Crain's Cleveland Business

VOL. 38, NO. 8

FEBRUARY 20 - 26, 2017

Source Lunch

Inside look The Edison is opening doors for hundreds of luxury rentals. Page 3

Westfield Bank CEO gauges industry. Page 19

CLEVELAND BUSINESS

The List Top patent recipients in the region Page 19

SPORTS BUSINESS

Sandusky builds on tourism might Huge Sports Force Parks project will give Cedar Point a boost, too

By KEVIN KLEPS kkleps@crain.com @KevinKleps

The Sports Force Parks at Cedar Point will host 39 tournaments in its first year and is expected to draw about 111,000 annual visitors by 2020. (Contributed photo)

It’s not as if Cedar Point was hurting for visitors.

In November, Cedar Fair — the Sandusky company that owns and operates 11 theme parks and four waterparks in the U.S. and Canada — reported that attendance jumped 2% and out-of-park revenues spiked 6% in the first three quarters of 2016. An annual report by Themed Entertainment Association said Cedar Point’s 2015 attendance increased 8%, to 3.51 million visitors, edging Kings Island as the top amusement park in Ohio.

But Cedar Fair officials believe a massive, $23.5 million project that officially opens for business next month ensures that its flagship property has all of its bases covered.

“Today, kids are overprogrammed.

They have so many things to do,” said Jason McClure, Cedar Point’s vice president and general manager. “One of the biggest summertime commitments is sports. We just heard from our guests, ‘We’re spending time and money on tournaments. We don’t

Money matters How the $23.5 million Sports Force Parks project is being funded: $17 million: Funds from Erie County bed taxes $3.5 million: Cedar Point’s purchase of the former Griffing Sandusky Airport site $3 million: Investment by The Sports Force of Canton, Ga.

have time to make it to Cedar Point.’ ” That sparked Cedar Point’s $3.5 million purchase of the former Griffing Sandusky Airport site, and led to a partnership with The Sports Force, a Canton, Ga.-based company that designs, builds, operates and maintains sports facilities.

The Sports Force contributed $3 million, and another $17 million in Erie County bed taxes produced Sports Force Parks at Cedar Point Sports Center — a 57-acre home of future baseball, softball, soccer and lacrosse tournaments that will double as a playground and Cedar Point recruiting spot.

SEE SANDUSKY, PAGE 15

EDUCATION

State is adding to teachers’ challenges

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

Gov. John Kasich’s proposed twoyear budget aims to more closely intertwine business and pre-K-12 education.

Under the proposal for the fiscal year 2018-2019 budget, teachers

would be required to take part in some kind of “externship” in order to renew their educator licenses, superintendents would have to name three business people to non-voting positions on their school boards, and the state would put a stronger focus on work-based experiences for students.

The proposals rose out of recommendations made in December by the Governor’s Executive Workforce

Entire contents © 2017 by Crain Communications Inc.

Board, which is made of business leaders, government officials and educational administrators.

Ryan Burgess, director of the Governor’s Office of Workforce Transformation, said the skills needed for today’s jobs are changing rapidly, and the state wants to make sure Ohioans are being appropriately trained. To make that happen, business leaders really need to “roll up their sleeves”

and get engaged with schools, he said.

One of the budget proposals that has attracted a good deal of negative attention recently is the teacher “externship” proposal. As written in the House bill for the budget, teachers would have to take part in some sort of “on-site work experience” with a business or chamber of commerce so they can renew their teaching licenses.

The language in the budget was

written broadly on purpose, Burgess said, as the state wants to leave it up to the local districts to decide what this looks like in practice. Ultimately, if this provision is passed, the state Board of Education would write the rules, and local professional development committees would determine the specific parameters. It could end up being as simple as planning a field trip, he said.

SEE TEACHERS, PAGE 18

Akron news << Industrial leagues helped Larry Brown get his start in basketball. Page 16 Ohio Gratings gets the job done on the river. Page 17

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CRAIN’S CLEVELAND BUSINESS

Datatrak’s numbers are finally in the black

By CHUCK SODER csoder@crain.com @ChuckSoder

First, activist investors took control of Datatrak International. Then, the software company started doing things it hadn’t done in a very long time.

Like making money. And hiring new employees at its Mayfield Heights office — which no longer has to compete for the title of “headquarters” now that Datatrak has closed the downtown Chicago office that it opened in 2015.

The local office wasn’t allowed to hire new employees under the previous management team, which was led by a CEO who lived in Chicago.

But that team is gone: They were kicked out by activist investors after a nasty proxy battle that gave the activists total control over the board of directors at Datatrak, which makes software that’s used to manage clinical trials.

The team that replaced them appears poised to stop Datatrak’s long money-losing streak: The company turned a profit of $886,000 during the first three quarters of 2016. If it posts decent fourth-quarter numbers, then 2016 will have been a banner year, given that Datatrak has lost money for nine of the past 10 years. (It earned $100,000 in 2010.)

How did it generate $886,000 in profit for the first nine months of 2016? By taking a hacksaw to administrative expenses, which dropped by $3.7 million, or 44%. The biggest savings came from lower executive salaries, followed by legal costs and expenses related to the Chicago office, which has been subleased, according to the company’s new leaders, CEO James R. “Jim Bob” Ward and chair-

man Alex Tabatabai, who led the activist investor group. Datatrak’s legal costs fell partly because, days before the new management team took over, the company settled a patent lawsuit it had filed against a competitor called Medidata.

“None of that was the core business — the things that mattered,” Tabatabai said. “ ... We’ve done a 180.”

Now Datatrak is reinvesting in a local office that had been slowly shrinking. The company has hired several new sales people over the past year and now has about 50 employees, including 30 people in Northeast Ohio. On Monday, Feb. 20, the company is scheduled to take down a wall so that it can add 2,200 square feet to its 4,400-square-foot office at Landerbrook Corporate Center, Ward said.

Ward works from the company’s small office in College Station, Texas, but he emphasized that its base of operations is now in Mayfield Heights.

“This is the corporate headquarters of Datatrak — forever. This is the corporate headquarters,” he said.

Ward has a history with Datatrak: He previously served as CEO of ClickFind, a Texas company that Datatrak acquired in 2006. He left in 2008. That year, Datatrak sued Ward and other former ClickFind shareholders, saying they failed to disclose important information about the company prior to the deal. The parties settled the lawsuit a few months later.

The real fight, however, didn’t start until late 2015, when Tabatabai’s investment firm put out a news release accusing Datatrak’s previous leaders of mismanagement. For instance, the first release noted that Datatrak paid two former employees, CEO Lawrence Birch and chief financial officer Jennifer Mabe, a combined total

Topsy-turvy times A look at Datatrak’s closing stock prices since March 2015: March 2, 2015

$5.50

May 1, 2015

$7.35

July 1, 2015

$7.75

Sept. 1, 2015

$7.05

Nov. 2, 2015

$5.30

Jan. 4, 2016

$3.52

March 1, 2016

$4.80

May 2, 2016

$4.50

July 1, 2016

$5.40

Sept. 1, 2016

$8.10

Nov. 1, 2016

$7.80

Jan. 3, 2017

$10.00

Feb. 15, 2017

$8.67

Source: OTC Markets

of more than $1 million during fiscal 2014 — a year when it generated about $11 million in sales. At the time, a Datatrak representative told Crain’s that the two executives chose to take some of that money in stock, but he wouldn’t say how much.

Both sides made a series of brutal public statements about each other, but in the end, shareholders elected the three board members favored by Tabatabai Investment Management, which at the time was called Arosa Investment Management LLC. Three other members resigned in February 2016 as part of a legal settlement with the investment firm. Datatrak still faces a lawsuit from Birch and another filed by Mabe and Varnesh Sritha-

ran, former vice president of legal affairs. Both lawsuits accuse Datatrak of breaching their employment contracts, among other offenses.

Ward said he isn’t worried. He feels like the company is moving in the right direction.

He also says that morale is high among employees, many of whom have been with the company since he left in 2008.

“I was so happy to see smiling faces that I know,” said Ward, who receives an annual salary of $220,000, according to his Oct. 1, 2016, employment agreement. Before that, he was making $1 per month, though he did receive $155,000 in Datatrak stock to compensate him for that work.

Granted, there still are problems to solve at Datatrak: The company’s revenue was down through the first nine months of 2016.

For instance, it generated $2.14 million in sales during the third quarter, down from $2.64 million during the third quarter of 2015. The company’s backlog of purchase commitments is down as well.

Though revenue fell, not one client left Datatrak during the leadership transition, said Scott DeMell, a longtime employee who was recently promoted to vice president of sales.

“Every client we had then, we have today,” he said.

DeMell expects the revenue numbers to eventually turn around now that Datatrak is beefing up its sales team. DeMell said he was the only outside sales employee at the start of 2016. There now are seven, plus a new marketing employee, he said, noting that inside sales “shrunk a bit to grow outside” sales.

The sales team also has a new product to sell. Datatrak in November released its Clinical Trial Management System, a product that is

“This is the corporate headquarters of Datatrak — forever. This is the corporate headquarters.”

— James R. Ward, CEO, Datatrak, on the company’s Mayfield Heights office

designed to help clinical research organizations manage multiple clinical trials — and the people, budgets and timelines associated with those trials. It’s meant to work with Datatrak’s existing product, which helps customers capture clinical trial data.

The sales team also will have an easier time selling under the new management team, DeMell added.

The company previously required clients to sign what he described as overly burdensome contracts, and it didn’t offer enough price flexibility.

“That was a massive barrier,” he said.

He isn’t the only longtime employee who was unhappy with the previous management team. Chief financial officer Julia Henderson said she felt an “incredible level of frustration” working for what she described as a “top-heavy” management team that needed to rein in spending. Before the leadership change, Henderson was the company’s controller, but she said she felt powerless to do anything about the situation. That has changed, now that new people are in charge.

“They listen,” she said.

CRAIN’S CLEVELAND BUSINESS

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PA G E 3

Edison is enticing draw at Gordon Square $30 million project features 307 suites, with monthly rents topping out at $3,900

More online: Take a peek inside The Edison by checking out a photo gallery at crainscleveland.com.

By STAN BULLARD sbullard@crain.com @CrainRltywriter

Weston Wilson describes the wait until construction workers complete his one-bedroom apartment at The Edison at Gordon Square in Cleveland as “six months of the night before Christmas.”

The Rocky River native, 33, who moved back to town last Christmas after living in cities on the coasts including Manhattan and San Francisco, leased at Edison because of its proximity to the Cleveland Museum of Art and the Cleveland Orchestra, and the ability to ride his bike to Edgewater Beach.

However, other tenants will move in sooner than Wilson, as the lights will go on in April for the first 100 suites to be finished at NRP Group’s 307-suite rental community in Cleveland’s Detroit-Shoreway Neighborhood. The $30 million project is on a sprawling site bordered by Breakwater Avenue between West 58th and 65th streets. The remaining suites will go on the market as more buildings are finished every few weeks through the fall.

Although apartments in new or renovated buildings have exploded in Cleveland proper the past few years — and are booming this year with another four projects throwing 400 suites onto the market — the Garfield Heights-based developer’s Edison has unprecedented scale in a city neighborhood such as Detroit-Shoreway, and it comes with resort-style amenities.

Jeff Ramsey, executive director of Detroit-Shoreway Community Development Corp., said Edison “provides a product that is currently only available in the suburbs as a lifestyle community. We’re also excited because it will bring 300 families to Detroit-Shoreway. Increasing population density in the neighborhood is really important to supporting our restaurants and retail development.”

The complex has a large pool and fitness center, and a penthouse space that can be rented for dining or entertaining. It also offers pedestrian access to Edgewater Beach and the neighborhood’s entertainment and nightspots.

Ralph McGreevy, executive vice president of the Northeast Ohio Apartment Association trade group, said Edison’s “scale is amazing.

With the Lake Erie connection, it’s Chicago-style living at Cleveland prices.”

Edison doesn’t have Chicago prices, but it doesn’t have the cheap rents of Cleveland’s notso-long ago past, either. Rent for an Edison townhouse (which includes attached parking) tops out at $3,900 monthly. Two-bedrooms are in the $2,000 range, and one-bedrooms start at $1,075.

Demand has been so strong, said Nancy Arnold, NRP senior marketing manager at Edison, that introductory one-bedroom rates have been phased out; 25 suites already are leased.

Prospective tenants began getting tours on Feb. 6, the same week NRP opened a leasing center in a trailer on the site and the one- and two-bedroom model suites.

The extension of Father Caruso Drive through the center of the complex will be paved in the spring, but it’s currently a muddy, tire-track marked access construction workers use to reach the buildings. Walking through the blockslong construction site creates the feeling of trekking through construction of a new city.

Workers are finishing seven new buildings on the one-time industrial site. The tallest buildings are four stories. The shortest are the 18 townhouses with three floors. Suites facing Breakwater at ground level have a brownstone feel.

With all the contemporary-styled buildings, designers and NRP planners spent a lot of time ensuring suites have as many views as possible of the lake or surrounding city.

On a tour of the property, even Arnold ad-

Above is a view of Lake Erie and the marina at Edgewater Beach, which is the backdrop for 307 apartments going in at NRP Group’s The Edison on Cleveland’s West Side. Below is a look at the living area of one of The Edison’s artsy models, and a one-bedroom suite is shown at bottom. (Stan Bullard photos)

mitted she was surprised the first time she saw the view of downtown Cleveland from east-facing windows in the suites.

The design also may warm the hearts of urban planners: Edison is not a gated community. The finished Father Caruso Drive will connect with the surrounding street grid. Watson said he would not have considered the property if it were gated or lacked such a link to the neighborhood.

NRP also took steps to match the new suites to current tastes and city life, including offering quartz as an optional upgrade to granite countertops, which are standard.

Scott Villani, NRP vice president of marketing, said the design incorporates a parking spot for a food truck — complete with an electrical connection so vendors won’t need a noisy generator — that NRP hopes to have occupied on a daily basis to generate some local flavor for the property.

“We believe our tenants don’t cook as much as homeowners,” Villani said. “We believe it will be a nice feature to offer tacos from a food truck. This is something we are going to do in our other urban properties going forward.”

A national developer of market-rate and affordable properties, NRP included in Edison a space for working on bikes as well as bike storage.

“We feel like we are part of the neighborhood in Cleveland in a different way than in other cities where we build and there might be more chain restaurants nearby,” Villani said, so tenants will get information about Detroit-Shoreway restaurants, even a few tickets to the nearby Capitol Theater, 1390 W. 65th St. To build local connections, Arnold has joined the local merchant’s association meetings; its members also got an early tour of the development.

Even though it accents local ties, NRP estimates that 40% of its prospective tenants will move to Cleveland from other cities. Villani said Edison also is getting looks from a lot of current downtown dwellers seeking a quieter surrounding “still close to the action.”

In addition to standard marketing techniques, NRP has created cardboard virtual reality goggles — essentially boxes a smartphone fits into — for prospects so they can explore a video the company produced of the city, the project and a map of the neighborhood.

Artistic flair also went into the two-bedroom model suite to draft on the vibe of the neighborhood’s arts district.

Susie Frazier, an artist and designer who has a studio at 78th Street Studios, 1300 West 78th Street, created some furnishings and brought in others produced by local artists, manufacturers or retailers.

The model includes furnishings of smaller-than-typical sizes to match apartments, she said, that are available for sale.

For example, a four-seat dining table produced with found wood and metal measures just 52-by-36 inches. A coffee table consisting of a horizontal slice of a Spruce tree that Metropolitan Hardwoods Urban Sawmill of Cleveland retained from a Lakewood site has edges formed by the tree’s natural shape rather than a straight edge. She also produced tiny end tables in one bedroom, and curated artwork from Hedge Gallery that decorates the space.

“There’s great value for tenants who want to live an urban lifestyle but also want to feel low anxiety when they come into their homes,” Frazier said. She described the features, which are also available for sale, as a “modern Zen sanctuary steeped in modern design.”

However, not everything is new on the 10acre site.

One old building was retained — Frazier actually used rods she found inside for a sculpture in the model — for a so-far undetermined use.

Arnold said the water tower atop the industrial building will be painted and lighted to serve as a locater beacon. The tower is familiar to motorists approaching the Shoreway’s Westinghouse curve from both directions.

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BUSINESS GOT YOU UP AT NIGHT? count fewer sheep with us by your side.

Strong housing market is a Third Federal focus

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

Coming off a record year, Cleveland’s Third Federal Savings and Loan is looking to a rebounding housing market for another strong performance in 2017.

For observers, that prognosis is a promising sign the housing market will continue to rebound.

Yet, for one of Cleveland’s oldest hometown banks, which built itself on the residential mortgage business, some diversification would elevate the bank, and its revenues, to the next level.

TFS Financial Corp., the bank’s parent company, is run by a conservative team helmed by president and CEO Marc Stefanski, a second-generation leader who clearly values staying true to the business and driving philosophies of his parents, who founded Third Federal in the tail end of the Great Depression.

That risk-conscious approach has worked rather well for TFS this far.

But it’s also stymieing the bank's full potential.

“They are a financially strong company. The question is one of growth,” said Fred Cummings, president of Elizabeth Park Capital Management, a bank-focused hedge fund in Pepper Pike. “It’s a nice, steady bank, just not fast-growing.”

The company hit a record stock value of $19.83 per share in early December, but that has since come back down and currently hovers around $17.40 per share.

Slow revenue growth is seemingly why TFS stock lost a little luster with investors recently — dropping more than 10% in a matter of weeks — despite a record year of loan originations and growing dividend payments.

“They have a lot of work to do,” Cummings said.

Banner year for mortgage business TFS’ last fiscal year, ending Sept.

30, 2016, saw net income grow 11% over the prior year to $80.6 million.

That’s a solid increase. But it was mostly attributed to a $7 million reduction in non-interest expenses and $5 million in loan loss provisions that were released and plugged into income.

Notably, though, the bank did see home purchase mortgage volume increase 21% in 2016 over the prior year. That rate outpaced a national housing market that saw an increase of 7% in home sales in the same period, according to the U.S. Department of Commerce.

Stefanski chalks up that performance to a variety of factors. Besides increased consumer confidence, the bank is marketing mortgage products in 19 states besides its home state of Ohio and Florida, the two where the bank has a physical presence. And that will remain a focus

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have, it gets people moving and doesn’t scare them away.”

That’s because borrowers want to lock in rates for refis and new-home buys before they move further.

That helped carry originations at the bank to a decade high.

“But I think, overall, consumers in general are more optimistic than they have been since the start of the recession,” he added. “That optimism is critical for continued growth in the economy in general. But it’s especially important in the housing market.”

Customer service and subscriptions: 877-824-9373

Contently conservative

“From 2008 to 2014, we were stagnant, with not much appreciation of homes in Northeast Ohio especially. Now, that’s begun to change, and that’s giving room for home equity lines of credit.”

— Marc Stefanski, president and CEO, Third Federal Savings and Loan

moving forward.

In the last quarter of 2016, for example, 33% of new loan originations in mortgages and equity lines of credit came from states other than Ohio and Florida.

In terms of diversification, spreading out the mortgage-related business is where Third Federal is focusing much of its efforts. And with a positive outlook for the housing market, with values rising not only in Northeast Ohio but nationwide, Stefanski expects that volume to continue to grow this year.

“From 2008 to 2014, we were stagnant, with not much appreciation of homes in Northeast Ohio especially," he said. “Now, that’s begun to change, and that’s giving room for home equity lines of credit.”

Having a strong presence in Florida, where home values have grown faster than Ohio, also helps, he added. And a strong online lending business makes the bank competitive in its other markets.

In the loan origination business, Stefanski partly credits growth there to the Fed’s movement on interest rates.

“The slow movement by the Fed to raise rates actually helps the whole housing market,” he said. “If rates went up too fast, then the market could dry up. That makes people anxious. But when they inch up like they Volume 38, Number 8 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright © 2016 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00.

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Historically speaking, with such a heavy focus on the residential mortgage business, Third Federal could have faced disaster in the last recession when home values sank between 30% and 50%.

However, the bank was relatively well positioned when the downturn came. That’s because the company raised $1 billion in capital with a 2007 IPO. “The housing market got clobbered, and we felt it,” Stefanski said.

“But we raised that capital before the bottom fell out of the economy. So we had plenty to endure whatever was going to happen.”

Having that high level of capital for a “rainy day” comes back to a philosophy Stefanski said his parents imparted on him.

And it’s fair to say TFS has quite the rainy-day fund.

TFS’ total capital ratio at the end of its last fiscal year was more than 21%.

A bank is deemed “well-capitalized,” the best regulatory designation, at 10%.

So while TFS has a significant cushion in its capital levels, that’s a lot of money that could otherwise be put to use in various ways. TFS most regularly uses it conservatively, buying back stock.

Most banks would use excess capital to expand the company by developing new products, or breaking into commercial real estate, or even buying another institution. Any of those efforts should, in theory, grow margins and expand loans and deposits.

And with a loan-to-deposit ratio around 140% — an optimal level, experts say, is generally around 80% or so, and most banks should be below 100% — that’s something the bank will need to watch.

However, acquisitions aren’t part of the TFS growth strategy. The housing business is.

And maintaining those uniquely high capital levels is something important to Stefanski.

So while TFS is a well-capitalized, financially sound company, revenue growth could be a challenge regardless of what the banking landscape looks like in coming months or years.

Stefanski has only optimism for the future, though, and remains wholly confident in the company’s conservative approach to the market.

“I do think 2017 is going to be another great year,” he said.

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NEO is now a ‘predator’ in biomedical industry

By LYDIA COUTRÉ

$89 million

lcoutre@crain.com @LydiaCoutre

Of the nearly $200 million that was raised by the Northeast Ohio biomedical industry in 2016, 45% was secured by the medical device field.

Northeast Ohio has reached — and maybe even passed — a key tipping point in the region’s efforts to grow the biomedical industry, said Aram Nerpouni, president and CEO of BioEnterprise.

Not only is the region seeing more acquisition activity, but there’s also been an increase in companies staying here and adding to the economy, he said.

“We’re no longer just the prey.

We’re also the predator when it comes to the biomedical space,” Nerpouni said.

BioEnterprise, a local nonprofit tasked with helping health care startups, began in 2002, bringing Northeast Ohio institutions around the table to figure out how to grow the region’s biomedical sector. That sector grew 59% between 2000 and 2016 to become a $5.6 billion industry, according to a report from BioEnterprise and Team Northeast Ohio, the regional business attraction nonprofit.

Manufacturing employment has been declining since the early 2000s, but those losses were offset by growth in health care, said Jacob Duritsky, vice president of strategy and research for Team NEO. Historically strong industries in the region — automotive, steel, manufacturing — help drive a productive biomedical sector, he said.

“If you think about job creation, output, future productivity, it truly is the overlap of those innovations onto these historically really strong industries,” Duritsky said.

In roughly the past decade, the region has gone from having institutions, a vision and some capabilities to having companies, infrastructure and an ecosystem around the bio-

$58 million Amount that was raised in biotechnology, which represents 29.3% of the total.

$50 million Amount that was raised in health information technology — 25.3% of the total.

medical industry, said Bill Koehler, Team NEO CEO. “They’re not just companies that pay people that generate payroll tax,” he said. “These are entities and industries and supply chains that are rich and need to be cultivated and nurtured, et cetera, so that we can continue to grow. And that’s what we’re seeing.”

Nerpouni said he was a little worried about a lull in 2015 with only 34 local health care startup companies raising venture capital. But in 2016, that jumped to 46, the second-highest number in the past five years.

In total, those 46 companies raised about $197.8 million in venture investment, just below the $200 million threshold the region had been achieving and surpassing.

Nerpouni is focused on the “incredible diversification” in health care, which he said bodes well for future years.

“It’s not like we’re hanging our hat on one sector and forsaking everything else,” Nerpouni said. “It’s a really nice mix of things we’re good at as a region in medical devices, and things that are broad opportunities in the larger economy that we want to

make sure we’re riding that wave as well.”

BioEnterprise defines biomedical in three categories: medical devices, pharmaceutical and health care technology.

Medical device companies raised 45% of the capital funding in the region, leading as it historically has.

Biotech and pharmaceutical companies raised 29%.

And though health care IT and software and services companies accounted for the smallest slice of the pie with 25%, funding in this sector more than doubled between 2015 and 2016.

The growth is in part driven by the fact that determining the success of a health IT company is cheaper and faster than other areas that require years of clinical trials and a lengthy approval process.

There isn’t as much job creation here in pharma, Nerpouni said, but companies like Abeona Therapeutics (which develops gene therapy and plasma-based products for rare diseases) and BioMotiv (focuses on accelerating breakthrough discoveries into therapeutics) are very helpful in shifting that paradigm.

Growth in the biomedical industry also has a horizontal effect that can resonate across the broader economy, Koehler said.

For instance, other industries may look at how they can leverage the growth in technology for their own companies.

“When you look at the opportunity in health care and biomedical, this isn’t something where we’re hoping it happens. This isn’t something where we need a transformational change to really get us on the right track,” Nerpouni said. “We’re probably 10 years into what is a 20or 30-year cycle when you look at this cluster development where we’ve made a tremendous amount of progress.”

Euclid recycler InterGroup International shuts down

By FRANK ESPOSITO Plastics News

Recycling company InterGroup International Ltd. has closed its doors after 11 years in business.

Euclid-based InterGroup may operate on a reduced basis through the end of the month, owner Neil Gloger said in a Feb. 14 interview with Plastics News, a sister publication of Crain’s Cleveland Business. The company “had too high of a debt load,” he added, and was closed by its lender, Fifth Third Bank of Cincinnati.

“Several of our customers have gone bankrupt, leaving us with $1.2 million in uncollectable receivables,” Gloger said. “We never missed a payment to our bank, but they have regulations that they have to follow.”

Five InterGroup customers in total have filed for bankruptcy, including one that owed the company almost $600,000. The customers included a mix of compounders and processors.

“We were proud to have served the

“We were proud to have served the industry as long as we did. We conducted our business in a respectable way.”

— Neil Gloger, owner, InterGroup International Ltd.

industry as long as we did,” said Gloger, who founded the company in 2006 in Warren. “We conducted our business in a respectable way.”

The closing affects InterGroup’s locations in Euclid and Cleveland, as well as a former company site in Jackson, Ga. Gloger expects the company’s unprocessed scrap and some machinery will be sold by the lender.

At its peak, InterGroup had annual

sales of $20 million, but that dropped to $11 million by full-year 2016. Many recyclers have been affected by lower selling prices for recycled material.

“In 2012, we were getting 22 cents per pound for material that we’re now getting only 5 cents for,” Gloger said. “That’s part of the problem.”

InterGroup survived a late-2007 fire that destroyed its original site in Warren and almost all of the firm’s inventory, including millions of pounds of plastic scrap. InterGroup rebuilt its business and moved to the Euclid site in 2010.

As the business grew, InterGroup added the Jackson site near Atlanta and a site in Springfield, Mo., as well.

InterGroup did most of its business in polypropylene, sourcing scrap from industrial packaging, automotive and housewares. The company also recycled polyethylene, polystyrene, PVC and PET. Gloger said he remains committed to the recycling market as he looks for his next stop. “Whether I start something new or work for someone else, I still love this industry,” he added.

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Deregulation could add bank to PE sector

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

Fund managers at small, new or otherwise aspiring private equity groups seem hopeful a rising tide of deregulation in financial services could lift their ships as well.

And in Northeast Ohio’s rather active private equity scene, populated by small and midsize firms to some of the world’s largest, deregulation could open up new financing streams by permitting banks to dabble in funds like they used to prior to the Dodd-Frank Act. “Right now, it’s hard to tell what might happen,” said Chris Jones, managing partner at Align Capital Partners, Cleveland’s newest private equity firm, which closed its first fund last fall at $325 million. “But it’s something we are watching closely with our advisers.”

Of the many parts in Dodd-Frank, section 619 in particular — commonly known as the Volcker Rule — generally prohibits federally insured banks from sponsoring or investing in private equity and hedge funds.

There are some exceptions. The regulations get complicated, notes Ronald Stepanovic, a partner at law firm BakerHostetler whose practice focuses on private equity. But a motivation behind the rule, he explained, was to mitigate banks’ participation in risky investments — whether private equity was truly “risky” many finance experts would disagree with.

And as a result, banks spun out private equity operations and stopped financing deals and investing in funds while letting current investments age out of their portfolios.

Even though the deadline to comply with divesting from private equity operations is actually later this year (the

deadline was pushed back a couple times), many banks acted right away.

Cleveland’s Cyprium Investment Partners, for example, was established in mid-2011 as the investment and finance team of KeyBank’s Key Principal Partners and left the bank to form their own firm as a direct result of Dodd-Frank regulation. The bank could let its portfolio of investments run down with Cyprium managing those, but the difference was the bank was no longer running that operation in-house.

“The exercise with Dodd-Frank was to bolster bank capital bases, and these operations were seen as risky,” said Cyprium chairman John Sinnenberg. “If you really thought there was risk to it, then it’s the right move to get out of it. But for every bank holding company I’m aware of, these were profitable investments.”

Ironically, Sinnenberg said, some banks had “knee-jerk” reactions and sold off their private equity investments instantly on the secondary market, likely for less than they would’ve made if the investment ran its course — which would’ve had a negative effect on capital.

More importantly, prior to DoddFrank, banks often participated in funds in their early stages when firms had no real track record for performance, providing early-stage support that gets funds moving.

Cleveland’s Evolution Capital Partners received support in its first fund in the mid-2000s from what was National City Bank at the time, among other investors. Without that, cofounder and managing partner Brendan Anderson said he’s unsure how their first “puny” fund of $17 million may have come together.

“Financing wasn’t easy, but this gave you a base when the banks come in,” he said. “It was a wonderful thing to have them on board.”

By the time Evolution began raising its second fund in 2011 with a $30 million target, Dodd-Frank was in place, and banks were no longer participating.

“The traditional PE rule was if you had a good fund one, you keep your investors and roll into fund two,” Anderson said. “In our case, in my opinion, we had a good fund one — we had more than 30% investor return — but then without the banks, we lost at least 25% of our investor base. It’s painful to go out and replace that.”

Non-bank specialty finance companies would, and continue to, fill the gap as banks became less competitive for financing or ditched them entirely because of the regulations.

Dodd-Frank actually led to a surge in those firms as they sought to fill the void created by banks. New York’s Madison Capital Funding would be an example of one of those.

But those groups tend to be on the coasts. There aren’t any in Cleveland.

And that’s something Jones said he laments simply because he’d rather work with local institutional investors — like a Cleveland bank.

Anderson said that if banks were participating, Evolution’s third and most recent fund, which closed at $30 million, might have exceeded $40 million.

If financial deregulation does

stretch to provisions that have shaped private equity today, there’s a sense that banks would, in fact, see opportunity and get involved.

“The longer-term question is whether banks go back into the market. Can they? Would they? It’s hard to say,” said Sinnenberg. “But it’s likely. I think it’s an asset class banks would like to have in their portfolios. And I think banks are paying attention to it.”

Contacts at some large banks in Cleveland said it’s preemptive to weigh in on their interest until regulations change.

But conversations about private equity are certainly happening.

Of course, if banks do get involved in private equity again like they used to, it’s not going to have a transformative impact on the industry.

There’s more than enough capital out there right now at this point in the cycle, and that’s helped even small, new firms like Align Capital get traction with fundraising early on.

Meanwhile, giant firms like The Riverside Co., with a massive base of investors and long track record of deals, are unlikely to see much impact if banks do get involved in the sector again. Firms like that aren’t having any issues with fundraising right now — the challenge is more in finding the best deals as dollars flow into the sector.

“The banks themselves haven’t

Mark R. Levine, M.D.

been missed,” Sinnenberg said. “But I think the banks miss loaning into and providing debt capital to leveraged-buyout firms. They’re just restricted by the regulators now.”

In a market like Cleveland’s, where there is a number of small funds and a history of new funds starting up, another stream of financing could spur new firms and enhance deal terms as more groups compete for financing. After all, banks have lower costs of capital than specialty finance companies, so they can offer lower rates and still be profitable.

So fresh funds, like Align, would likely see more dollars and better financing terms. And new funds could form, spurred by a renewed interest from banks.

“When it comes to smaller business getting capital or smaller funds getting capital, I think banks are a huge piece of the puzzle,” Anderson said. “I think probably the biggest swing is for first-time funds and smaller funds who want to focus on smaller ends of the market.”

Could that translate to more competition in the private equity landscape at-large?

“It would be interesting to us if some of these institutions came back into the market because they have largely just left it,” Anderson added.

“We would love it if they did.”

Bryan Costin, M.D.

The Cleveland Eye Clinic Welcomes NOMINATION DEADLINE: MARCH 13 ISSUE DATE: JUNE 12

This year, Crain’s Cleveland Business will single out 20 up-and-coming professionals who haven’t turned 30 yet. While their names might not be top of mind and they likely haven’t made their first million yet, there’s no denying these young professionals are making a mark on Northeast Ohio.

Do you know a 20-something we should know about? Maybe he or she has started an interesting company or is already disrupting their field for the better. Or perhaps he or she has already made an impact through their philanthropic or civic involvement.

This year’s class of Twenty in their 20s will be profiled in an editorial feature in Crain’s Cleveland Business.

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

Immigrant’s tale extends to workplace

Editorial

Toby talks Cozying up with President Donald Trump poses some challenging optics for any brand. Just ask Uber CEO Travis Kalanick, who resigned from the president’s business advisory council amid an uproar from his employees in the wake of the president’s controversial travel ban.

Cleveland Clinic CEO Dr. Toby Cosgrove has received considerable criticism for his organization’s decision not to abandon plans to hold a fundraiser at Trump’s Mar-a-Lago resort, as it had done in years past, in the wake of the ban. The ban, announced in late January, directly affected one of Cosgrove’s own employees. All the while, Cosgrove — who had been a top contender to head the Veterans Affairs department in the new administration — continued to meet with Trump alongside other business leaders.

There’s something to be said about having the president’s ear, which Cosgrove clearly does. Caving to critics and severing that relationship to save face politically or prevent a few bad headlines would be a disservice to the Clinic, the U.S. health care industry and Northeast Ohio.

Talking with reporters after last week’s State of the Clinic address, Cosgrove acknowledged he voiced his displeasure to the administration regarding the travel ban. Still, until those remarks, Cosgrove had been relatively mum regarding his conversations with the president.

The Clinic’s actions as an organization — and particularly those of its staff — spoke volumes, particularly the vocal support for the prompt return of Dr. Suha Abushamma, the Clinic doc caught in the ban.

Assuming the president can start tackling major policy issues rather than “Saturday Night Live” or The New York Times, Cosgrove’s voice could prove particularly useful. There’s plenty of work to be done on the health care front as the Republican-led government looks to unwind the Affordable Care Act. And given Northeast Ohio’s reliance on health care as a driver of the economy, it’s critical someone with our region’s interest in mind is at the table.

“I think the important thing is that everybody gets an opportunity to express their opinion and there’s been lots of protest, and I think that’s fine,” Cosgrove told reporters last week after his address. “I think our opportunity is to be at the table and give our input directly to the people that are involved”

Global edge

It’s no secret Global Cleveland has grappled with relevance in recent years. In fact, before Joe Cimperman took the helm, dysfunction might have been the more appropriate term to describe the talent attraction nonprofit.

Last week, however, a new initiative brought forth by Global Cleveland and the Flashstarts business accelerator is just the sort of entrepreneurial thinking we need more of in Northeast Ohio. The two organizations announced they’re working together to create what will be called the Flashstarts Global Entrepreneur-In-Residence program.

The program aims to recruit foreign entrepreneurs who would be interested in starting companies in Northeast Ohio while working part-time for a local university. A university partnership is expected to be finalized in the coming months.

The most enticing piece for those recruits? An H-1B visa — one that isn’t affected by a cap that limits how many of them are given out each year.

Flashstarts CEO Charles Stack told Crain’s the university partner would employ the entrepreneur for at least 20 hours a week. They could teach entrepreneurship classes, mentor students or even help the university recruit international students.

Today, America is grappling with what role it should play in the global economy and whether those from foreign nations should be given the opportunity to pursue the American dream.

It’s heartening to see two Northeast Ohio organizations working to make that a possibility for some of the brightest minds abroad.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

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My friend could be an employee at any of our businesses.

She’s dependable, exceeds expectations, always helpful. And she is an immigrant.

Recently, she headed out for her lunch break at her usual spot, a food court downtown, because it is quick and convenient.

But something was different this day. As she picked up her order, another food court customer looked at her and asked, “Hey, are you Iranian?” She isn’t, as though that matters. But she froze, unsure how to react.

“I thought it was a weird question,” she posted later that day on social media, “but I look ethnic and I am often mistaken for Italian or Greek, so I didn’t think much about it.”

When she began to leave, her questioner Elizabeth left no question that his intent, along with McIntyre that of another customer, was bigotry.

They began shouting obscenities at her. “Go back home!” is probably the most sanitized statement I can repeat. My friend got out of there, fast.

“I felt super embarrassed and just kept my head down and walked away,” she wrote on Facebook.

She returned to work and tried to forget the incident, but that wasn’t so easy. Our inclination might be to forget it, too; to chalk it up to two idiot bigots hanging out in the mall.

But that’s too easy.

My friend’s story is important for employers and coworkers to hear because she could be the person sitting next to you or outside your office door. Or you, for that matter.

We talk about the importance of workforce diversity in all of its forms, and we celebrate it. But we also must defend it.

My friend is from Eastern Europe. Her family came to the United States in the early 1990s seeking a better life. Her parents worked full-time jobs in the day and cleaned office buildings at night, saving their money. My friend and her sister stayed with relatives for several years until they, too, could come to be with their parents and join in the American dream, along with their U.S.-born baby sister.

There has been much discussion and debate in recent months about refugees and immigrants, extreme vetting and temporary immigration bans. About how best to keep America safe and, at its core, still America.

There is nothing wrong with healthy debate. But my friend’s experience is evidence that this national conversation isn’t always healthy. Sometimes, it’s hazardous. She is harassed on her lunch break because she is … different? Because she has an accent? Because she looks like she might be, what, an Iranian? A Muslim? A terrorist? All that from her dark hair and slight accent?

Unfortunately, we are in what author Pankaj Mishra rightfully calls “the age of anger.” And angry — and fearful — bigots have the potential to do much harm. Even if it is not something your family has experienced, perhaps someone in the family of co-workers has.

And it just can’t stand. Not in the office. Not in the food court in the mall. Not anywhere. We cannot be silent. That’s a message I hope is proactively delivered, and modeled, from the top of every organization that employs our strong and diverse Northeast Ohio workforce.

“It’s easy to ignore the situation until you are the target of the hatred,” my friend wrote with grace and courage on her Facebook page. “We need to unite together against this type of behavior because, honestly, if it can happen to me … it can happen to anyone who looks, talks or just acts a little different.”

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com.

Please include a telephone number for verification purposes.

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Help us

Personal View

Clean energy revolution offers jobs, opportunity

By DAVID ABBOTT, ELLEN ALBERDING and JULIA STASCH

As the new administration in Washington promises to champion the growth of fossil fuels, progress on clean energy might seem stagnant at best.

But at the state level, the advancement of clean energy still serves as a practical, bipartisan solution to people’s everyday needs.

Despite the federal government’s apparent determination to disengage on this front, Illinois, Michigan and Ohio — Midwestern states led by Republican governors — are taking steps to ensure that families have access to reliable energy, cost-effective options, and cleaner air and water.

In Ohio, Gov. John Kasich took a stand for economic development and clean energy, carving a different path than what’s emerging in Washington. He concluded 2016 with a veto of a bill that would have effectively frozen new clean energy development in Ohio, thus affirming the integration of clean energy and efficiency standards into our energy future as a crucial economic initiative that transcends party lines.

The bill he rejected would have weakened the state’s clean energy goals and made compliance with renewable standards voluntary for the next two years, while increasing costs on customers. Instead, the now-renewed standards require Ohio utilities to generate 12.5% of their energy from wind, solar and other renewable sources by 2027 and cut power usage via efficiency programs by 22% by the same year.

The governor’s decision rested on the economic benefits that clean energy provides to the state, and he had the evidence behind him. The 2014 energy efficiency programs alone created more than 14,000 jobs and increased state income over $1.2 billion. Ohio ranks second in the Midwest in clean energy jobs with over 100,000 employed.

“Ohio workers cannot afford to take a step backward from the economic gains that we have made in recent years, and arbitrarily limiting Ohio’s energy generation options amounts to self-inflicted damage to both our state’s near and long-term economic competitiveness,” said Kasich.

In a letter applauding the decision, companies like Nestle and Whirlpool stated that renewable energy and energy efficiency standards help them save money, stay competitive and avoid energy price volatility.

With renewed market certainty and predictable policy, Ohio is encouraging businesses to continue invest-

ing in clean energy locally.

Across the country, the clean energy sector provides well-paying employment for millions of Americans. In the Midwest alone, clean energy jobs are expected to grow at a rate of 4.4% this year, almost nine times as fast as the long-term national average.

Ohio is not the only Midwest state seizing this opportunity. In December, Illinois and Michigan both approved bipartisan deals to grow clean energy. Illinois Gov. Bruce Rauner signed a compromise that repairs the state’s clean energy standards while keeping valuable nuclear plants open, a move that will generate $15 billion of investment in clean energy. And Michigan clean energy advocates and utilities came together in a bipartisan manner, with active support from Gov. Rick Snyder, to revamp the state’s clean energy policy for the first time in eight years.

It’s clear that clean energy is on the ascent. It already costs less to build new solar and wind plants than it does to build a natural gas plant in some parts of the country. And Fortune 500 companies that use the highest proportion of renewable energy consistently have better financial performance than their competitors.

States that seize the energy transition will have a competitive edge for job creation and economic development. Ohio’s history as a seat of American industrial innovation is long — companies like Goodyear, Dow Chemical and Owens-Corning all started in the Buckeye State, and the governor clearly recognizes the opportunities of the clean energy revolution. The state legislature would do well to join Kasich’s support for clean energy lest they risk putting the state at a competitive disadvantage.

In Ohio and in other states across the U.S., policymakers and investors can seize the many opportunities clean energy offers to bolster regional economies, provide stable jobs and social services, and prioritize public health and safety into the future. Regardless of decisions made in Washington, a state-led clean energy revolution reminds us what prudent public policy can — and should — look like.

Abbott is the executive director of the George Gund Foundation. Alberding is president of the Joyce Foundation, which promotes the vitality of the Great Lakes region by supporting clean water and clean energy.

Stasch is president of the Chicago-based John D. and Catherine T. MacArthur Foundation, which supports climate solutions in the United States, India and China.

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Web Talk Re: Buses and Public Square

Re: Four terms for Jackson?

This is really embarrassing and wildly misguided.

We’re going to pay a $12 million fine just because of the mayor’s personal preference for not running buses on Superior Avenue through the square? No safety benefit, negative economic effect, negative transit effect. Oh, and we’ll probably be ineligible for (federal transit) grants as long as Superior is closed to buses. Combined with a lack of state and city budget room, you can say goodbye to anything transformative with regard to Cleveland streets, buses or rail. — Ronnie McGill

Regarding Crain’s recent editorial, “Mayor for life?,” it seems like Cleveland’s best mayors have been “uninspiring.” They don’t grandstand. They work hard. They are fiscally responsible and they hire good people. If these are bad qualities, then Mayor Jackson is guilty as charged. He has presided over the great recession, and Cleveland stayed fiscally sound through that (not all Rust Belt cities could do that); the building boom downtown, and the return to residential living in the city. The neighborhoods and schools are long-term fixes, and he wants to stay to continue these long-term fixes. I’m glad he is running. Hopefully, there will be others who will eventually step into his shoes at some point in the future. — Vic Voinovich

The opening of the route is not a safety issue. The result would not be any more of a hazard than it ever was. This is politics at its worst. — Randall Frye

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CRAIN’S CLEVELAND BUSINESS

The Dish: Susan Condon Love

Burntwood Tavern continues its expansion run In just six years, the rustic-with-amodern-vibe Burntwood Tavern — born from an almost spur-of-themoment decision during an exercise run in Chagrin Falls — is one of Northeast Ohio’s most successful and rapidly expanding restaurants.

In recent months, the ninth Burntwood Tavern location opened, at Crocker Park in Westlake, and the restaurant’s management group, Chef Art Pour Restaurant Group, announced plans to build its first outof-state Burntwood Tavern, in North Naples, Fla. In addition, CAP founded and manages M Italian restaurant in Chagrin Falls.

By most business models, that is a very rapid growth. The success rests squarely on the relaxed shoulders of Bret Adams, 44, Burntwood Tavern founder and CAP chief executive officer. He credits the popularity of the restaurants to site locations, timing, intuition, finding the right staff and selecting good core administrators.

The backbone of Burntwood Tavern’s continued growth is simple, Adams said, settling back in a windowed conference room during an interview in the CAP offices in Chagrin Falls.

Reclaimed wood and old metal barn doors dominate the office, just as at

Susan Condon Love is a freelance writer who was an editor and writer at The Plain Dealer, The Las Vegas Review-Journal, the Savannah (Ga.) Morning News and The Annapolis Capital.

Burntwood Tavern locations.

“There’s a lot of energy, passion and experience,” he said. “That’s the formula.”

It all started in March 2010, when after 20 years in the restaurant and hospitality industry, Adams decided he was ready for a life change and quit his management position with the Bravo Brio Restaurant Group, which operates restaurants across the country. He started his restaurant career while still in school, earning a degree in accounting and hospitality management at Columbus State Community College. He spent much of his time at Bravo Brio working with his mentor, Rick Doody, the company’s chairman and founder.

“He gave me the tools to be successful,” Adams said.

But it was time for a break from Bravo Brio.

“I was tired of traveling,” said Adams, the father of five children with his wife, Michelle (the “M” of M Italian).

Thanks to his work with Bravo Brio, Adams, who is originally from Ashtabula County and has lived in Columbus, and his wife fell in love with Chagrin Falls and wanted to stay.

“I planned on taking the summer off and then starting a different career, maybe in selling real estate,” he said.

One day, Adams started off on his regular workout run.

“But this time, I turned left instead of right on my normal route,” he said.

“All of a sudden, I saw this big billboard about a fully equipped restaurant for sale. I stopped immediately.”

After calling some friends, including designer Chris Kalinyak, for their input, Adams cashed in his Bravo Brio stock and took the plunge into restaurant ownership.

The $150,000 investment into the first restaurant in Chagrin Falls now translates to a restaurant group that earns between $36 million to $40 million annually, he said.

Adams realizes he has beaten the odds: About 60% of new restaurants

S AV E T H E D AT E !

FAMILY BUSINESS FORUM

Burntwood Tavern founder Bret Adams says his company has a simple formula for success.

(Susan Condon Love for Crain’s)

fail within the first year. And nearly 80% close before their fifth anniversary, according to CNBC. Often, the reason is simply location.

“We have been very lucky in our selection of locations,” said Adams.

“But really, the backbone of the business has to be to serve the guests.

“It’s also been a huge asset to understand the numbers,” he added, referring to his accounting degree.

While intuition on interior design (“Keep the core decor elements the same, but give each restaurant its own personality”) and location might account for continued success, Adams also had a simple goal with the restaurant’s price point.

“We wanted to accommodate those wanting something one step up from Applebee’s, but not as high up as, say, a Ruth’s Chris Steak House.”

Finding that price niche, he said, was key.

Michael Huff, dean of the hospitality management department at

Cuyahoga Community College, thinks that Burntwood’s success is based, in large part, on the changing model for restaurants.

“Once upon a time, the restaurant industry was dominated by franchises, chains and big-box restaurants,” he said.

According to Huff, owners used to use a very specific formula to decide if they would open in an area. That formula included counting the number of households in a 2- to 5-mile radius, determining the disposable income in those households and counting the number of restaurant seats in that same area.

“With the proliferation of independent, chef-driven restaurants in the last 10 years, the matrix has tended to fall apart,” said Huff. “People are willing to drive if they hear of a great restaurant opening up. That’s why you are seeing the big-box restaurants starting to close.”

Burntwood, and other unique restaurant groups, such as Melt Bar and Grilled, had good timing, Huff said.

“It is the right product at the right place at the right time,” he said.

Adams credits his success to a core administrative staff of six, each of whom “love their areas of expertise.”

They help support the success of the business that now employs some 650 people.

Adams does have an end-view to the expansion.

“We are looking at one or two more (restaurants) in the Cleveland area, and maybe three or four in North Naples.”

At that point, he said, CAP is going to just maintain and operate its existing locations.

“We are going to enjoy the moment,” Adams said, smiling.

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Focus

MARKETING AND CREATIVITY

Can Trump make Twitter great again?

The platform’s earnings are off, and brands are pondering its relevance

By TIMOTHY MAGAW tmagaw@crain.com @timmagaw

P

resident Donald Trump’s love affair with Twitter is no secret. In 140 characters or less, the Commander-in-Tweets — as many have characterized him — has used the platform to pitch his policies and admonish his critics.

The president’s tweets often become headlines themselves, and marketers and brand managers have wondered whether Trump’s proclivity for Twitter would result in a bump in active users, and thus relevance, for the nearly 11-year-old social media platform. So far, at least according to its latest earnings, the Trump bump seems to be as elusive as Hillary Clinton’s emails.

Twitter’s revenue for the fourth quarter of 2016 hovered at $717 million, up only 1% from the like period in 2015 and well below analyst expectations. Also, the company’s advertising revenue — which makes up the bulk of its overall revenue — fell for the first time since the company went public. Those aren’t heartening numbers for prospective advertisers.

Moreover, other platforms like Facebook and Instagram have prov-

en to be much more attractive vehicles, particularly for paid reach, given their steady user growth.

Early last year, eMarketer, a research firm, forecast continued growth of the share of Twitter’s social network usage, but dramatically tempered that assessment last August. It then said it expected Twitter would capture 28.1% of U.S. social network users in 2016, a decrease from 2015.

Also, eMarketer expects Twitter’s share to continue to decline through 2020. The shift is due to other platforms like Instagram and Snapchat siphoning away Twitter’s prospects.

Meanwhile, from 2015 through 2020, eMarketer expects Facebook’s share to slip only marginally from 90% to 89.2% and Instagram’s to grow from 31.9% to 46.6%. (Facebook, it’s worth noting, bought Instagram for $1 billion in 2012.)

Those figures are certainly more alluring for advertisers. Plus, the Instagram and Facebook platforms are more video-friendly, which consumers tend to respond to more favorably.

Progressive Corp., for instance, last week unveiled a new Facebook-centric campaign it created in-house with an assist from Facebook’s team.

“There is just more leeway to express some artistry in there and to catch people’s attention,” said John Znidarsic, senior director of social

influence at Cleveland-based agency Adcom. “As a culture, we’re more reactive to visuals. Facebook and Instagram have upped their game with advertising and allow you to drill down a lot deeper.”

These days, many brands have moved the management of their Twitter accounts in-house, whereas five or six years ago much of that work was farmed out to agencies.

That doesn’t mean it’s worth ignoring — and marketers stress that Twitter should still play a role in a company’s overall outreach efforts.

“I’d argue Twitter’s relevance remains high. The good news is that they are in the news every day, because every time he tweets, that becomes news. But you can get that information everywhere outside of Twitter,” said Dominic Litten, chief marketing officer for Westlake-based Budget Dumpster, a tech startup that facilitates dumpster rentals. “You don’t have to be a user to see what the president is saying. It’s almost like a catch-22. Everyone knows about Twitter, but you don’t have to be active on Twitter to get that out of the system.”

Bottom line? Relevance doesn’t equal revenue, and that’s a troubling sign for brands looking to invest their time and money in Twitter, according to Litten, who before joining Budget Dumpster spent time at Razorfish and Rosetta.

However, Twitter’s troubles, according to Dix & Eaton’s Lisa Zone, are a bit overblown. She said the company’s obstacles are simply part of the maturation process and that Facebook — Twitter’s elder by only two years — went through the same growing pains.

“The companies I am familiar with heavily rely on Twitter as a key social platform,” said Zone, a managing director at Dix & Eaton, a Cleveland-based communications firm.

“You saw that as part of the Super Bowl. There are more platforms for brands to spread their message across, but I don’t sense any have

Crain’s Illustration by David Kordalski

FILM FESTIVAL - Page 12 | Q&A - Page 13 | ADVISER - Page 14

abandoned Twitter or that they will.”

When it comes to social media, the discussion shouldn’t necessarily focus on the platform but rather a business’s overall strategy, according to Todd Morgano, a senior vice president with Cleveland-based Falls Communications. Twitter, in particular, is good at establishing thought leadership within a particular sector or other B2B purposes.

“It all goes back to what this particular channel can do for my business strategy. It’s important to always look through that lens — not just jumping on whatever platform is hot,” Morgano said.

Several local institutions have been lauded for their uses of Twitter, the most notable being the Cleveland Clinic and the Cleveland Indians.

The Clinic, for one, has used Twitter to push out content that positions its docs as experts in their fields. The Tribe’s account, known in particular for its snark, has worked well as a sounding board for fans — even the most critical ones.

“People go on there sometimes just to complain,” Litten said. “It’s important for brands to manage that process and interact with customers, but it’s certainly less sexy than it’s ever been.”

Speaking of complaints, the president has certainly taken some companies to task on Twitter, opening an entirely other debate when it comes to the use of Twitter by brands.

Trump’s already put Nordstrom, Chevrolet and Boeing in his digital crosshairs. Trump tweets have the potential to move markets, and brands, especially those with a strong national footprint, should have some sort of action plan in place if they expect to upset the president in some way, experts say.

“If you’re going to make some sort of announcement about jobs or expansion or anything that doesn’t align with the protectionist approach he’s taken, I think you should have your head on a swivel,” Znidarsic said.

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MARKETING AND CREATIVITY

Film fest campaigns take cues from fans

By JUDY STRINGER clb freelancer@crain.com

Although Paris is The City of Lights, organizers of the annual Cleveland International Film Festival (CIFF) hope Cleveland can capture enough electricity to become the center of ideas and inspiration for 12 days — and then some.

Last month, CIFF unveiled the marketing campaign for its 41st running, which takes place March 29 through April 9, with a flashy and bold departure from recent years.

The 2017 campaign “Illuminate” speaks very directly and literally to the projection of the film on the screen itself, according to CIFF marketing and media director Debby Samples, but is meant to be more than just a play on words.

“The word ‘illuminate’ a lot of times is associated with education, it’s associated with a sense of happiness — which is a feeling that people feel at the festival — and with bringing things to life,” Samples said. “We first want to entertain our audiences, but we really want to do everything in our power to educate them along the way, so it’s really about that educational component.”

More than 102,000 people attended the 40th film festival in 2016, which included 408 screenings of full-length features and short films and upward of 300 visiting filmmakers.

Designed by Brittyn DeWerth of Type Twenty Seven, the marketing campaign for the 41st CIFF features stark black and gold block lettering and an image of bursting light, which visually “suggests motion and move-

“Illuminate,” the Cleveland International Film Festival’s marketing campaign for its 41st event (top), is a pretty large contrast from its themes in past years. Also shown are logos from the 2014, ’15 and ’16 film festivals.

(Contributed photos)

ment,” DeWerth said, and reinforces the idea that the festival’s impact lives beyond the 12 days of galas, screenings and forums.

“The light is actually coming toward the viewer as well as going away, so it is almost like you are coming into the festival and then gaining your experience and taking it out into the community,” DeWerth explained.

Samples said development of the

marketing campaign began during the 2016 CIFF, when she and her colleagues collected key words and phrases used by audiences and filmmakers and took note of the vibe of the festival.

One of the predominant messages and moods during the event and after was “this ripple effect,” she said, of how attendees were moved to action by the ideas and experiences shared by the artists and fel-

low viewers. They got involved in national or international causes.

They joined local committees, clubs or organizations. They wrote letters and raised funds.

“It is just the biggest reward we get as a staff when we hear from our audience that they took something like that away, took it back not only into their own lives, but into their own community,” she said.

Of three proposed themes reflecting this idea of impact and empowerment, “the notion of illumination just really stuck out to all of us,” Samples said.

Embracing a theme like illumination also gave DeWerth the opportunity to move in a different direction with the 2,800 pieces of advertising and merchandizing that accompany the annual event.

In 2014, CIFF began designing the festival messaging around the approaching 40th milestone. For the 38th year, the theme of “The Home for Stories” highlighted the international flavor of the festival, how it drew narratives from around the world. The 39th festival’s tagline, “The Home for Inspiration,” was more locally focused and led into the all-encompassing 40th theme, “Welcome Home.”

The three-year campaign used softer, more subtle coloring and line drawings or sketches. The current theme, by contrast, is “much more photographic.”

“It definitely does have a little bit more of a bold approach to really make that separation from 40 to 41 and moving forward,” she said.

While it may seem challenging to create fresh and compelling themes every year for an event that is now

CIFF 41: By the numbers

When: March 29 through April 9 Where: Tower City Cinemas Tickets: Starting March 10 for CIFF members; March 17 for the general public 190+: Feature films will be shown 200+: Short films will be shown 300+: Filmmakers and other guests planning to attend 60+: Countries represented 1,500: Anticipated crowd for the opening night film and gala 8,400+: Students participate in CIFF’s media literacy program, FilmSlam

40-something, Samples is not afraid the well for CIFF will dry up anytime soon.

The organization is fortunate to have a dedicated fanbase who is more than happy to provide feedback. The first festival took place in 1977.

And, she said, as long as CIFF continues to do its job, ensuring guests are entertained and enlightened — about other cultures, about the topic at hand or about the experience of the filmmakers themselves, for instance — audiences will have plenty of ideas to share.

“Our audience is such a big part of our festival that they really do have ownership over it and they keep us going and wanting to make it better each year,” Samples said.

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MARKETING AND CREATIVITY

Q&A: Jeff Charney

Chief marketing officer, Progressive Corp.

A quick glance around Jeff Charney’s office will tell you a lot about Progressive Corp.’s chief marketing officer. There’s a life-size guitar, a life-size cutout of FloBron and, of course, a large portrait of Progressive’s familiar cast of characters — from Flo to Babyman to the villainous Rate Suckers. But sitting on his coffee table is what perhaps says the most about the bombastic marketer: a large glass die and a grenade (a deactivated one, of course).

“You have to be disruptive and take risks,” Charney said. “We take risk — it’s calculated risk, but be bold or go home.”

Charney joined the Mayfield Village-based insurer in 2010. Before that, the South Carolina native held executive marketing roles at Aflac, QVC and even led his own experiential digital marketing and consulting agency. Crain’s recently sat down with Charney to talk about the secrets behind Progressive’s success and the challenges of remaining relevant in such a fast-paced industry. The interview has been edited for length and clarity. — Timothy Magaw You didn’t do a Super Bowl ad but pushed out your new “Social Etiquette” spot starring Flo on social media a few days later. Tell me about your strategy.

Everything we try to do is zig versus zag. We’ll never do a Super Bowl ad.

That’s not who we are, but we’ll push out our content when people are listening. We put it on social the Tuesday after the Super Bowl after people had digested all the other ads. People listened in a different

way. In that ad, Flo is waiting for the right time to speak. That’s how we are as marketers. We’re not going to outspend anybody. We’re going to out-create them.

You mentioned how insurance is one of the most competitive industries, especially when it comes to advertising. What’s that like?

All those advertisers are good. I love being around people that make you better. I love competition. I love to win

in a lot of ways, but I also love to play fair. I love to out-create them, out-think them and outmaneuver them. If you’re not disruptive in today’s marketplace, you’ll get left behind. You might as well put milquetoast out there because nobody’s going to notice. This ad specifically is something people are already buzzing about on social because it’s different and says something more than just advertising in a lot of ways.

How do you differentiate yourself from others in the industry?

We operate as a network. We don’t run a marketing department. I run a network. We have this sitcom; Flo is at the center of the sitcom. We have all these characters. You don’t know them all as much, but there are rivals and foils, but it’s a hero's journey.

There are protagonists along the way. That’s the core of the network, and there are many spinoffs and other campaigns. But nobody else runs their department like a network.

And arguably we have the No. 1 icon in the country right now with Flo, and she’s almost 10 years old. She’s fresh. She’s authentic. If you met her, you’d love her.

You say that Flo the character in many ways was shaped by the actor that portrays her, Stephanie Courtney. What’s so special about what Stephanie brings to the character?

She’s an improv actor. She is smarter, quicker than anybody because she has to be. We let her improv. A lot of the things we write for the commercials, but a lot of times we

don’t script her at all. We give her the situation, and then she’ll say something like “sprinkles are for winners.” Half the endings she comes up with. We surround that cast with improv actors. If you’re an energy person like I am, you want to be around other people with energy.

She’s a very in-your-face character. How do you keep her fresh and relevant?

She has a lot of people around her.

We don’t lean everything on her.

That’s why we put these other campaigns out there. Other characters balance out her character. The network philosophy allows her to not always be center stage. It’s like any sitcom. Sometimes the sitcom is about the main character or another character. She doesn’t have to carry the weight all the time.

The structure of your department also is a differentiator in the

industry, right?

We buy media inside the company.

Other companies I was at, I’d call my agencies to buy media. But here I can walk down the hall 50 yards and see what the results of my efforts are.

That’s unheard of in the industry. It’s a beautiful thing for me to be able to see where my content is going and how well it is doing in the context of it. We also have an internal creative agency (96 Octane) on the same floor, too. When I first got here, I said we had to build this thing. Talent will come. We wanted to create pound for pound the best team in the country here in Cleveland, and we are. It’s the most creative and strategic 100 yards in business. It’s a melting pot of really great talent, but we work at it.

How many people wouldn’t want to make history versus just sell insurance? We definitely sell insurance, but you can make history with this brand in a lot of ways.

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CRAIN’S CLEVELAND BUSINESS

MARKETING AND CREATIVITY Adviser: D. Peter Hochberg

Protect your creative assets — here and abroad Many companies invest a tremendous amount of money in their various inventions and innovations that make them unique in the market.

These can include the products they market or even the unique packaging or images that they use in the marketing of their products.

The problem is that, unless these creative assets are properly protected with registered trademarks, the company is vulnerable to being ripped off by competitors or losing its unique identity (also known as its marketing edge).

Trademarks, including service marks relating to the performance of services rather than goods, are used to indicate that goods or services come from a particular source. While many businesses use trademarks, often they are not registered with the U.S. Patent and Trademark Office (PTO). One reason is that it is not felt to be necessary, and another is that there may be a notion that the registration process can be expensive.

However, many business owners would be upset if they found that a competitor or other third party is us-

Q&A CONTINUED FROM PAGE 13 The Facebook collaboration you recently launched is unique given that you worked directly with the social media platform. Why is that noteworthy?

We put an Octane team beside these guys. The best creatives were

D. Peter Hochberg is a partner in the Intellectual Property Practice Group of Walter | Haverfield LLP.

ing a trademark that is similar or identical with their own trademark.

Reasons for registering trademarks with the PTO include: the ability to use the trademark symbol; the constructive — even if not actual — notice that the mark is registered; access to federal district courts for enforcement; and creation of the foundation for foreign applications.

Not every trademark can be registered. Trademarks often are categorized as imaginative (such as coined words, i.e. Kodak, and unusual symbols), descriptive and generic, which cannot be registered.

To register a trademark, it should not be “confusingly similar” to other around the table trying to crack the code. The best got better. Facebook knows their medium best, and we know our content best. They wanted to work with Flo. We try to find people with like interests and work with them. I’m amazed nobody has raised their hand like we did.

Wouldn’t you? We like to be first movers on all digital.

What are some things you learned

trademarks used with the same or similar goods or services. A trademark attorney usually will conduct a trademark search to identify potential conflicts. Finding none that would preclude registration, the attorney can then proceed to prepare to file the application online with the PTO. It’s important to remember that trademarks are valuable for protecting more than just a product, as they also can be used to protect symbols, designs, cartoons and the like that may be integral in differentiating the product in the marketplace. Trademarks can also protect unique packaging that effectively brands goods, such as the pinch bottle for scotch.

Or the unique colors or shapes of products also can be trademarked, such as those found in Life Savers candy.

The trademark application process is relatively simple and inexpensive, often costing about $275 per class.

To qualify for a trademark, the item must either be in use or there must be a bona fide intention to use the trademark in commerce. A “speci-

men” of the trademark must be filed.

For goods, this could be a label, a picture of the goods or packaging showing the trademark. For services, the specimen can include the trademark used in rendering the services or in advertisements for the services.

The trademark application is prosecuted in the PTO to determine if it can be registered. A key consideration is whether or not there are any identical or confusingly similar trademarks based on their sound, appearance, meaning and commercial impression — all in connection with the goods or services with which the trademarks are used.

If the trademark prosecution is successful in favor of the applicant, the application is published for opposition, a process that is similar to a trial, although it is done almost entirely by paperwork with a possible final hearing. However, most oppositions are settled.

Foreign trademark applications based on the U.S. application can be easily filed provided the foregoing foreign filing is done within six months of the U.S. filing date. The

common foreign jurisdictions are Canada, Mexico, China and the European Union Intellectual Property Office. Foreign applications provide protection in those countries or jurisdictions where the filing occurred.

U.S. trademark applications can also be registered with the U.S. Customs and Border Protection to help prevent the importation of competing goods into the U.S. Once a trademark is successfully filed, it’s important to continue monitoring activity involving possible conflicting trademarks by reviewing weekly publications of the U.S. Trademark Office Gazette and using worldwide monitoring firms.

For many companies, their ability to legally protect their creative and marketing assets can mean the difference between success and failure.

Fortunately, with the help of legal counsel experienced in domestic and foreign intellectual property applications and enforcement, it is possible to keep would-be competitors from creating copycat products that could interfere with successful marketing campaigns.

from Facebook that work best?

Short bursts of things. It’s an ADD world. Things that are quicker to the point are what matter. If you lose them in the first second or two, you don’t have them. It seems fairly logical, but there’s an art and science to it. A lot of marketers are so proud of their art, but they don’t know the science. Facebook knows the science backwards and forward, upward and down. It’s not the thing I find most

creative, but it works on their model.

What would be your message to an aspiring marketer?

You can make history, especially if you’re an aspiring marketer here. If you have the idea, we want you to execute it. This is the best place for the right person, the worst place for the wrong person. It’s a very fast treadmill, and it continues to go up. If you walk in that door, you better be progressive as a marketer.

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What’s the hardest part of your job?

Keeping your brand relevant and continue living that progressive way.

I look at that Progressive sign every day, and wonder how am I being progressive today? It’s an arms race today. It’s a battle, and we have to win that battle.

CRAIN’S CLEVELAND BUSINESS

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Estimated impact

SANDUSKY

The Force Sports Parks are expected to have the following annual economic impacts by 2020:

CONTINUED FROM PAGE 1 The complex opens with a two-day St. Patrick’s Day baseball tournament on March 18, and 29 more youth events are already posted on an online tournament schedule that runs through the end of August.

Will Spence, the regional manager of Sports Force Parks, expects the complex to host 39 tournaments in its first year. The majority will be twoor three-day weekend events, but some will last five or six days, depending on the sport and the number of participating teams.

“It will be the premier park in the Midwest,” Spence said. “It’s like nothing else. Traditionally, when you see a lot of these fields, they’re either diamonds or rectangle baseball fields or softball fields. We’ve gone to multiuse fields. Each is uniquely based on the sport.”

The park has 12 synthetic turf baseball fields, 11 softball fields, and eight full-size fields for soccer and lacrosse. The complex also features an 18-hole miniature golf course, a promenade with concessions and merchandise, a ropes course that soars 25 feet in the air, a trampoline park and two playgrounds.

Spence said the targeted age group is 8 to 18, but there are enough distractions for toddlers and adults, too.

“Our focus is to get people to the area and take advantage of the area,” he said.

Spreading the wealth Shortly after Eric Wobser left his job as executive director of Ohio City Inc. to take over as Sandusky’s city manager in 2014, McClure, Cedar Point’s GM, wrote him a letter concerning a proposed admissions tax increase. In it, McClure said taxes paid by the amusement park represented more than a one-third of the city’s annual tax receipts, and Cedar Point was responsible for more than 98% of Sandusky’s admission taxes.

Nearly three years later, Wobser said those figures are still “pretty

$56.9 million: Additional income for Erie County $1.7 million: Admissions and bed taxes 900: New jobs, including those at the sports complex

Dollars and sense

Clockwise from the top, the Sports Force Parks at Cedar Point Sports Center features, among many other attractions, 12 baseball fields with synthetic turf, a ropes course on which participants can soar 25 feet in the air and two playgrounds. (Contributed photos)

accurate.”

That’s one of the reasons he sees the development of Sports Force Parks as critical, since the complex will attract thousands more visitors to the area (a projected 111,000 annually), and it will do so during the “shoulder seasons” — the spring and fall months when Cedar Point isn’t as busy, or is closed.

“I think it’s incredibly exciting because we pride ourselves on being a destination, but we want to be a des-

tination that people come to for a number of reasons,” said Wobser, a Sandusky native. “We know Cedar Point is a major driver. Waterparks and the islands are a major driver.

This is going to help us get more people to the area in a positive way.”

And, Wobser hopes, more businesses.

The groups estimate that Sports Force Parks will generate 80,000 annual hotel stays by 2020, which represents about 10% of Erie County’s

current annual total, plus $56.9 million in annual spending and $1.7 million in admissions and bed taxes.

“As we look to diversify our economy, that’s an effect we’re looking for,” Wobser said. “We want to be a destination, which helps us attract more restaurants and businesses to the area. Maybe someone will want to bring a technology company here because somebody boats here or wants to spend more time here.”

The public-private partnership between Cedar Point and Sports Force Parks is a simple one, McClure said.

“On the business side of the deal, it’s all about selling tickets,” the Cedar Point GM said. “We own the land.

Sports Force operates the facility.”

Each tournament participant gets a free ticket to the amusement park and waterpark. That, of course, leads to family members purchasing passes, and adds to Cedar Fair’s already-robust bottom line.

Spence, the Sports Force Parks regional manager, said Cedar Point is also the complex’s food and beverage vendor.

It isn’t a novel concept.

The ESPN Wide World of Sports complex outside Orlando, Fla., has been open for 20 years. Cedar Fair’s top executive, CEO Matt Ouimet, spent 17 years as a Disney executive.

“We’ve seen that success,” McClure said of the Wide World of Sports facility. “We’ve seen those complexes that opened around the country. The land was available, and we saw the chance to make this happen.”

If the Sandusky complex is as successful as the projections, the groups probably won’t be finished. Wobser said there’s a study being undertaken that is looking at the possibility of an indoor complex that would sit next door to Sports Force Parks. Cedar Point’s Express Hotel is adding rooms for the 2017 season, and a tower of rooms at Hotel Breakers is scheduled to open in 2018.

“That was one of the foundations of the whole project — keep people engaged in the community longer,” Spence said.

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CRAIN’S CLEVELAND BUSINESS

AKRON

Industrial leagues put Akron on hoops map

By RICHARD WEINER clbfreelancer@crain.com

Larry Brown was looking for somewhere to play basketball after he graduated from the University of North Carolina in 1963. Brown, who would go on to fashion a successful career in professional and college coaching, asked his then coach, Dean Smith, what he should do.

“After I graduated from North Carolina, I was hopeful that I could play in the NBA,” said Brown. “(But) at that time, the league didn’t give little guys much of a chance.”

Brown was 5-foot-9, and though he was drafted by the Baltimore Bullets, his college coach had another idea. Smith told Brown to go to Akron to play for the Goodyear Wingfoots, at the time one of the top amateur basketball teams in the country.

Brown came to Akron to try out for the Wingfoots, his first stop on the way to his Hall of Fame career. He stayed and played for two years.

“It was a special time in my life,” he said.

The story of the Wingfoots and their competitors is the story of the beginnings of organized basketball, from the National Association of Intercollegiate Athletics, to the Amateur Athletic Union, to the National Basketball Association.

Yes, like the NFL — and before LeBron James made Akron synonymous with basketball — the NBA has origins in the Rubber City.

Fifty years before Brown began his post-college basketball career in Akron, the Goodyear Tire & Rubber Co. developed an extensive intramural athletic program for its employees.

Other Akron companies — including

Chuck Taylor, namesake of the now-famous Converse shoes, was a member of the Firestone Non-Skids. This picture is from about 1918. (Firestone Archives)

The Firestone Non-Skids take on the Goodyear Wingfoots during a 1937 game at the Firestone Clubhouse. (Firestone Archives)

Firestone Tire and Rubber Co. and General Tire and Rubber Co. — were doing the same.

The earliest known photograph of a Goodyear Wingfoots basketball team, an intramural squad, is dated 1914, according to Goodyear’s director of national media relations, Keith Price. By about 1917, Goodyear, Firestone General Tire and other Akron companies competed against one another in multiple sports in the Akron Industrial Athletic Association.

Building teams The industrial leagues were a part of a movement within the burgeoning factory-based industries across the country to engage employees in

team-building exercises, said historian Jeffrey Smith. Smith, who is on the faculty of Lindenwood University in St. Louis, wrote his University of Akron doctoral dissertation on the Akron industrial leagues.

Other businesses were forming the same kinds of competitive teams across the nation, said Smith, including the steel mills of Pittsburgh and Youngstown, automobile manufacturers in Detroit and many more in virtually every region of the country.

“There was a great deal (of organized sports) going on in a lot of places, including Akron,” said Smith.

“Company-sponsored sports were a part of a movement by these companies to make workers’ lives better.”

Those efforts included company

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cafeterias, housing (Goodyear Heights and Firestone Park as examples) and newsletters, which reported on the sports teams and serve as historical resources today.

The point, said Smith, was to gather employees together outside of work. It was a natural progression to invite competition from local companies, and the industrial leagues began to spring up.

At first, the spectators were not distinguishable from the players, and families filled the stands. In the case of the Goodyear Wingfoots and the Firestone Non-Skids (the Non-Skid being the first treaded car tire), basketball also was a chance to show the use of rubber as an athletic shoe sole.

In a very short time, though, teams started recruiting and paying outside players. In the case of Goodyear, players were offered jobs in the factories and offices in return for playing for the company team for two years.

About 20% of those players stuck with the companies, said Price, and the teams included several future top executives of Goodyear.

The crowds expanded, according to Smith, and the companies built baseball fields and basketball courts to accommodate them.

The 1920-21 Firestone team featured a skinny future shoe salesman by the name of Charles Hollis “Chuck” Taylor. The cover of his biography features a photo of Taylor, whose name graces the famed Converse shoes, in his Firestone uniform.

Firestone was sold to Bridgestone Corp. in 1988. Nashville-based Bridgestone Americas Inc. didn’t have anyone who could speak about Firestone’s basketball teams.

The seeds of the NBA

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During the next two decades, the basketball programs would develop into what the sport looks like today — on the professional, amateur and collegiate levels.

The teams played a schedule that included college squads and are credited with helping to found the National Association of Intercollegiate Athletics. At the same time, Akron industrial teams helped form the core of the Amateur Athletic Union, winning several national AAU championships from the 1930s through the 1960s.

In the late 1930s, the national industrial basketball leagues began to morph. In 1936, the Wingfoots joined the semi-professional Midwest Basketball Conference. The next year, 13 industrial basketball teams, organized by Goodyear, Firestone and

General Electric, formed the National Basketball League.

Akron became title town: Goodyear won the league’s first championship, and Firestone won the next two.

The Goodyear Wingfoots dropped out of competitive basketball during World War II, coming back into it after the war was over.

The NBL continued, however, and, in 1949, merged with the failing Basketball Association of America to form the National Basketball Association. Of the 17 original NBA teams, five that still play have direct roots to the NBL and the local industrial leagues: the Lakers, Pistons, Hawks, 76ers and Kings. The three BAA teams are now the NBA’s Knicks, Warriors and Celtics.

“If (the Wingfoots) had stayed playing in the NBL, one of the original NBA teams would have come from Akron,” said Price.

But the Goodyear Wingfoots went a different route.

“When we came back into competitive basketball, we went to the National Industrial Basketball League,” said Price.

Goodyear and four other industrial teams formed the NIBL in 1947.

Goodyear stayed in that league until it became a part of the National Alliance of Basketball Leagues in 1961.

Basketball players who needed to retain their eligibility or weren’t interested in the NBA played in the amateur leagues. At the time, said Price, working for Goodyear actually paid more than professional basketball.

Plus, NBA jobs were hard to get.

Work and play When Brown arrived in Akron, he was surprised he had to try out for the team, he said.

“I packed my clothes, got a room in a house in Akron with a widower and tried out,” he said.

He made the team, which meant that he also got a job with Goodyear.

“During the season, we worked in different departments around the company,” said Brown. “In the offseason, we worked in the factory, learning how to build tires. Then on the weekends, we coached local kids in their youth basketball league. I had always wanted to be a high school basketball coach.”

Goodyear won the NABL title in 1964, with a team featuring three members of the gold medal-winning 1964 U.S. Olympic basketball team: Brown, Dick Davies and Pete McCaffrey, along with the Wingfoot’s coach, Henry V. “Hank” Vaughn.

The Wingfoots also won the league championship in 1968, featuring Olympians Cal Fowler and Jim King, along with Vaughn.

Former NBA All-Star Adrian Smith had also played for the team in 1961.

Goodyear ended its team sponsorship in 1970, although the name continues as a privately owned elite AAU team, most recently based in Las Vegas.

Brown credits his years in Akron with laying the foundation for his coaching career. He also maintains emotional ties to the people and the area.

“When I got into coaching professional ball, it was always good to come to Cleveland and play the Cavaliers,” he said. “I got to see a lot of people I knew from back then. I loved the people there. It’s a neat place, and I have a lot of good memories.”

CRAIN'S CLEVELAND BUSINESS FEBRUARY 20, 2017 PAGE 17 C R A I N ’ S C L E V E L A N D B U S I N E S S | F E B R U A RY 2 0 - 2 6 , 2 017 | PA G E 17

AKRON

Canton firm stretches out to span Big River

By JUDY STRINGER clbfreelancer@crain.com

A mile-long pedestrian pathway — soaring over the mighty Mississippi — opened last October, linking Memphis, Tenn., with West Memphis, Ark., and bringing to fruition a visionary idea that was years in the making and gave a Canton company some well-deserved bragging rights.

Ohio Gratings, a 47-year-old family-owned business, provided the 48,000 square feet of aluminum plank for the walkway surface and 82,000 square feet of fencing and handrail infill for a grand total of more than 3 miles of grating materials. And it did so in less than a year.

“The amount of grating for the time of the project was a huge challenge that they were able to meet,” said Seth Norment, assistant project manager at OCCI Inc., the Missouri-based contractor that built Big River Crossing, now the country’s longest rail-bicycle-pedestrian bridge.

OCCI converted the 100-year-old Harahan Bridge’s dormant roadway lane into a bicycle and pedestrian path alongside an active railway.

“The fact that Ohio Gratings could mass produce the product was what made them the right fit for the project,” Norment said.

While it’s true the company had only a year to manufacture and deliver the 130,000 square feet of grating products, its connection to Big River Crossing dates back to 2011, according to Ken Apperson, director of engineering and product development for Ohio Gratings. That’s when a retired Memphis engineer named Tweed Bryant, who was working on a feasibility study, called the company to inquire about its aluminum plank.

Because of the bridge’s age and span, Bryant and his team were look-

Supplied by Ohio Gratings, the mesh on the outside of Big River Crossing is more open for high visibility of the river. The mesh between the walkway and railroad tracks (above right) is tight to keep people from climbing it and protect pedestrians from debris. (Contributed photos)

ing for a lightweight flooring material, Apperson said, but it also had to be strong and able to support an ambulance or emergency vehicle if the need arose.

In addition, the walkway surface needed to incorporate a traction material, comply with the Americans with Disabilities Act and be bicycle and high-heel friendly. That limits the size of grating openings so that wheels can pass over smoothly and heels don’t get stuck.

“They also had to add fencing to protect the (pathway users) from the trains, because it’s an active Union Pacific Railroad right next to it. And there was a lot of weight to this fencing and the posts associated with that,” Apperson said.

Following three years of discussions and planning, Ohio Gratings in October 2014 won a bid to supply not only its 6-pound-per-foot, ADA-complaint aluminum plank for the walkway surface but also its galvanized steel PressLock mesh for fences lining both sides of the bridge path. The

boardwalk itself cost $18 million, according to Apperson, and was partially funded by a federal Transportation Improvement Generating Economic Recovery grant. Ohio Gratings declined to provide the value of its part of the work.

The company, which employs about 400 at four U.S. locations and does all its manufacturing in Canton, provides a full line of grating products, from sunshades and louvers to fencing and various grades of commercial and industrial flooring. The grating can be found at airports, concert stages, data centers, parks, wastewater treatment plants, nature preserves and office buildings, among other places, and on bridges and walkways across the country.

For the Big Crossing project, the 11-foot fencing between the railroad track and the walkway is a tight mesh, Apperson said, to keep people from climbing it and to prevent rocks or debris from passing rail cars from striking walkers and cyclists.

“Even though it’s a close mesh

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grating, they wanted high visibility through it,” he said. “This is like 85% open area.”

Mesh on the river side fencing is “a little more open,” closer to 90%, Apperson explained, and only extends as high as the handrail to promote uninhibited views of the Mississippi River and city of Memphis.

Ohio Gratings also designed and manufactured several gates — with concealing locking systems — within the steel mesh grating that maintenance crews can use to access the train tracks and special panels to accommodate junction boxes for lighting, which was added to illuminate the 1916 bridge. “We were able to develop some openings in the grating panel themselves and reinforce them in a way that would maintain the integrity of the mesh,” said Aristotle Zournas, product sales engineer for Ohio Gratings. “We had to provide some custom solutions, so it was not as simple as just fencing.”

Beyond the cool factor of having been a major supplier to the longest

pedestrian bridge spanning the Mississippi, Apperson said the project allowed Ohio Gratings to showcase its capabilities, especially in customizing its products “for stringent requirements.”

“We were able to optimize the weight, the strength and the mesh to give them exactly what they needed to have in the open area and all these other engineering constraints to satisfy the railroad, the city, the engineers and the public,” he said. “That is what makes it a fun, interesting project for Ohio Gratings.”

The biggest winners, according to Ohio Gratings chairman David Bartley, are the residents of Memphis, West Memphis and the surrounding areas, who now have a new, more active and arguably more picturesque way to access both communities and a key piece of a planned 10-mile Main Street to Main Street trail.

“It was a grassroots project that is really great for the citizens of Memphis, Tenn.,” Bartley said. “We are proud to be a part of that.”

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PA G E 18

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F E B R U A RY 2 0 - 2 6 , 2 017 |

CRAIN’S CLEVELAND BUSINESS

THE THE LIST LIST

THE LIST

Ranked by Total Patents Issued 2013-2015.

Ranked by Total Patents Issued 2013-2015

Ohio Company Patents

Ohio Company Patents Ohio Company Patents Ranked by Total Patents Issued 2013-2015 THIS COMPANY/CITY YEAR WEBSITE

TOTAL 2013-2015

PATENTS 2015

PATENTS 2014

PATENTS 2013

THIS COMPANY/CITY YEAR WEBSITE

TOTAL 2013-2015

PATENTS 2015

PATENTS 2014

PATENTS 2013

1

Procter & Gamble Co./Cincinnati www.pg.com

1,209

383

410

416

21

American Greetings/Westlake www.americangreetings.com

62

21

26

15

2

Eaton/Cleveland www.eaton.com

476

171

147

158

22

Lubrizol Advanced Materials Inc./Brecksville www.lubrizol.com

60

21

26

13

3

Rockwell Automation/Mayfield Heights www.rockwellautomation.com

399

152

126

121

23

Battelle Memorial Institute/Columbus www.battelle.org

59

14

24

21

4

Ethicon Endo-Surgery Inc./Cincinnati www.ethicon.com

274

66

99

109

24

Saint-Gobain Performance Plastics Corp./Akron www.plastics.saint-gobain.com

57

18

24

15

5

Goodyear Tire & Rubber Co./Akron www.goodyear.com

260

97

77

86

25

Nanotek Instruments Inc./Dayton http://nanotekinstruments.com

55

23

24

8

6

Diebold Nixdorf/North Canton www.dieboldnixdorf.com

181

70

43

68

26

Teradata Corp./Dayton www.teradata.com

54

20

15

19

7

Cleveland Clinic/Cleveland www.clevelandclinic.org

178

77

55

46

27

University of Toledo/Toledo www.utoledo.edu

51

14

18

19

8

PPG Industries Ohio Inc./Cleveland www.ppg.com

175

55

71

49

28

GE Lighting Solutions LLC/East Cleveland www.gelighting.com

49

17

22

9

9

Parker Hannifin Corp./Mayfield Heights www.parker.com

156

58

50

48

29

Owens-Brockway Glass Container Inc./Perrysburg www.o-i.com

41

23

12

6

Case Western Reserve University/Cleveland www.case.edu

150

58

56

36

30

University of Cincinnati/Cincinnati www.uc.edu

41

12

13

16

10

THE LIST

THE LIST

Ohio Company Patents

Ohio Company Patents IDENTIFY, PROTECT AND Ranked by Total Patents Issued 2013-2015 Ranked byENFORCE Total Patents Issued 2013-2015 The Intellectual Property Attorneys of

YOUR INTELLECTUAL PROPERTY AT HOME AND ABROAD

THIS COMPANY/CITY YEAR WEBSITE

TOTAL 2013-2015

PATENTS 2015

PATENTS 2014

PATENTS 2013

THIS COMPANY/CITY YEAR WEBSITE

216.781.1212 | walterhav.com

TOTAL 2013-2015

PATENTS 2015

PATENTS 2014

PATENTS 2013

11

Ohio State University/Columbus www.osu.edu

136

27

38

71

31

Invacare Corp./Elyria www.invacare.com

39

13

18

8

12

Nordson Corp./Westlake www.nordson.com

127

41

38

48

32

Devicor Medical Products Inc./Cincinnati www.devicormedical.com

38

14

15

9

13

Emerson Climate Technologies Inc./Sidney www.emersonclimate.com

100

39

22

39

33

Ohio University/Athens www.ohio.edu

35

15

8

12

14

The Lubrizol Corp. (1)/Wickliffe www.lubrizol.com

92

30

31

31

34

Babcock & Wilcox Enterprises/Barberton www.babcock.com

35

9

11

15

15

Gojo Industries Inc./Akron www.gojo.com

81

35

23

23

35

The Timken Co./North Canton www.timken.com

34

16

9

16

First Solar Inc./Perrysburg www.firstsolar.com

79

28

24

27

36

Kent State University/Kent www.kent.edu

33

10

12

11

17

University of Akron/Akron www.uakron.edu

74

20

25

29

37

AtriCure Inc./Mason www.atricure.com

33

8

11

14

18

Bendix Commercial Vehicle Systems LLC/Elyria www.bendix.com

69

19

23

27

38

PolyOne Corp./Avon Lake www.polyone.com

31

9

12

10

19

Owens Corning Intellectual Capital LLC/Toledo www.owenscorning.com

66

18

25

23

39

Steris/Mentor www.steris.com

29

13

16

NA

20

Crown Equipment Corp./New Bremen www.crown.com

64

26

23

15

40

Velocys Inc./Plain City www.velocys.com

29

8

10

11

9

RESEARCHED BY CHUCK SODER Source: U.S. Patent and Trademark Office; compiled by Ocean Tomo LLC, an intellectual property services firm in Chicago. (1) Does not include patents for Lubrizol Advanced Systems, which are listed separately.

TEACHERS CONTINUED FROM PAGE 1 Burgess said this proposal was designed to expose teachers to the jobs that are in demand in their area and the skills that those jobs require, so they can better share that knowledge in their schools.

Ohio Education Association president Becky Higgins said she considers the proposal a “needless hoop” for teachers to jump through, and she couldn’t think of another licensed profession expected to do something like this. The Ohio Federation of Teachers’ stance is not as hard and fast: the union thinks it would be fine as an option but is problematic as a requirement.

President Melissa Cropper said the proposal doesn’t make sense for every teacher, noting the number of relevant workplace opportunities available, as well as asking how it would work for teachers of younger grades.

It’s a “huge, huge overreach,” she said.

“Let teachers choose that if it

makes sense to them,” Cropper said.

David Quolke, president of the Cleveland Teachers Union, said improving career prep education in schools is critical, but he agrees the externship should be an option rather than a requirement.

At the district’s career tech schools, known as the Academies of Cleveland, externships for teachers already are being created so they can get real world experiences of what they’re teaching, said Shari Obrenski, the union’s third vice president for senior high and special schools. That relevance is important.

“The concept in the right context is valuable,” she said.

John Colm, president and executive director of manufacturing-focused economic development group Wire-Net, has seen many of the proposals in the budget in action at Max S. Hayes High School. The school provided externship opportunities for teachers this past summer and has a pre-apprenticeship program for students in place, with more in the works. Wire-Net is part of the

Friends of Max Hayes, a community group that supports the school.

Although he supports the ideas in the budget proposal, Colm’s issue with them is that they’re high-level ideas, instead of initiatives at the building level.

Beyond educators, companies could find an externship initiative challenging. Terrence Robinson, executive director of Magnet’s Early College Early Career manufacturing work-based learning program, noted that even taking on traditional interns can cause upheaval at a business.

The state’s other big proposal to get more direct business-school interaction would be for local superintendents to appoint three members of the business community to their school boards in non-voting roles.

Burgess said this component was included to put business leaders and educators in the same room in a public way. School districts generally already are supposed to have business advisory councils, but Burgess said this would put the conversation into “prime time,” so to speak. The conversations would

happen at the school board meetings where members of the public could hear what’s being discussed. The roles would be non-voting because Burgess said the state wants the business leaders to be focused solely on job skills instead of “freelancing” into other issues.

Quolke said he thinks this proposal would be “window dressing” that wouldn’t have a meaningful impact in the classroom. Schools should focus more on creating relationships with businesses and opportunities like internships for students, he said.

That kind of work-based experience for students is another focus of the budget. Proposals related to that include giving students high school credit for work-based experiences, having school districts review their plans for awarding such credit and aligning pre-apprenticeships with the College Credit Plus program, which lets students earn college credit in high school.

Robinson said Magnet advocates for work-based learning experiences, which help students be college and career ready. Right now, most students

aren’t ready for a non-minimum wage job straight out of high school. But that work-based experience can give them the technical and soft skills they need to earn a livable wage, he said.

Joe Roman, president and CEO of the Greater Cleveland Partnership, said the “directional objective” of bringing business and education closer together makes sense, but it’s too early to tell if these proposals are the right way to do it. The workforce talent issue is critical in terms of growing the state’s economy, Roman said.

Overall, Cropper said there’s a frustration because the budget proposal shows a disconnect from what’s already going on in the education community. The state is in the process of creating plans for the federal Every Student Succeeds Act, but there seems to be no correlation between that and the budget, she said. And even the parts of the plan she thinks are valuable, like making sure students can get credit for experiences outside of the classroom, are already going on. It should be about expanding those kinds of options, she said.

PA G E 19

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F E B R U A RY 2 0 - 2 6 , 2 017 |

CRAIN’S CLEVELAND BUSINESS

Source Lunch Jon Park

Chairman and CEO, Westfield Bank Like most industries, running a successful community bank means adapting to change — and Jon Park has seen plenty of it. ¶ Park became chairman and CEO of Westfield Bank in 2010 after serving as president at the $1.2 billion-asset community bank in Medina County since 2000. From the impacts of the internet to the regulations imposed on the sector following the last economic downturn, Park has personally witnessed, and navigated, the myriad headwinds that have shaped today’s modern banking landscape. ¶ As Park looks forward on his 17th year with Westfield, Crain’s decided to sit down with the banking veteran to discuss how the business has changed and how he views the future of the industry under a new presidential administration. — Jeremy Nobile

Five things Favorite local craft beer?

Barnburner, a Dortmunder-style lager from Lager Heads Brewing Co.

Hobbies Boating, skiing, biking and golfing

What did you want to be as a kid?

A farmer

What’s something people don’t know about you?

I started a farming business in Oberlin when I was 11. My parents bought me chickens and I sold eggs.

Then I raised crops, and eventually pigs, which I’d sell to Bob Evans.

Star Wars or Star Trek?

I’m a sci-fi fan and I like both. But, Star Trek.

Lunch spot Rosewood Grill 16740 Royalton Road, Strongsville 440-783-5500

The meal Iced tea and Mediterranean tuna cobb salad with seared, rare Ahi tuna. Fish tacos with crispy whitefish, black beans and rice.

The vibe Fast service, good food and mellow ambiance in a generally upscale setting. Pricey fare — the tacos were maybe a bit expensive for fried whitefish, but that didn’t stop me from trying them. Solid lunch option.

The bill $32.35, plus tip

One of the biggest challenges in banking these past few years has been the mountain of regulations.

What’s your sense of how the landscape will look under the new presidential administration?

I think there’s considerable upside for the banking industry and broader economy. That all means strong earnings, growth upside and economic expansion. An improved economy and job growth means more lending opportunities. But the biggest component for banks is lowering taxes, which would instantly improve profitability for banks.

And there’s a sense today that you have to adapt to all of it because customers expect that much more, even from a smaller bank, right?

This all ups the ante in terms of the speed of which you need to evolve and transform to remain relevant and competitive in the business.

Today, you’re competing with other banks, but you’re also competing with the non-banks and fintechs of the world that are coming up with all the innovative alternatives to banking. That all changes customers’ expectations, and you have to keep them happy.

And the downside?

I suppose the downside would be a recession risk. When you look at the last eight administrations or so, when you go from the second-term president to the next one, I think every time it’s triggered a recession in two years. I think everyone is kind of aiming in the direction that that’s not likely to happen this time. And I would tend to agree with that. But history would tell us otherwise. One risk is we don’t know what could trigger a recession. Maybe it would be trade barriers or a global recession we get pulled into.

And those are costs that simply weren’t part of the model even just a few years ago.

Each year, the bar goes up more and more. To afford these new technologies, you have to have operational effectiveness, which means being more effective in the back office, reducing processes and costs so you can invest in new things. When you look at 2017, 2018, 2019, I see that bar set even higher.

In terms of running a bank today, technology has really revolutionized the industry, hasn’t it?

It’s a revolution, yes. I was looking at a story back from 2003 discussing how the latest innovation in banking was digitizing images — so the electronic exchange of checks versus exchange in paper. That was called the biggest innovation since 1956. That’s when magnetic ink character recognition happened. So then you fast-forward to today. It’s funny — when you look at the 1950s to the 2000s, there was massive innovation. But when you look at the 2000s to today, there’s been a ton of innovation as well. Things have completely turned around. Just look at how payments are processed and who the competitors are, like Venmo, Apple Pay, Google Wallet.

The proliferation of technology is forcing change at a faster pace, then.

That’s right. Technology, specifically the internet, has led to wireless capabilities, mobile, handheld devices, new products and services.

It’s all radically shifting how customers interact with banks.

It sounds like fintech — or financial technology — is causing the revolution the internet did.

It really is. This all reminds me of another article I read from 2000. It featured a discussion on how the internet would transform banking.

There used to be talk that internet banks would displace brick and mortar banks. And it also said big banks were dinosaurs and would go away. So, some of what many predicted shook out today. Some of it missed. What really ended up happening is banks absorbed the new technology and transformed themselves. The internet became a new way to interact with customers faster and cheaper. And while there’s billions being invested to win customers and market shares from banks, the banks will adopt the tech and figure out how to do it faster and cheaper.

In terms of running a community bank, this no doubt is a challenge.

But is all that unsettling?

The smart banks will have good strategies and figure out how to adapt to all this. Like many industries, the ones that lag behind or think it doesn’t matter or don’t pay attention are the ones who will become obsolete and get acquired — and that’s been happening in banking for years.

in

sider intel

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