Changing Gears is a public media project about the future of the industrial Midwest. Each week, reporters Dan Bobkoff in Cleveland, Niala Boodhoo in Chicago and Kate Davidson in Ann Arbor cover issues of interest to the Great Lakes region. Changing Gears also sponsors public events and conversations.
Three stories making news across the Midwest today:
1. Sales up at Ford, forecast down. Ford’s third-quarter sales rose 14.1 percent year over year to $33.1 billion, the company said Wednesday morning. But the automaker’s global production plan of 1.37 million vehicles is below the 1.44 million anticipated by analysts, and investors had sold off Ford shares in morning trading, according to the Detroit Free Press. The gap came as a result of “a lower outlook in South America, Asia Pacific and Europe,” Morgan Stanley analyst Adam Jonas wrote.
2. Cook County plans layoffs. Cook County executives unveiled a budget that called for more than 1,000 layoffs to help narrow a projected $315 million deficit, according to our partner station WBEZ. Saying “there’s been nothing easy about this,” board president Toni Preckwinkle said hospital funding and the county’s jail population would be reduced in additional savings measures. She is also trying to convince the county’s union workers to accept furloughs to save $40 million instead of layoffs.
3. Wisconsin public employee pay freeze ahead? Wisconsin state employees may face a pay freeze over the next two years if lawmakers support a proposal from Gov. Scott Walker. The new proposal comes months after Walker required public workers to pay more for their pensions and health insurance while also eliminating almost all collective bargaining. The Milwaukee Journal Sentinel reports another change in the proposed legislation would award overtime only for actual hours worked, after a newspaper investigation revealed how prison guards gamed the overtime system to boost their pay.
CHICAGO – Ask people who run business incubators what they do, and the strange thing is, a lot of them don’t want their organizations to be referred to as “incubators”. That’s what I found out while researching a story I just did about what it takes to be a successful business incubator. I went to the National Association of Business Incubation to select incubators in the Illinois, Michigan and Ohio to speak with. I spoke to eight of them – and got basically eight different responses as to how they measure success. Here’s what they said:
The Incubator is one of the Midwest’s oldest business incubators. Since it started, the nonprofit has helped more than 350 companies. It has graduated 23 companies that employ more than 450 people in Evanston, and said a “fair number of graduates” overall is 135. Currently, it has 39 companies in the incubation stage which employ 80 people. Director Tim Lavengood said what they promote is innovation.
“We’ve been in the first 36 months of building a business for 25 years,” he said. “The best thing an incubator can be is the institutional memory of the startup process.”
Business incubators are designed to turn an idea or concept into a successful company. The goal is for these new companies to bring jobs and revenue. Across the Midwest, some have been around for decades, while new ones are just starting up. But many tend to produce few companies. Last week, we did a series of stories looking at the so-called Magic Bullets to save our economy. In that style, here, I report on what principles incubators need to focus on to create successful offspring.
Each Friday, inside the old Northern Brewery building in Ann Arbor, 4:30 p.m. is known as “beer thirty”. That’s when the self-described tech geeks who are part of this informal business community gather for drinks.
The Tech Brewery houses three dozen start-ups – but don’t call it business incubator.
“We don’t call ourselves an incubator,” founder Dug Song said. “If anything we call ourselves a start-up coop.
Song has his own start-up – Duo Security. He began the TechBrewery after being frustrated by traditional business incubators. In his opinion, they provide little more than cheap rent for lots of start-ups – instead of what it takes to get a company up and running.
“A lot of folks get to a point where they don’t want to be in a hoteling kind of environment, which is a lot of what these incubators tend to be,” he said. “They’re a little bit more isolated.”
The lack of a hotel environment drew Victor Volkman to the Tech Brewery. He had been involved in other incubators where he says his business ideas went nowhere.
“You have a biotech company next to a software company next to a something of completely different origin and we really didn’t talk to each other,” he said, adding the value in the Tech Brewery is running into someone in the hallway who can immediately help solve a problem.
The biggest cost for start-ups is office space. That’s why most incubators provide free or reduced rent. But it’s not just about office space. Having the same type of companies together helps everyone grow – something Volkman said he has found at the Tech Brewery.
Volkman left the traditional incubator environment because it didn’t work for him. That turns out to be a common sentiment.
The University of New Hampshire at Manchester’s Kelly Kilcrease studied incubators across the country. Out of the almost 500 entrepreneurs he surveyed, Kilcrease found that their opinion of incubators was “lukewarm – at best”.
Based on Kilcrease’s research, the happiest – and most successful clients – came from a specific type of incubator:
“Those that stress a certain type of clientele, deliver high quality services and those who have professional managers are more apt to be successful than those that do not,” he said.
Kilcrease thinks an incubator’s true measure of success is its graduation rate – the companies that actually make it on their own, apart from the incubator.
Often, incubators – like TechTown in Detroit – don’t publish graduation rates. The Incubator in Evanston, Illinois is one of the oldest in the Midwest – it celebrates its 25th anniversary this year. They’ve helped more than 350 companies and have graduated 23 companies that remain in Evanston. Director Tim Lavengood said a “fair number of graduates” overall is 135.
“You know – here’s some cheap office space, here’s a photocopier, here’s a fax machine,” he said, adding: “We don’t really care what you’re doing, but please turn yourself into a globally successful corporation.”
They quickly realized that approach wasn’t going to work. In 2001, they began to focus on software technology firms.
Today, the organization has a network of more than 1,000 people virtually through a private LinkedIn group, as well as four buildings full of clients – including nine companies that no longer need the incubator’s help. In fact, these companies pay rent which makes up about a third of the nonprofit’s $750,000 total budget. (A rent, by the way, that Cossler says is a premium on other commercial office space in Youngstown.)
Ten years ago this month, Turning Technologies walked into the Youngstown Incubator with its idea – adapt audience response technology to be used in classrooms.
Today, it’s a $50 million company that employs 200 people. One of the YBI’s paying tenants, the company takes up an entire building.
Co-founder Mike Broderick says the YBI is “fairly rare” in its level of success, which he attributes to their focus.
“What we really needed the most was expertise,” he said. “The introduction to potential clients, to people who had been through the type of thing we had done before, who could provide advice.”
Broderick told me something academic research backs up – he thinks the company would have succeeded even without the incubator. But the YBI’s network accelerated his company’s progress. And he thinks that’s the best an incubator can do – accelerate a potential company’s growth.
This story was informed by the Public Insight Network.
Correction: An earlier version of this story did not fully elaborate how many companies “graduated” from Evanston’s incubator program, as the original number included only graduates that remained in Evanston. The director says a “fair number” of overall graduates from the incubator is 135.
While voting will not be complete until the end of the day, it appears members of the United Auto Workers will ratify a new agreement with Chrysler.
Workers at key plants in Sterling Heights, Mich., Dundee, Mich. and Toledo, Ohio have all passed the tentative contract within the last day on percentages that range from 53 to 80 percent. Voting has not yet concluded at Chrysler’s truck plant in Warren, which is considered a bellwether.
Even if Warren workers reject the contract, it may still have enough support elsewhere to pass overall, according to the Detroit News.
Unlike previous negotiations with Ford and General Motors, the UAW has not made the overall voting tallies public during Chrysler voting.
New poll points towards repeal of SB 5. The Ohio law to restrict collective bargaining is losing support, says a poll, by Quinnipiac University. The repeal effort has a 24 point margin over the effort to keep the law. Ohio voters will decide on “Issue 2” as the repeal effort is called,on November 8. Cleveland.com reports SB 5 is not polling well among Democratic or Independent voters. Republicans involved in the poll said they continue to support the measure. Read more of our SB5 coverage here.
Real estate market recovering in Chicago, Detroit. Home prices in Chicago and Detroit went up in August for the fourth straight month, signaling growing strength in those cities’ economies. The Chicago Tribune, reporting on the numbers from the S&P/Case-Shiller home price index, points out that good news is relative, and housing prices in those markets are still at 2002 levels. Still, the rate of growth in the Midwest as a region is exceeding many areas in the country.
Chrysler and UAW deal to be announced soon. UAW members continue to vote on a proposed contract with Chrysler. The Detroit Free Press is reporting that a Toledo, Ohio assembly plant has approved the contract, making it more likely that the deal will be ratified on a national level. Pete Bigalow will have more on the contract vote later today.
Rahm Emanuel earned his political breakthrough while working as the chief fundraiser for Chicago’s Richard M. Daley during his first mayoral campaign in 1989. When Emanuel moved on to positions in the White House and a Congressional job, Daley often functioned as a mentor.
Yet in his first five months in the office formerly occupied by Daley, Emanuel has laid the foundation to dismantle many of the core tenets of Daley’s long tenure as mayor. Changing Gears senior editor Micki Maynard, writing in The Atlantic, examines the changes outlined by Emanuel.
In part, they’re driven by finances. In facing an unprecedented $637 million budget deficit, Emanuel has proposed police and fire department cuts – two sacred budget lines in the Daley era – among a laundry list of other proposed reductions.
Three stories making news across the Midwest today:
1. Chicago food deserts dwindle. Fewer Chicago residents are living in food deserts, according to a recently released report. In the past five years, the number of residents living in so-called food deserts – a low-income census tract where a substantial number of residents lack access to a grocery store – has dropped 40 percent. The study’s author, Mari Gallagher, tells partner station WBEZ that some “big name” stores have arrived in poorer communities, but that the remaining problem lies in African-American neighborhoods on the city’s south and west sides.
2. Ohio unemployment rate holds steady. Ohio’s unemployment rate remained unchanged at 9.1 percent in September, according to data released Friday by the Bureau of Labor Statistics. It marked the third consecutive month the Buckeye State’s unemployment rate was at or above the 9 percent mark. State officials found some promise in the numbers. “We’re in a recovery, we just think it’s going to take some time,” Angela Terez, spokesperson for the Ohio Department of Job and Family Services, tells our partner station Ideastream. “We’re seeing some good things like initial unemployment claims going down, and the number of layoffs going down.”
3. Wisconsin repaying $1.18 billion. The state of Wisconsin owes the federal government $1.18 billion borrowed to pay unemployment benefits, according to the Milwaukee Journal Sentinel. The state has made $42.4 million in interest payments to date in 2011, and is taking several steps to pay the money back, including enforcing a one-week waiting period for people seeing unemployment benefits. Among 27 states that owe the federal government money, Wisconsin ranks 11th. California takes dubious top honors, owing $8.63 billion, according to the newspaper.
History is filled with searches for Magic Bullets.
Economically speaking, those are quick-fix endeavors that promise to fix sour economies, provide jobs and bring prosperity to communities and regions. Changing Gears reporter Kate Davidson wrote earlier this week that, “Some have soared; many have backfired.”
Communities across the Midwest are employing a new round of Magic Bullets in attempts to rescue themselves from the Great Recession. All sound promising, but which ones stand up under further scrutiny?
Here’s a look back at Changing Gears coverage from the past week:
Three stories making news across the Midwest today:
1. Groupon scales back IPO expectations. Downsizing its initial expectations, Groupon said Friday that it expects to raise between $480 million and $540 million from its initial public offering. Originally, the Chicago-based company had expected to raise at least $750 million. In an filing with the Securities and Exchange Commission, Groupon said it expected pricing between $16 and $18 per share in its IPO pricing, according to the Chicago Tribune. That range would give Groupon a value between $10.1 billion and $11.4 billion, less than half initial expected valuations between $20 and $30 billion.
2. Columbus mayoral candidates spar. Columbus Mayor Michael Coleman sees a city with an improving crime rate and an “enviable job-creation record,” according to the The Columbus Dispatch. His counterpart in November’s upcoming mayoral election sees an economy that could be doing much better. In a debate Thursday night, Coleman, a 12-year incumbent, said he has created or saved 90,000 jobs in Ohio’s capitol while Jr. questioned why public money was being used to finance the purchase of Nationwide Arena, a deal he called “morally reprehensible.”
3. Wisconsin teachers under scrutiny. Wisconsin lawmakers approved a bill Thursday that allows school officials to use standardized test scores to help determine whether teachers should be disciplined or fired. It passed, 17-16, on a party-line vote. Previously, school officials could use test scores as a means to evaluate teachers, but not to fire or suspend them. The bill, according to the Milwaukee Journal Sentinel, also eliminates a cap on the number of teaching days in the Milwaukee Public Schools school year.
A few years ago, crime topped the concerns of residents in Atlanta, Chicago and New York. These days, residents expect low crime.
The mayors of those three cities spoke Monday, all agreeing those concerns have shifted. Anecdotally, they say that, these days, citizens ask them most about concerned with housing costs and their jobs.
“And if they have kids, school,” Mayor Michael Bloomberg of New York said, while speaking Monday, October 10, during a panel discussion that kicked off Chicago Ideas Week. “They don’t care about what’s at a national level or state level. If they haven’t lost a house or job, they’re worried about it. It is very local.”
Bloomberg was joined by Chicago Mayor Rahm Emanuel and Atlanta Mayor Kasim Reed on the panel about issues facing local governments, which was moderated by New York Times columnist Thomas Friedman and sponsored in part by Changing Gears and our partner station WBEZ.
Emanuel said that laying the foundation for economic growth and job creation has been the central focus of his first five months in office. He said Chicago’s central U.S. location has given the city a geographic advantage in maintaining – and hopefully expanding – its infrastructure.
“We’re the only airport system with two major carries, and a quarter to a third of the nation’s rail freight comes through Chicago,” he said. “Rails, roads and runways. We invest in those, Chicago will continue to recruit companies and expand.”