cities, representing 8% of the total private-sector economy, according to a study released last month by the Initiative for a Competitive Inner City, which also advises urban activists in nearly 20 other cities in the United States and Britain.

“Many people have thought that the inner city was some kind of economic dinosaur - that the global economy was passing it by, that all the growth inevitably had to be in the suburbs,” said Harvard professor Michael E. Porter.

Porter, 57, founded the Initiative for a Competitive Inner City. He has spent his career studying how nations, regions and corporations survive in an era of perpetual global competition. Porter was tenured at 26 as one of the youngest professors in Harvard’s history and has ties to the World Economic Forum, the prestigious body that hosts a summit of finance ministers and multinational chief executives each January in Davos, Switzerland. He travels perpetually.

He has found himself drawn to Milwaukee as a laboratory of urban change. Porter freely admits that crime and unskilled labor throw up big hurdles to growth. Still, he said, “We shouldn’t be bashful about profit and the market economy because that’s the only sustainable way of addressing most of these problems.”

Beyond the safety net

Porter says social safety nets are necessary for individuals but that welfare programs cannot alleviate poverty, create jobs or even stall the city’s economic erosion.

Anne Habiby, co-executive director in Boston for the Initiative for a Competitive Inner City, said Milwaukee stands apart from the nearly 20 other cities her group has worked with nationally. Milwaukee, she said, has rallied a broader spectrum of civic, academic, business and government leadership behind the framework. Other cities, by comparison, are looking at only pieces of the puzzle while Milwaukee is looking at the whole puzzle, she said.

“Milwaukee is very different,” Habiby said. “Based on where they are economically, they have to work a lot harder.”

Legacy Bank epitomizes the new economic paradigm in all its promise and limitations.

As a federally insured commercial bank in the heart of the black community, it exists to inject capital into expansion-minded businesses and central-city start-ups. Legacy Bank began five years ago when it acquired a colonnaded 1928 bank edifice with a marble-festooned lobby that sparkles today with a fresh $2.9 million renovation.

Opportunity measured in dollars

In the past two years, Legacy Bank doubled its assets to $99 million - proof, Henningsen said, of bona fide opportunity in an area that other banks have ignored. It boasts a low rate of loan defaults.

Robert E. Litan, vice president for research at the Kansas City-based Kauffman Foundation, a policy think-tank that studies entrepreneurialism, says Milwaukee has found itself in a “vicious cycle” because it lacks an entrepreneurial tradition.

“The most important predictor is if someone in your family is an entrepreneur and if they have worked in the family business,” said Litan, one of the nation’s leading researchers on the character of American entrepreneurialism. “It’s not in your genes; it’s in your environment.” In Milwaukee, he said, “not enough kids grow up living in an entrepreneurial family. They are already behind the eight ball.”

According to U.S. Census Bureau data, the city lags at 48th place among the nation’s 50 biggest metropolitan areas in the number of black-owned businesses per 1,000 black residents. That puts Milwaukee at the extreme of a national anomaly that finds only 4% of all U.S. entrepreneurs are African-American.

Litan says new urban revitalization strategies can compensate for a lack of mentors. “They need coaching,” Litan said.

Keith Bailey, 37, was raised by his mother in the central city. He finished high school, joined the Army and learned the dry cleaning trade as an apprentice. In 2000, he heard that an elderly north side shop owner planned to close an established dry cleaning shop, and Bailey saw an opportunity. But, like so many other Milwaukee blacks, he had no history running businesses. Three banks denied him a loan.

But Legacy Bank didn’t reject Bailey. Four years later, Bailey’s Dry Cleaning & Laundry Service has doubled its annual revenue to $120,000. “This service is a ministry and a mission for my community,” Bailey said.

Wisconsin’s 1996 welfare-to-work reforms spawned Robert Carroll’s basement tech start-up - Rhythms Software Systems. Carroll, 56, a database techie by inclination, noticed a proliferation of street-corner day care centers in his Sherman Park neighborhood. He wrote a program to manage high-volume centers tailored to central-city needs: It weeds job applicants who don’t meet child care qualifications and tracks as many as four adult custodians who have clearance to pick up a single child.

Letting the market help

State Commerce Secretary Cory L. Nettles said the city’s African-Americans made “a late crossover from the industrial to the professional economy.”

Nettles, 34, grew up as a “poor black kid from Milwaukee.” Some of his playground pals never finished high school, ended up in jail or on drugs. Nettles graduated magna cum laude from Lawrence University, earned a law degree at UW-Madison and worked at Quarles & Brady before Gov. Jim Doyle appointed him commerce secretary at age 32.

A stalwart Democrat, Nettles disavows old welfare models as an economic remedy. “The social policy prescriptives have not really helped families break out of poverty,” he said. “We should model what has worked for countless other ethnic minorities, which is entrepreneurialism.”

Other cities are rediscovering free-market economics. The Kauffman Foundation launched a project in October to cultivate urban start-ups in Atlanta, Cincinnati, Cleveland, Jacksonville and Kansas City. A small number of for-profit black venture capital firms have sprung into existence.

The Brookings Institution in Washington, shifting its attention from rates of social distress to rates of economic growth, is fine-tuning databanks that for the first time track consumer and economic growth trends in the nation’s inner cities.

Inc. Magazine compiles its annual Inner City 100 rankings in cooperation with the Initiative for a Competitive Inner City.

“Our readers are exclusively people who own and run their own companies, and they are very fascinated in the success stories of people like them,” said Inc. Executive Editor Mike Hofman. Entrepreneurs and investors, he said, track an elite class of small businesses called gazelles - companies that grow 20% each year for at least five straight years, a level of growth never reached by 15 of every 16 companies in the United States.

Milwaukee has been absent from the Inner City 100 since 2000, when Smith’s travel agency ranked No. 95. He cajoled 29 local firms this year to undergo the exhaustive application. Smith won’t release the names of nominated Milwaukee companies, saying the process is confidential. Winners are to be announced at a banquet in Boston in April and published in the June magazine issue.

Milwaukee’s biggest challenge, Porter said, is what he called an “inferiority complex.”

“We’ve got to put aside any notions that Milwaukee is in some sense in a bad set of industries,” he said.

Yet Finland turned its evident disadvantages - vast unpopulated expanses - into an asset.

“What every region fights is cynicism and fatalism - the sense that nothing will ever change, that the region cannot be successful,” Porter said.

Last edited by g.   Page last modified on December 10, 2004

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