Enterprise Minnesota Magazine - Spring 2021 by Enterprise Minnesota

BRIDGE THE GAP

Growth Acceleration Program can make manufacturers more competitive.

Helping Manufacturing Enterprises Grow Profitably SPRING 2021

The

Race to Safety Manufacturers can minimize cybersecurity risk by backing up data and being smarter online.

Enterprise Minnesota 2100 Summer St. NE, Suite 150 Minneapolis, MN 55413

9001:2015

Enterprise Minnesota

9001:2015

FY 2019 Manufacturing Workshops and Business Events

Enterprise Minnesota’s events offer outstanding professional expertise Enterprise Minnesota’s workshops offer and practical business solutions to improve competitiveness andoutstanding growth opportunities for Minnesota’s manufacturers and related industries. professional expertise and practical business solutions

to improve competitiveness and growth opportunities DATE TOPIC CITY for Minnesota’s manufacturers. 7/10/2018 Strategy St. Peter 7/26/2018

Continuous Improvement

St. Cloud

Leadership/Talent

Inver Grove Heights

Strategy

White Bear Lake

Leadership/Talent

Brooklyn Park

Continuous Improvement

Shoreview

Strategy

Anoka

1/8/2019

Continuous Improvement

St. Cloud

2/7/2019

Continuous Improvement

Willmar

Continuous Improvement

Mankato

Leadership/Talent

Apple Valley

Continuous Improvement Plymouth 2021 VIRTUAL MANUFACTURING WORKSHOPS

8/7/2018

Date

8/23/2018 9/6/2018 9/27/2018

Topic

10/9/2018 ContinuousNavigating Improvement WyomingFuture Feb. 25, 2021 Strategically an Uncertain 10/25/2018

11/8/2018 Continuous Improvement Eagan Mar. 30, 2021 Investing in Your People to Create Leaders at All Levels 11/13/2018

Apr. 8,12/6/2018 2021

How toLeadership/Talent Manage a High Performing Business: ISO Burnsville

Apr. 14, 2021 Profiting from Revenue Growth Winona 1/24/2019 Leadership/Talent May 6,2/19/2019 2021 3/7/2019

June 3,3/27/2019 2021 4/9/2019

June 9,4/25/2019 2021

Strategically Future The Value Navigating of Peer Councils an Uncertain Shoreview Investing in Your People to Create Leaders at All Levels Strategy North Branch Continuous Improvement Continuous Improvement

5/22/2019

Continuous Improvement

June 23, 2021 Strategic Management 6/27/2019 Leadership/Talent

Eden Prairie Bemidji Anoka

STATEWIDE ENTERPRISE MINNESOTA EVENTS

TO REGISTER: 5/14/2019 2019 State of Brooklyn Center Earle Brown Heritage Center Visit enterpriseminnesota.org or email us at events@enterpriseminnesota.org. Manufacturing Statewide Release Manufacturing workshops are exclusive to manufacturers and free of charge. ®

For more information and registration, go to www.enterpriseminnesota.org,

Sponsorshipor opportunities are available. email us at events@enterpriseminnesota.org. Please call Chip Tangen at 651-226-6842 or email chip.tangen@enterpriseminnesota.org. Sponsorship opportunities are available. Please call Chip Tangen at 651-226-6842 or email chip.tangen@enterpriseminnesota.org.

SPRING 2021

THE RACE TO SAFETY

Manufacturers can minimize cybersecurity risk by backing up data and being smarter online.

After the Assessment Assessments can be powerful tools to identify deficiencies. Taking bold action to correct deficiencies? That’s genius.

From Turkey Farm to Helicopter Parts

Legislative Roundtable

Balance of Power

Legislators Gene Pelowski, Barb Haley and David Tomassoni talk about COVID, workforce issues and the state’s budget crisis.

Minnesota’s Growth Acceleration Program (GAP) helps smaller manufacturers afford the tools to sharpen their competitive edge.

2 The Power of Being Heard Manufacturers shouldn’t be afraid to brag about their impact on the community.

Servant Leader Lakeshirts President Michelle Daggett listens, empowers, excels.

When you work at Ericco, you’re part of a family.

6 Hoping for Very Busy Babies

Automation is a Win-Win

Beth Fynbo is hoping to move the manufacturing of her popular baby mats to Minnesota.

An MIT study supports what manufacturing executives have known for years: Automation won’t be a job killer.

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

Subscribe to The Weekly Report and Enterprise Minnesota® magazine today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit enterpriseminnesota.org/subscribe. SPRING 2021 ENTERPRISE MINNESOTA /

Helping Manufacturing Enterprises Grow Profitably

The Power of Being Heard

Publisher Lynn K. Shelton 9001:2015

Manufacturers shouldn’t be afraid to reach out to legislators and brag about their impact on the community.

f you want to know how important it is for manufacturers to communicate with their legislators, just ask Jim Seifert, an attorney with the Fafinski Mark & Johnson law firm. “They should know what their interests and policy priorities are,” Seifert says. “And they should ideally have at least one face-to-face meeting with a legislator or senior staff member. It’s the people who show up who have the power.” Seifert should know. He happens to be a former legislator. These are uncertain times. Since COVID hit, nothing has been business as usual. Even the state legislature is conducting much of its work via Zoom. Just because we’re living in uncertain and inconvenient times, however, doesn’t mean the machinations of government will stop. Things keep churning, which is why manufacturers need to remain diligent about having their voices and concerns heard at the Capitol. I’ve told a story numerous times about touring some manufacturing facilities with a handful of legislators in central Minnesota a decade or so ago. One legislator was amazed to learn he didn’t really know what kind of products a particular company manufactured. The company, located in this legislator’s district, employed more than 50 people. The point: Your elected officials should know who you are, what you produce and what your impact is on the community. Don’t assume they know or figure they should know. Be proactive. Reach out to them. Leave no doubt about their understanding of your company. One state investment we’d love to see expanded this year is the Growth Acceler2

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ation Program (GAP), an incentive-based program that buys down the cost of improving business for smaller manufacturers. GAP funding allows companies to receive up to a 50% rebate for services the company receives. The legislature is currently considering expanding GAP as manufacturers try to navigate COVID. The program’s initial funding of $800,000 was cut to $400,000 by the 2019 legislature. The message from manufacturers to legislators should be clear: Manufacturers are job creators and keep current employees employed. Jobs produced by manufacturers come with competitive wages and often lead to careers. In many cases, they provide rural residents with jobs close to home and become the heart of the community. The average manufacturing wage across the state dwarfs other industries. Manufacturing in Minnesota pays an average annual wage of $68,081, which is 16 percent higher than the state’s overall wage average. That can fuel growth regardless of community size. So, it is important to reach out to your representative or senator. Don’t be humble. Brag a little bit about the power of manufacturing jobs. They will listen. I’ve visited enough manufacturers to know that virtually every elected official is interested in hearing about the kind of jobs and careers manufacturing companies provide. And most elected officials will take a call from a manufacturing business constituent inside his or her legislative district. Bob Kill is president and CEO of Enterprise Minnesota.

Editorial Director Robb Murray Creative Director Scott Buchschacher Copy Editor Catrin Wigfall Writers Brian Arola Sue Bruns Tom Mason Photographer Jackson Forderer

Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-455-4239 For additional magazines and reprints ldapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event chip.tangen@enterpriseminnesota.org 612-455-4225

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TRAILBLAZER

Servant Leader Lakeshirts President Michelle Daggett worked her way up from HR manager to company president by listening, empowering, excelling.

etroit Lakes-based Lakeshirts — maker of resort and college novelty apparel — learned during the pandemic that grooming the right kind of leader can make all the difference. Lakeshirts CEO Mark Fritz and CFO Mike Hutchinson picked the right rising star to groom for leadership when they hired Michelle Daggett 24 years ago. When the pandemic hit, Daggett helped them guide Lakeshirts through the worst financial disaster in the company’s history. Fritz and Hutchinson hired Michelle as the company’s first-ever human resources director. A few years later, they promoted her to become the company’s first-ever operations manager. Four years ago, they promoted her again to president. They likely had no idea they were creating the kind of leader who would be a perfect answer to a pandemic. “We have been fortunate to experience a lot of successes over the years, but like most, we have experienced some challenges as well. This year is a perfect example of that,” says Fritz. “When those rough patches or challenges arise, Michelle has been able to put things in perspective and roll up her sleeves to help our entire team get through any roadblock or hard time.” The past 11 months have been about the hardest time imaginable for many companies, Lakeshirts included. But with Daggett in the role of president, she was able to help Lakeshirts weather the storm and get back on a path toward normalcy. Just prior to the onset of the pandemic, Lakeshirts had inked deals with Zephyr Headwear and Elite Fan Shop, two partners that would further solidify Lakeshirts’ standing as a dominant player in the indus-

Michelle Daggett has been with Lakeshirts for 24 years.

try. The company also brought in a new investor, Carlson Private Capital Partners. The year 2020 was looking rosy. And then, just as March Madness was about to capture the nation’s attention and the resort season a few months away, COVID-19 turned the world upside down. The NCAA canceled March Madness. Resorts halted orders in anticipation of being closed for the summer. In March, Lakeshirts had 740 employees and was poised for record profits. But with much of its traditional business at a temporary standstill, Lakeshirts laid off 700 of them. Of those who remained,

managers took pay cuts, some as much as 50%. Things were quiet in Lakeshirts’ 300,000-square-foot facility. “In April, we billed about 10% of what we should have,” Daggett says. “And it was the lowest we had billed since 1996. May was also very low.”

Learning curve

Daggett admits she knew nothing about manufacturing when she came to Lakeshirts. But one of the things she’s picked up is the importance of understanding performance measures and realizing not everything that can be counted counts.

SPRING 2021 ENTERPRISE MINNESOTA /

Lakeshirts is one of the country’s top producers of both college and resort novelty apparel. They’ve recently inked deals with Zephyr Headwear and Elite Fan Shop, which will further solidify the company’s position in the marketplace.

For example, during one recent summer the company found itself getting behind on jobs. Using a KPI of “garments per hour,” leadership analyzed their process and discovered their production wasn’t failing — their measurement was. A trend in garments at the time was putting designs on the front, back and sleeve, meaning each garment was getting three “hits” instead of the typical one. “Suddenly we realized we were tracking the wrong measure. We needed to be watching how many placements on garments were coming in and adjust according to that,” Daggett says. “So, there are things like that, where you have setbacks or failures, and you learn from those.” One of the things that has helped Lakeshirts weather such storms is the focus the company has put in recent years on planning. Daggett says they implemented a plan where each of the company’s managers has an execution plan to clarify his or her goals and mission. They’ve instituted “quality meetings” where representatives from all departments attend and hash out any issues arising with production. “It’s so important because otherwise you 4

/ ENTERPRISE MINNESOTA SPRING 2021

might think errors are happening because somebody produced a shirt wrong. And you might have looked at that operator before and said, ‘Well, we need to train the operators better,’” she says. “But now, because we started this weekly meeting, we might find out that the problem could have stemmed all the way back to the point where we develop the product. The line development person will raise his or her hand and say, ‘We never intended for that design to go on that shirt anyway. It’s not going to look good.’”

Cross-trained

Daggett’s rise to leadership in the world of resort and college apparel seems a perfect fit. And she says the fact that she’s held various roles at Lakeshirts is a good thing. “I really think it helps you become a better manager if you’ve had experience working in another department,” Daggett says.

“Our HR manager worked in operations for a while, and our IT manager worked in a number of areas throughout the plant. Because she has that understanding of how everything works, that makes her much more valuable as the IT manager now to implement systems.” One of the things Daggett likes about Lakeshirts is the company’s “all hands on deck” attitude. And as a leader, she says, she’s helped promote that. “I saw a quote once that said, ‘If you’re offered a seat on a rocket ship, you don’t ask what seat, you just get on board,’” she says. “That’s kind of what people do here. It helps to have that attitude.” Lakeshirts CEO Mark Fritz lauded Daggett’s contribution to the company he started in 1984 with CFO Mike Hutchinison, and praised her leadership style. “Without question, Michelle has been a big part of our company’s growth and success,” Fritz says. “She is a servant leader,

listens as much as she talks, and empowers others to problem solve. She believes we are a much stronger company if we can build an army of problem solvers. And she encourages our entire team to be part of the continuous improvement process. She makes a great president because she leads by example and her work ethic is second to none.”

GROWING COMPANIES, ENHANCING COMMUNITIES

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“I really think it helps you become a better manager if you’ve had experience working in another department.” – Michelle Daggett, president of Lakeshirts

Slowly coming back

Things are slowly coming back, including the employees, with the company currently employing just over 500. Resort sales, though, are down 30%. College sales are down over 50%. With the COVID-19 vaccine in mass distribution, Daggett says the worst may be behind them. More workers are returning to Lakeshirts. More T-shirts are being designed and printed. And this summer’s resort season looks promising, she adds. There may even be March Madness this year — albeit sans fans — which will help bring back profitability to Lakeshirts. It’s been a trying time for the company, and one that has tested Daggett’s mettle. Thankfully, her path to the role of president may have given her exactly the kind of experience necessary to help guide Lakeshirts through these trying times.

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SPRING 2021 ENTERPRISE MINNESOTA /

Beth Fynbo began manufacturing her Busy Baby play mats in China because, at the time, it was the only option she could afford. Today, she’s hoping to begin manufacturing them in Minnesota within a few months.

AMERICAN DREAMS

Hoping for Very Busy Babies After her China-made Busy Baby mats exploded in popularity, Beth Fynbo is hoping the next chapter can be Minnesota made.

hen Beth Fynbo got together for lunch a few years ago with some friends — new mothers with babies in tow — she made a keen observation as the babies began to fuss and play. “The kids were constantly dropping stuff on the floor, and the moms were constantly picking those things up,” Fynbo recalls. “One of the moms was a germophobe, so she was wiping toys down every time.” The next day, Fynbo pondered that adorably distracting lunch and wondered if there was a product available that could keep babies occupied while avoiding the inevitable “toy overboard” scenario. Finding nothing, she decided to build one. Within a few days she gave her prototype to one of the moms from lunch, and

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then sort of forgot about it until a few months later when her phone rang. It was that mom. “She said, ‘I forgot this thing last night when we went to the bowling alley and it was horrible. I had no idea how useful this little mat was until I didn’t have it,’” Fynbo says. Fast forward a few years and Fynbo is the proprietor of a company called Busy Baby. And she is busy, baby. Fynbo’s silicone Busy Baby mats use suction cups to hold snugly to the tops of infant highchairs. Silicone tethers connect toys to the mat. Then, when the child invariably tosses the toys overboard, he can reel them back in himself. For now, though, Fynbo’s operation in Oronoco is more of a fulfillment center.

She processes, packages and ships orders out of a tiny warehouse behind her home. But the actual manufacturing of her foodgrade silicone mats and tethers takes place in China. She’d like to change that. Because she’s a military veteran and

“I had to do China because that’s all I could afford as a singleperson startup. It was the only way I could get them made.” – Beth Fynbo proud Minnesotan, Fynbo would love to move the manufacturing of the mats back to her home state. She’s currently searching for a facility in Minnesota capable of the kind of silicone compression molding she needs at a price comparable to China’s. With the help of Enterprise Minnesota, along with the Department of Employment and Economic Development (DEED), Fynbo hopes to be manufacturing Busy Baby mats — and other products, as well — somewhere in Minnesota very soon. Enterprise Minnesota Business

INNOVATE. RECOVER. GROW.

Developer Kurt Bear is helping Fynbo scour the state for appropriate facilities. DEED’s assistance had a head start: A few years ago, another business was looking for compression molding companies, and they passed their list on to Fynbo. She says she initially had her mats manufactured in China because she didn’t really have a choice. After the up-front investments of hiring a professional product developer and securing patents, her production options were limited. “I had to do China because that’s all I could afford as a single-person startup,” Fynbo says. “It was the only way I could get them made.” Her development firm connected her with a man who specializes in helping small businesses work with Chinese manufacturers. But when the pandemic hit, he returned to the U.S. He still has a team in China, but he’s looking globally for other manufacturing partners. He’s also interested in helping Fynbo launch a compression molding business so he can direct other small manufacturers to her. But that is on the back burner. For now, Fynbo is focused on selling as many Busy Baby mats as possible. Last year, Busy Baby’s revenue was $97,000. By November 2020, the company was at $600,000. Fynbo has been using a part-time employee to help her

PHOTOGRAPHS BY JACKSON FORDERER

Fynbo uses a garage at her Oronoco home as a fulfillment center. The mats use suctions and tethers to keep toys on the baby’s tray instead of on the floor.

with shipping, but soon she’ll add a fulltime employee — her brother. “Our goal is to blow up Busy Baby,” she says. “It’s going to be a family-run thing, and I’d love to make it a Minnesota thing.” Utilizing the knowledge of Enterprise Minnesota, she says, has helped. “I don’t feel comfortable with my knowledge of manufacturing. I don’t know this world. I feel like for the last three years I’ve done nothing but learn. It’s fun. I like learning. But I would like a little help in figuring some of it out,” Fynbo says. “Kurt is helping me figure out how to vet these potential manufacturers. He’s helping me find them, and he’ll go with me to visit them. I don’t know that I would have pursued this without him being willing to help me. He’s got the background.”

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SPRING 2021 ENTERPRISE MINNESOTA /

people going into manufacturing.” They discussed the challenges of healthy workers who can’t or won’t come to work for precautionary reasons. Maki said Custom Products had only one worker who contracted COVID. That illness, Maki said, caused the worker to miss just one day on the job. However, healthy workers’ time lost at Custom Products piled up quickly. The company lost more than 300 worker days, Maki said, due to healthy people who couldn’t show up for work because they were waiting for a test result or caring for a family member who may have been exposed. When COVID hit, InLine Motion pivoted from manufacturing foodservice equipment to protective face shields. As orders flooded in from across the country, they needed to add workers.

Sen. Amy Klobuchar requested a meeting with Enterprise Minnesota and several manufacturers to get a better handle on how the pandemic was affecting the industry.

‘MARCHING ORDERS’

Meaningful Input Manufacturers tell how COVID has impacted supply chains, workers and customers.

handful of Minnesota manufacturers recently told Sen. Amy Klobuchar how the government could have done more to help struggling companies — and still could. The group met last month via Zoom at Klobuchar’s request for an informal roundtable facilitated by Enterprise Minnesota. Despite the initial deployments of COVID vaccines, they said, many are still dealing with lost revenue, workforce shortages and other pandemic-related issues that will undoubtedly linger well into 2021. Participants included Heidi Korb, coowner of Black Swan Cooperage in Park Rapids; Scott Maki, president of Custom Products in Litchfield; Liz Wauters, direc-

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tor of operations at Colburn Manufacturing in Fridley; and Marco Fenu, co-owner of InLine Motion in Detroit Lakes. “Our biggest issue is workforce,” Korb told the senator. “We were down at least 15 employees right before the shutdown. After that, we lost almost half. And I would say the bulk of them went on unemployment because they can make so much more than I could afford to pay them. We could definitely benefit from another round of PPP (Paycheck Protection Program).” “This is a critical time to be hearing from all of you,” Klobuchar told the group. “We have the problem we had even before the pandemic, which was that we need more

“Manufacturers, especially our size, really need more help during these tough times. We need grants or tax credits, and definitely the rapid testing.” – Liz Wauters, director of operations at Colburn Manufacturing “We had a hard time finding extra labor because people didn’t want to come to work,” he said. “And some of our older staff was working from home because we don’t want them to be potentially exposed.” Wauters said Colburn Manufacturing took extra precautions to keep workers safe. But company managers still worry about another wave of workers coming down with the virus. “Manufacturers, especially our size, really need more help during these tough times,” she said. “We need grants or tax credits, and definitely the rapid testing.” As Klobuchar wrapped up the call, she said the manufacturers were clear about what kind of help is needed. “I have my marching orders here to get as much done as we can immediately,” Klobuchar said, “so we can take some action here.”

NEW ADDITION

Fired Up Midwest Metal Products CEO/Owner Joe Plunger joins Enterprise Minnesota board.

foundry executive with 40 years of experience is the newest member of the Enterprise Minnesota board of directors. Joe Plunger, CEO and owner of Winonabased Midwest Metal Products, joins Enterprise Minnesota’s nine-member board with an eye toward improving workforce and infrastructure issues for Minnesota manufacturers. Plunger, a graduate of Michigan Tech University in Houghton, MI, spent about 15 years working for Grede Foundries in Southfield, MI. After that, he spent six years at a foundry called Citation Corp. before being recruited by Midwest Metal. “I have been in high-level roles for much of my 40 years of manufacturing, so I have lived very many of the problems that our manufacturers are, or will be, facing. With that experience, I can bring a certain perspective to the Enterprise Minnesota board and leaders with regard to how we can help manufacturers.” Plunger says one pressing issue facing manufacturers is the nation’s infrastructure system. Regardless of size, all manufacturers rely on roads — whether through direct shipping or for supply chain purposes. “I think the country’s infrastructure has the potential to be a long-term problem for manufacturing,” he says. “We built a really wonderful transportation system in this country a long time ago. And, sadly, we

have not kept it at the high level of quality that it should have been.” Plunger also says he’s eager to help manufacturers move beyond COVID’s challenges. “From a long-term standpoint,” he says, “I think we’ll look back at it as a 12- or 18-month bump in the road.” Enterprise Minnesota President and CEO Bob Kill says Plunger will bring innovative ideas to the board. “While a foundry is an ‘old’ manufacturing industry, Joe’s strategy and new investments are an example of how manufacturing leaders must think. He will be an asset to our board, and I am delighted he has joined.” A more pressing and long-term issue will be workforce shortages. “Just the evolving demographics of the population are going to continue to make it difficult to secure workers,” Plunger says. “It seems in the more physical applications of labor is where we’ll all end up working on automation of some sort, at some level.” Plunger says any manufacturer looking to become more profitable should look to Enterprise Minnesota for help in making that happen. “Manufacturers, you do not have to navigate building a strong business infrastructure by yourself,” he says. “Use this resource to spread the work, speed up the process, and help set you up for the future.”

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Joe Plunger (second from left), CEO and owner of Midwest Metal Products, is the newest member of Enterprise Minnesota’s board of directors.

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When Mikayla Asfeld, a welder at C4 Welding, wanted to become an engineer, company leadership helped her in any way they could. Today she’s one of the company’s go-to engineers.

UPWARD MOBILITY

From Welder to Engineer C4 Welding has found success helping its welders become engineers.

few years ago, if you’d walked onto the C4 Welding shop floor on the right day, you may have seen Mikayla Asfeld working diligently. But she wasn’t working for the company. At least not that day. Asfeld, a full-time certified welder at C4, was doing college homework for her bachelor’s degree in engineering from Bemidji State University. C4 Welding — a Sauk Rapids-based full-service welding shop — was helping by giving her access to tools, equipment, people and resources. Why? Because they believed in her, and still do to this day. With C4’s help, Asfeld went from a welder to one of the company’s go-to engineers. Her early displays of potential as a future company leader aligned perfectly with the company’s desire to encourage employee growth.

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“I was able to work with everyone on the floor, hands-on, figuring out exactly what they did for their job function.” – Mikayla Asfeld, on being given access to C4 Welding’s shop floor to pursue a bachelor’s degree C4 President and COO Henry Ewers says helping Asfeld achieve her goals is part of the company’s approach to business. “I think that’s really how you should grow companies,” Ewers says. “By growing your people.” Asfeld’s rise from welder to engineer — and her use of the C4 Welding shop

floor — was no fluke. Ewers says four of the company’s six engineers have gotten to where they are at C4 by first being welders. Investing in people is a model that has paid off for C4, a company Ewers says will do whatever it takes to retain good talent. C4 Welding is the kind of welding company you go to when other places can’t do the job. “We get into a lot of exotic materials, like Hastelloy, nickel, titanium,” Ewers says. “And there’s not a lot of people who are certified to weld them. We’re certified to weld over 150 different welding procedure specifications and procedure qualification records. And with that, when most customers call us, we’ve already got the certifications to meet their needs.” But if you asked Ewers what he’s most proud of, it might be his company’s ethos of helping people such as Asfeld. She came in as a certified welder and be-

gan learning the various types of unusual materials C4 Welding is known to work on. Ewers says she struggled at first. But once she got her footing, “She can run circles around some of our other welders who have been here for years. She probably won’t admit that, but I do.” Asfeld had a goal, however, of becoming an engineer. And C4 Welding had a goal of helping people help themselves. “She was working full time and going to school full time,” Ewers says. “There were times when we gave her some extra time off to work on her degree. But we knew it was going to be a great success for her and for C4 at the same time.” At one point during pursuit of her bachelor’s degree, Asfeld needed to complete a project where she studied a company’s production process from beginning to end. Because she was already employed there, she chose to study C4. “I was able to work with everyone on the floor, hands-on, figuring out exactly what they did for their job function,” Asfeld says. “And then being able to put that all into the

“I think that’s really how you should grow companies: by growing your people.” – Henry Ewers, president and COO of C4 Welding process of how everything flows from the beginning, where it starts at customer support, all the way to the end when our product leaves the building, was a cool experience. By being able to talk to everyone about that

sort of stuff, I learned stuff I probably never would have known otherwise.” Asfeld appreciates the freedom C4 gave her to not only complete a project like this, but also to work full time and pursue a four-year degree. She says C4 was flexible with hours. (It also helped that she was able to complete the bulk of her bachelor’s degree online, even before the age of COVID.) Ewers says he’s a firm believer in encouraging employers to strive for more; Asfeld and other engineers who were once welders are emblematic of that. Ewers says he hopes these employees have a firm grasp of the full range of the C4 Welding process. The support the company has given its employees, combined with the fact that they’ve grown professionally under C4’s guidance, is something Ewers predicts will go a long way in retaining talent. “I don’t see them ever leaving C4,” he says. “They’re very happy right now. They work so cohesively as a team, and it’s just fantastic to see that.”

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Tilsner Carton’s investments in recent years include a new APSTAR four-color rotary die-cutter aiding in the manufacture of corrugated products. The machine has about a 15-minute set-up time before production capabilities of 12,000 blanks per hour.

CONTINUOUS IMPROVEMENT

Not Boxed In Investments pave the way for Tilsner Carton’s future.

ilsner Carton’s commitment to improve operations and invest in new technology has its leaders feeling confident that it can be a one-stop shop for corrugated products, from design to delivery, into the future. The St. Paul company is going on 103 years in business. What started with Isadore Tilsner using a horse and wagon to collect used boxes from liquor stores for resale back in 1918 grew into a company manufacturing its own stock and custom boxes in a 200,000-square-foot facility. Over the years, you might’ve pulled your newly arrived purchase out of a Tilsner Carton box or seen its point-of-purchase displays in grocery and sporting goods stores or other retailers. Third-generation owner and president Joel Tilsner, Isadore’s grandson, and other company leaders have pursued improvements in technology and automation in recent years. New computer software, for example, allows new machinery to quickly make corrugated products for them, and en12

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ables a new fleet of semi tractors to deliver the end results. The technology improvement efforts extend beyond the company’s corrugated products, including its newest addition, a Viking Turbo 606 nailer for the pallet manufacturing side of its business. Each recent addition stemmed from the same underlying idea. “If you’re not improving, you’re getting left behind,” says Mike Mackley, company vice president, adding that recent investments indicate it was more than just talk. New machinery added in the last couple of years meant set-up times for the hundred-plus styles of boxes the company manufactures decreased and run speeds increased. First came a BOBST flatbed die-cutter in 2019 followed by a $2.2 million APSTAR four-color rotary die-cutter in 2020, Mackley says. The latter — which the company touted in one of its many videos highlighting its services in 2020 — has about a 15-minute set-up time before production capabilities of 12,000 blanks per hour.

Quick turnarounds are a point of pride for the company, and it wouldn’t be possible if they weren’t ready to rapidly respond to customers facing tricky situations. As Joel Tilsner says in another company video produced in October, “We love having our feet to the fire.” Sometimes that willingness to take on a challenge means receiving an order for

“That’s our niche; we want everything that the big guys don’t want.” – Joel Tilsner, owner and president of Tilsner Carton 20,000 custom-made cartons at 11 a.m. and delivering them by 3 p.m. “That’s our niche,” Tilsner adds in the video. “We want everything that the big guys don’t want.” The company’s improvement plans date back four years ago to a meeting that took place between company management and Enterprise Minnesota’s team, Mackley says. Tilsner’s director of marketing, Michelle Lee, connected management to Enterprise Minnesota Business Growth Consultant Greg Langfield who specializes in lean transformations. Mackley credits Langfield and the Enterprise Minnesota team with “jump starting” the company’s plans. They helped

Workers at Tilsner Carton glue together a point-of-purchase display in the company’s manufacturing facility in St. Paul. Tilsner’s displays can be found in grocery stores, sporting goods stores and other retailers.

Tilsner Carton identify improvement areas, resulting in better processes and eliminating waste. Bob Arvold, a business development consultant with Enterprise Minnesota, says Tilsner Carton’s management grasped what Langfield taught them and have sustained it as they added new technology and automation. Implementing the new technology without improving those processes might’ve been akin to expecting a band-aid to fix an underlying health problem. Now, three new software programs — CorrPlan, CorrDisplay and Plant Floor — and displays at each machine keep everyone in the loop on job statuses in real time. The programs track supplies, average run times and priority levels as orders get routed through the plant. Enterprise Minnesota further helped the company secure a $25,000 automation grant from the Minnesota Department of Employment and Economic Development to train workers to use the new technology. Eliminating waste and investing in new technology added up to three years of good growth and a “tremendous amount of confidence” in the company’s future, Mackley says. The company experienced the same uncertainty other businesses did when the COVID-19 pandemic hit the state in early 2020, but the shift to more people working from home also seemed to create surges in the box manufacturing market. “Things are shipped more now,” Mackley says. “It’s really changed how things and people are getting their goods.” Tilsner Carton couldn’t have predicted that development. It could meet the surge, though, because it set out to improve and invest in itself well before shipping’s evolution happened. —Brian Arola

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CONTINUOUS IMPROVEMENT

Key Investments Enterprise Minnesota consultants are upgrading their credentials to serve a diverse client base.

e often talk about the value of continuous improvement, as it’s one of the foundations of Enterprise Minnesota’s consulting services. While we are experts at helping others improve and become more profitable, we also focus on continually improving our own skills and credentials to remain competitive in the manufacturing marketplace. Enterprise Minnesota Business Growth Consultants Keith Gadacz and David Ahlquist are great examples of enhancing their skills. In Keith’s case, he’s shrewdly leveraging his real-world experience within ISO to grow his ability to help clients. Prior to joining us, Keith worked for a medical device company, so it seemed natural for him to pursue credentials in ISO 13485, the standard that pertains to medical device manufacturers. (He’s also updating his credentials in ASO 9100, the 14

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standard for aerospace manufacturers.) He’s now certified as a lead auditor in both, which means he can guide a manufacturer through the certification process in those standards.  Many medical device manufacturers are already ISO 9001 certified. Upgrading to ISO 13485, which is specific to their industry, can give them a strategic advantage. “I’ll quote my cousin CJ who works at Polaris: ‘The supplier should know how they’re doing. I shouldn’t have to tell them with a scorecard. If I need to tell them with a scorecard, they’re not the supplier for me,’” Gadacz says. In other words, it’s better to take the initiative with a business management system certification that not only helps manufacturers zero in on mission and profitability but also sends out a specific signal of credibility.

Keith Gadacz, business growth consultant at Enterprise Minnesota

When manufacturers ask their suppliers to obtain a specific ISO certification, Gadacz says, it helps suppliers take ownership of their role and get them thinking about things such as customer satisfaction, delivery and performance metrics. ISO 9001 puts a stiff focus on business risk. Every aspect of the standard serves the larger goal of unifying a business’ parts for the betterment of the whole: optimize quality and efficiency to maximize profit. ISO 13485 requires a shift from that mindset.  “In ISO 13485, it’s all about safety for the patient,” Gadacz says. “Which makes

sense, right? We’re dealing with medical issues and dealing with people’s lives.” Medical device manufacturing thrives in Minnesota. According to the Minnesota Department of Employment and Economic Development: • Medical device manufacturing employs nearly 32,700 workers in Minnesota, ranking second nationwide. (Only California employs more.) • The state ranks first nationwide in the concentration of medical device manufacturing employment. • Minnesota ranks among the top states in medical device patents per 1 million people. Of course, many of those medical

There are between 200 and 400 medical device manufacturers in Minnesota right now that could benefit from a shift from ISO 9001 to ISO 13485. device manufacturing employees work for large companies such as Medtronic, which employs 10,000 workers alone. And Medtronic doesn’t have to worry about ISO 13485 because it’s regulated directly by the Food and Drug Administration.  But any manufacturer within Medtronic’s supply chain — or, more importantly, any manufacturer that wants to be in Medtronic’s supply chain — will likely need to strongly consider an upgrade to ISO 13485. Gadacz says that, by his rough estimate, there are between 200 and 400 medical device manufacturers in Minnesota right now that could benefit from a shift from ISO 9001 to ISO 13485. The credential upgrades aren’t stopping at medical device manufacturers. Both Gadacz and Ahlquist are also upgrading their credentials to become lead auditors in the AS 9100 standard utilized by the aerospace industry. Like medical manufacturing, aerospace and defense manufacturing thrives in Minnesota with roughly 6,700 workers, according to DEED, helping manufacture everything from small arms ammunition to aircraft and navigation systems.

608.512.1010

info@cybernines.com SPRING 2021 ENTERPRISE MINNESOTA /

This training kit allows students at South Central College in North Mankato to tinker at home while learning mechatronics, the discipline that allows practitioners to maintain sophisticated robotic and automation systems.

HIGHER LEARNING

Big Grant, Important Work South Central College is bringing mechatronics ed to rural high schools through a ‘train-the-trainer’ program.

even years ago, South Central College (SCC) in North Mankato used a $900,000 grant from the U.S. Department of Labor to develop new distance learning technology that introduces students to the emerging challenges and lucrative career opportunities in the hot new field of mechatronics. Mechatronics combines mechanical and electronic systems to maintain the sophisticated robotics and automation equipment used in today’s complex manufacturing environment. The college used the funds to establish the Internet Mechatronics Education Curriculum (iMEC) and to develop an experiential learning lab that enables students to practice mechatronics principles on remote labs. This summer, a $1.3 million National Science Foundation (NSF) grant will help the college expand that program to rural school districts that want to grow student

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interest in technical education. School officials and industry partners hope that they can help solve some of their workforce issues by exposing young people to the promise of exciting work environments and impressive wages. The new grant will also fund a summer program that trains high school teachers to deliver introductory mechatronics to their students through SCC. The experiential training kits were invented by South Central College Mechatronics Instructor Doug Laven who, recognizing the value of tinkering, developed portable boards full of the kind of materials a mechatronics professional might work on, including cords, wires, circuit boards and ports. And their integration into the curriculum happened almost by accident. Laven attended a National Science Foundation conference — a requirement

“Our vision is to bring mechatronics not only to students who already know they are interested in automation and robotics, but more importantly to those who may not even know this is a career possibility.” – Doug Laven, mechatronics instructor at South Central College for programs receiving NSF funding — prepared to show off the new distance learning technology SCC had developed through the original DOL grant. Through it, students could log into the mechatron-

Pipeline to industry

ics program network and use their computer mouse to manipulate an automated machine. It was a system they’d invested a good chunk of time and money into. Laven also brought along one of the college’s relatively inexpensive mechatronics kits. Instead of being wowed by the distance learning tech, attendees were much more drawn to the take-home kits. They were more hands on, more visceral, and just plain more fun. Laven approached a senior NSF program officer with the observation that the extraordinary interest in his kit might suggest that the future of tech learning should evolve around similar innovations.

“That’s exactly what we want; we want you to continually improve your process,” she told him. SCC’s newest iteration will show teachers how to administer a scaledback version of the SCC curriculum via the training kits. Teachers will build the kits over the summer and take them back to their high school classrooms for student use. Students can earn an iMEC 2.0 certificate by taking 12 credits remotely while still in high school. From there they can enter the workforce, continue toward a mechatronics associate of applied science degree at SCC, or do both.

Laven says most mechatronics students obtain jobs in production settings. The iMEC initiative has helped SCC develop partnerships with a variety of companies representing energy, biofuels, food processing, and manufacturing. Mechatronics students can participate in year-long, on-the-job internships while earning school credit and receiving valuable experience from industry mentors. Levin says the new program will expose a generation to a career most have never heard of. “Our vision is to bring mechatronics not only to students who already know they are interested in automation and robotics, but more importantly to those who may not even know this is a career possibility,” he says. “This is going to make a real difference in the lives of these students.” The grant will help SCC provide opportunities in schools that may not have adequate resources to bring the curriculum or equipment into their classrooms themselves, Laven says.

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Four Questions James Seifert, Attorney and Former Legislator

s a former state legislator, you’ve seen the political process from the inside and know how things get done. With the session in full swing, what advice would you give manufacturers about having their voices heard at the Capitol? It’s absolutely critical that manufacturers establish relationships with legislators. They should know who they are. They should know what their interests and policy priorities are. And they should ideally have at least one face-to-face meeting with a legislator or senior staff member. It’s the people who show up who have the power. It may be as simple as a letter, or a wellthought-out email that can make a difference. Or even it may be testifying before a committee. This year, because of COVID, we saw a $2 billion state surplus turn into a $4 billion deficit. So far, Gov. Walz has not implemented expense reductions. With variable obligations with our agency programs, particularly Health and Human Services, that implies a significant tax increase. Which is going to be an economic burden on manufacturers that they have to understand in detail, and they should put their viewpoint before their legislator. If they don’t, silence is often interpreted as agreement. They should actively participate in the process. You attended several Enterprise Minnesota focus groups as part of our annual State of Manufacturing® survey. The elephant in the room during those conversations was the impact of COVID-19 on manufacturers. What was your takeaway from those discussions? At least for now, we’re not dealing with a disaster scenario principally because of the Paycheck Protection Program. I think there were a lot of firms that applied for and received the PPP money and used it appropriately. Now, with the advent of the vaccine, that program has worked exactly as it should.

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It was probably an artificial environment we were dealing with this year, which mitigated the effects of COVID. The question is whether that’s going to be enough to get us through this next period until the vaccine is fully available.

INNOVATIONS

Thirty percent of manufacturers are genuinely hurting. I think another 30% are treading water. And the rest are actually thriving in this environment because they’re seeing demand, or discovering new markets, and their costs are lower with people

James Seifert

James Seifert is an attorney with the Fafinski Mark & Johnson law firm in Eden Prairie. A New Ulm native and former state legislator, Seifert has been practicing for more than 30 years and has focused much of his work on manufacturing and technology.

working from home. Minnesota manufacturers are fairly resilient. Given your experience in the legal field, at the legislature, and working with so many manufacturers, what have you learned about the things that produce success in manufacturing? I started my career in manufacturing with American Hoist & Derrick in 1985, and that was pre-internet, pre-personal computer, pre-cellphone. In looking back, I’m struck by how little the essentials have changed. Manufacturers still succeed by focusing on innovation and customer service. If you do either one of these wrong or poorly, you’re not going to be a manufacturer for very long. And if what you do doesn’t support one of those two critical pillars of manufacturing, that’s when the trouble begins. If I had to boil it down, it would just be those two things: be different and take care of your customer. You can survive darn near anything if you do those two things well. In what ways can a lawyer or a law firm help manufacturers beyond just contracts and legal advice? Lawyers offer a unique perspective regarding risk mitigation. I think we can see around the corner because people come to us in their time of need. And what we deal with are very complex problems that we ultimately solve. We deal with the overall enterprise risk in several ways, whether it’s people issues or commercial relationships. We do an awful lot of planning, from actual operations planning to corporate governance planning. Our firm is uniquely positioned because we have the capability to give holistic advice relative to second-, third- and fourth-generation succession planning. We have a very robust wills, trust and estate practice that allows the smooth transition of successful manufacturers from one generation to the next. That can mean three people, or it can mean a 300-person manufacturing operation. We service that range of manufacturers when they need to pass on to the next generation and don’t want to sell the business. So, that’s really how the law firm and lawyers, us specifically, can help manufacturers.

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Better Process

After the Assessment

Assessments can be powerful tools to identify deficiencies. Taking bold action to correct deficiencies? That’s genius. 20

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Minnesota Tool & Die Works is run by President Jay Sherer (left) and Vice President David Sherer. After doing an initial assessment, the company opted to pursue an ISO project.

PHOTOGRAPHS BY JACKSON FORDERER

ast spring, Pinnacle Climate Technologies — a global leader in climate control solutions — jumped on what it saw as a golden opportunity: With a pandemic raging across the country, the company used its existing technology and quickly produced an air-purification product called Airetrex 365. Designed for homes, the product’s secret sauce is its use of a particular piece of the ultraviolet light spectrum – UVC – that is a potent germ killer. “We had a hypothesis at the time that the COVID-19 virus was being transmitted via airborne particles,” Pinnacle Climate Technologies CEO Ron Ten Berge says. “We focused on building a product that would maximize the amount of air exposed to UVC light and not be impeded with current filters (like HEPA). HEPA traps particles and germs very effectively, but UVC neutralizes them.” But the story here isn’t just that Pinnacle developed a hyper-relevant product. They also did so faster than they ever have before. “This is a product we built and launched at the beginning of the pandemic. And it’s seen some pretty substantial commercial success,” Ten Berge says. “We went from ideation to actually building a complete website, building the complete product, and delivering it to consumers in 74 days — 74 days from ideation to in your home. That’s just unbelievable.” Ten Berge says they were able to develop this so

quickly, in part, because they’d worked with Enterprise Minnesota Business Growth Consultant Michele Neale on project management and communication. The company’s project management and communication work began with an assessment, a process where a consultant assesses a company’s current state and gives them a prescription for getting to a better future state. Pinnacle is an example of a company that took that prescription to heart and did the recommended follow-on work in hopes of seeing improvements. It’s that second step — the follow-on work — that Ten Berge says prepared them for success on the Airetrex 365 project. “The assessment and the work that followed was about improving the organization and roles and responsibilities,” Ten Berge says. “The outcome of that is better business performance, which is certainly indicative of the Airetrex 365.” Pinnacle’s process involves a lot of work with teams. But after assessing the company’s effectiveness, Neale determined their group-work dynamic had some room for growth. “They spent a lot more time talking about stuff “It’s a learning and not getting things experience here accomplished,” Neale for the company says. “I took them through the stages of and my team. team development With the assistance and shared some best practices and tools of Enterprise for project manageMinnesota, it’s ment. And when they coming to fruition.” had to present to their upper-level leaders, – Jay Sherer, president at I coached a couple Minnesota Tool of them on how they & Die Works could be more influential and received positively when working with their senior leadership team. They came together as a high-performance team fairly quickly.” Ten Berge says Neale helped them become more flexible, more resilient and better able to adapt to adversity. Undergoing an initial assessment — which Pinnacle has done several times in several different areas including leadership essentials, project management and team development — can provide a powerful first step for manufacturers to identify their potential. Taking steps to act on the recommendations in the assessment, however, is even better.

WHAT IS AN ASSESSMENT?

Enterprise Minnesota offers assessments in seven areas: a lean (continuous improvement) assessment, a quality management systems (ISO implementation) assessment, a leadership competency assessment, a financial assessment, an enterprise evaluation, a revenue SPRING 2021 ENTERPRISE MINNESOTA /

growth assessment, and a strategic assessment. Each assessment is unique. Lean assessments, for example, can evaluate a company’s culture and processes and identify opportunities to eliminate waste, improve productivity and cut costs. Leadership competency assessments, on the other hand, evaluate the collective skills of a company’s leadership team and help prioritize current and future development needs. Good assessments start with good planning. Consultants meet with company leaders, go over organizational charts, and any necessary COVID-related safety plans (such as, assuring the availability of PPE and space for social distancing). Consultants interview personnel, crunch numbers and analyze data, and finally put together a plan. “The next step is to put together a report that says, ‘This is where you currently are, this is where you say you want to go, and here are our recommended next steps,’” Enterprise Minnesota Business Growth Consultant Greg Langfield says. The assessments are so powerful, in fact, that roughly half of all clients who go through the process take further steps to improve, continues Langfield. “Opinions are great but data is better, and an assessment will provide the data on which to take action,” says Enterprise Minnesota President and CEO Bob Kill. “Taking advantage of the assessment findings and recommendations has helped a number of companies use this COVID environment to rethink their strategy, implement process improvement initiatives or invest in their people. Taking action now will position them to get ahead of their competition as the economy rebounds. Whether through strategy, process improvement or people development, they will help the manufacturer improve and grow his or her company profitably.”

GOING DEEP

Pinnacle provides climate control solutions to commercial, industrial, agricultural, and DIY and retail customers throughout the world. “We make it possible to raise dairy cows in the desert, work outdoors in the winter and be comfortable and productive when the weather and environment are not willing to cooperate,” according to its website. While its work with Neale didn’t involve any desert cows, it did involve deep, organic teamwork. 22

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velopment and talked about forming, storming, norming and performing. We talked about social styles, and how we can be different than other people and how can we be more versatile and meet people where they’re at.”

POWER TOOLS

Pinnacle Climate Technologies CEO Ron Ten Berge says the training his employees did with Enterprise Minnesota set them up for a successful rollout of a COVID-related air purification product.

Pinnacle made a shrewd strategic move during an early assessment of its communication and project management capabilities when manager Mike Mahota perceived the value of integrating Neale into one of their small group teams, treating her as a fellow employee. “I want you to feel like you can add value whenever you see the need to interject,” Mahota told her. Neale calls the experience “transformative.” The meetings enabled Neale to offer her expert input as issues arose. When she identified issues that warranted further discussion, Neale would prepare mini learning sessions for the next week. Neale intends to use this approach with other clients. Pinnacle employees told her that improvements would never have been implemented as quickly without her on board. Ten Berge says Enterprise Minnesota’s help has been vital to helping Pinnacle make it through a difficult time. And all the progress they’ve made building communication skills, improving project management and working with remote management, he continues, came after they’d first done an initial assessment. Pinnacle then took that next critical step in seeking to take action on the assessment’s recommendations. “Michele’s training was pretty in-depth,” Ten Berge says. In addition to remote management, Neale taught employees about “the art of influence,” a behavioral approach that goes deep on subjects such as likeability, reciprocity, credibility, composure and commitment. “Every week we would talk about each one of those. I noticed early on they were having a hard time influencing each other and on up to senior leadership,” Neale recalls. “We also did the stages of team de-

Minnesota Tool & Die Works, owned by the Sherer family, asked Enterprise Minnesota’s Business Growth Consultant Keith Gadacz to conduct an assessment of how they transform their already considerable success into future growth. Founded in 1991 by Keith Sherer — who at 90 years old still keeps an office — the company designs and builds large progressive and lamination dies, up to 12 feet long. It also works with compound dies, stage tooling, die repair and custom machinery. Today the company is run by Jay Sherer, president, and his brother David, vice president. They currently employ 21 workers. Minnesota Tool & Die Works is a job shop open to working with just about anyone, including clients in the agriculture, computer, appliance, electrical, lawn and garden and recreational vehicle industries. “I’ll quote anything,” Sherer says. “If it fits their needs and it fits my needs, it’s a go.” Sherer estimates the company’s revenue growth over the past five years at about 5 percent. But he says he’s hopeful the ISO project will position them for more robust growth. “We feel extremely confident about that,” Sherer says. Gadacz says the company’s leadership initially wondered about the nature and timing of expansion, what might it look like and what steps would be necessary to get there. But Gadacz advised them that setting up a solid quality management foundation can lead to cascading successes. ISO certification can help them secure a path to future sales by expanding their efforts in acquiring government contracts and making dies for government contract manufacturers. Those customers, he says, will want them to reliably deliver more products through a consistent management system. Financial success, then, can unveil shrewder avenues for facility expansion. Gadacz says the company wasn’t “foundationally” set up for the kind of financial growth its owners wanted. Pursuing an ISO

designation could provide that foundation. “The management system is the foundation they’re going to launch from,” Gadacz says. “They’ll get the structure, get the plan in place to then propel themselves forward. That was the starting point.” Gadacz’s assessment showed the company how an ISO certification will ensure that, when every part of the machine is working together properly, peak efficiency emerges. He mapped out a plan for Minnesota Tool & Die Works to secure an ISO 9001 certification, and the company wisely chose to follow Gadacz’s map. Minnesota Tool & Die’s path to certification took a detour about halfway through its ISO project. In addition to problems brought on by the pandemic, Sherer’s brother, Pat, died unexpectedly just a few months ago. He was the driving force behind working with Enterprise Minnesota on the ISO project. When he passed, and with COVID-19 making everything a little more difficult, the company briefly put the ISO project on pause. But Sherer agreed with his late brother’s vision to pursue the ISO project and vowed to finish what his brother started. Minnesota Tool & Die Works is now roughly halfway through its ISO project. “Obviously, growth was attractive to us,” Sherer says, “as well as being able to manage the business at a better level. It’s helping us organize better with record keeping, and everything that we need to do here on our end. It’s a learning experience here for the company and my team. With the assistance of Enterprise Minnesota, it’s coming to fruition.” Gadacz says language constructed within the ISO platform empowers businesses. Instead of providing a laundry list of things to do in order to secure certification, the language encourages buy-in to a system that doesn’t exist to merely satisfy an OEM request; it’s there to improve every aspect of a company for the company. “They’re in control of their own destiny. And the ‘a-ha’ came when they realized ISO is not telling me what to do. It’s describing a vision. And we get to make it match our business the most effective way possible,” Gadacz says. “And now they are absorbing what a better day can feel like because they’ve defined what a better process will look like.”

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GRAND EVOLUTION George Erickson, age 90, started the company and still lives on the property he farmed before turning a turkey barn into a tool and die shop.

From Turkey Farm to Helicopter Parts

When you work at Ericco, you’re part of a family. By Sue Bruns 24

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omewhere in the office of Ericco’s General Manager Mike Sorteberg is a tamarack post that used to hold up the ceiling of a turkey barn. The original buildings of the Ericco Manufacturing plant, located 17 miles west of Thief River Falls, Minnesota, have gone through a few remodels, Sorteberg says, but he keeps the old post “as a reminder of where we came from.” This third-generation family-owned business remembers its beginnings as a matter of

pride and as a guide to the future. Started in 1976 by farmer George Erickson, the company has evolved from a private machine shop to a 35,000-square-foot manufacturing company with more than 30 computer numerical control (CNC) machines that produce over a million high-quality parts per year for both high and low runs. Ericco’s tooling department designs, develops, and fabricates custom tooling, and its quality department uses top-of the-line inspection equipment to ensure its products are of the highest quality.

school. He studied drafting and machine tooling in college and worked a couple of years as a draftsman before he and his wife Sally moved back home to work for Ericco. As the business grew, Sorteberg says, “We just filled the [outbuildings]. If you look on our website, at the two main production buildings, [you can see the] turkey barns. They’ve had a lot of work done to them, but that’s essentially what they were.”

REMEMBERING WHERE THEY CAME FROM

In the beginning, Ben says, it was just a tool and die shop that did jobs for Arctic Cat, Polaris and Christian Brothers hockey sticks. “It wasn’t manufacturing highquality production stuff.” “Rick was kind of a one-man show,” says Sally Erickson, Ben’s mother. “He worked hard those early years and again when the company decided to take the leap with Arctic Cat and begin production machining.” Sally was involved in the early years, mainly working with payroll and benefits. But she also held a full-time position as director of the Thief River Falls Developmental Achievement Center (DAC), which works with adults with disabilities. The insurance and benefits from her job covered Rick too, as Ericco didn’t yet have a benefits package of its own.

“This used to be a working farm,” Sorteberg says of the plant that has produced parts for Arctic Cat snowmobiles for several decades. Recently, Ericco expanded production to also include products for window frames and helicopter and drone parts. Erickson bought the 320-acre property in the late 1940s on auction for about $4 per acre and farmed the land until the late 1960s when he switched to raising turkeys and livestock, according to his grandson Ben Erickson.

“It’s funny how life gives you some curveballs along the way. But it’s all been good.” – Mike Sorteberg, general manager of Ericco Ben, now president of Ericco, says his grandfather escaped a tough farm economy in the late 1950s by accepting a job as a tool and die maker with Bucyrus, a Milwaukee-based company that manufactured huge excavators. “They knew farmers were mechanically inclined [with a] good work ethic, so Grandpa took the bait,” Erickson says. “He went to Milwaukee and learned everything he could about machining.” George farmed another 10 years, then started a machine shop on the property. Ben’s father, Rick Erickson, worked with his father George in the shop while in high

FROM TURKEY FARM TO FAMILY BUSINESS

CAT PARTS

Located near Viking, Minnesota (population 103) and between Thief River Falls and Warren, Ericco’s primary business has always been with Arctic Cat. “Not that many years ago, they were probably 99% of our business,” Sorteberg says. “Right now, it’s about 75% — still a big chunk. We’ve been in business [with them] for 44 years, and in some respects, we probably know them better than they know themselves. We’re kind of their right hand. We’ll do it right for them.” When engineers and salespeople visit from Arctic Cat, he adds, “We know each other and we know what they’re working on, and how they might improve manufacturability of parts, reduce cost, things like that. That’s the kind of relationship we’ve had over the years.” When Arctic Cat needed slide rails

Today, the company that started out as a tool and die operation runs more than 28 CNC machines that produce over a million high quality parts per year.

for all the different models of Arctic Cat snowmobiles, Ericco developed a process to curve each rail without having to work with the aluminum in a soft state and then heat treat it later for strength. From 2008 to 2012, Sorteberg says, Ericco ran two production shifts to accommodate a boom in selling parts for Arctic Cat. But Ericco’s production decrease caused Arctic Cat’s inventory to stack up at the factory. He and Rick had previously worked to expand their customer base, but when Arctic Cat was bought by Textron in 2017, they explored more customer options with greater urgency. SPRING 2021 ENTERPRISE MINNESOTA /

Ericco has been the primary supplier of parts for Arctic Cat snowmobiles for four decades. On the show room floor, an early snow machine serves as a reminder of the earlier days of both companies.

“IF WE AREN’T MOVING AHEAD, WE’RE DYING”

That same year, Ericco completed its ISO 9001 certification. Sorteberg says it wasn’t in response to customer requests, but because “it made us a better company. Rick and I always said, ‘If we aren’t changing and moving ahead, we’re dying.’ So, we keep pushing to make ourselves a better company.” Ericco was geared up and ready to accommodate Arctic Cat’s expected increase in production in late 2019, but then COVID-19 appeared and sent much of the state into lockdown. While some of Ericco’s parts were deemed “essential,” which allowed them to keep operating, unneeded employees were sent home. When Arctic Cat started up again, their projections were conservative. No one knew what the economy would do. As a result, Ericco — which has about 30 employees — was forced to lay some of them off. The connection between the two companies remains strong, and for years Ericco has sponsored various snowmobile racers. “From the little kids on the Kitty Cats all the way up to the pros,” Sorteberg says, “we actively sponsor every year.” And for the past two years, Ericco’s name has appeared on all Arctic Cat snowmobiles, race machines and clothing. Despite a cut-back in production for Arctic Cat, Ericco managed about $6-$8 million in sales in 2020 and hopes new 26

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ventures will help them reach and exceed $15 million down the road. In addition to snowmobile parts, Ericco makes parts for a snow bike conversion kit built by MotoTrax of Spokane. Ericco also builds aluminum housings for airport runway lights as well as housings for lights on ships. Another unique client is SICO, for which Ericco makes frame pieces for portable dance floors.

OPPORTUNITIES, POSSIBILITIES

Recently Ericco landed a deal with Marvin Windows located in Warroad (85 miles northeast of Thief River Falls). “They’re going to a whole new screen where they use extrusions rather than roll form framework,” Sorteberg says. “We’re in the process of building our production line, which is also going to be huge for the company.” Other major opportunities have also materialized. “We started visiting with Bell Helicopter and made some prototype parts. Now that’s taking off,” he says. “We can make prototypes and parts for helicopters, planes or drones, which we’re doing. As long as they don’t put a person on it, you don’t have to be AS9100 certified, but we want to pursue that.” Enterprise Minnesota is helping Ericco pursue that aerospace certification, part of which will wrap up by early spring. Sorteberg credits Enterprise Minnesota with keeping the company’s ISO efforts focused and on schedule. “When we started doing ISO, we thought we could do it ourselves [but] found out we needed help.”

FAMILY BUSINESS

Sorteberg has been with the company for 12 years. He and Rick had been close friends for more than 30 years when Rick

was diagnosed with cancer in 2009. They had even played together in a gospel and blue grass band for several years. After Rick’s diagnosis, Sorteberg says, “He didn’t know what his future was going to be. He knew he needed help, so he asked if I would come [to Ericco]. “[Rick’s] kids, who are actively in the business now, weren’t in the position to take the reins of the company [at that time], so he and I worked together. He had a fight with cancer for nine years. We worked together, and it was great.” Although Sorteberg had no experience in machining in shops, he had worked for Arctic Cat for several years, and before that for 25 years for Homark, a home manufacturer in Red Lake Falls. “Mike is talented in so many ways,” Sally says, “from working with the employees to all the other general management stuff, whether it’s insurance or safety.” “That’s what I came for,” Sorteberg says. “To do the things that [Rick] knew

“It can be hard work, but it’s also rewarding. You can walk out of here and say, ‘I built that, and I did a good job today.’” – Lisa Lowell, materials manager of Ericco he needed done, and I had experience in that. It’s funny how life gives you some curveballs along the way. But it’s all been good.” Meanwhile, Ben and his sister Trudy had grown up with the business. Ben says he’s worked at the shop since he was old enough to push a broom. When he was young, his dad stacked pallets for him to stand on so he could reach the handle on a drill press and see how it operated. In the mid-1990s, when Ben was 15, he started working summers at Ericco. After high school, he went to college with plans for law school but returned to the company. “It’s been a good choice. The best part of that decision was being able to work with my family.” When Rick was diagnosed with cancer, Ben says, “He was wise enough to understand that I needed his many years of expertise, which I really did. So, through-

out those years, he diminished his role a little bit more and more without ever completely disappearing.” When she was just a kid, Trudy Erickson “kind of sensed” that she would work for the family business. “The mechanical stuff always clicked,” Trudy says. After graduating from high school, she studied engineering at the University of North Dakota. She briefly considered

“He came to work every day until about a week before he passed away [in 2017]. He loved it here. He was a really great example for us.” – Ericco President Ben Erickson, talking about his father, Rick Erickson, who died of cancer in 2017

was a learning curve,” she says. “It can be hard work, but it’s also rewarding. You can walk out of here and say, ‘I built that, and I did a good job today.’” Lowell says she is excited about Ericco’s work with Marvin Windows and Bell Helicopter, but more than anything, she is proud that what has kept her at Ericco for 16 years is the atmosphere. “We’re a family here,” she says. “All of us truly care about each other.”

NEW EMPLOYEES

Manufacturers in Greater Minnesota all struggle to recruit from their own areas. But Sorteberg believes the talent is there. For the past several years (except 2020, with COVID-19’s restrictions), he has hosted a manufacturing day with Thief River Falls High School to let kids know about opportunities in manufacturing. “It’s not the dirty grimy job that you thought,” Sorteberg says, “[but] high tech cool stuff. I team up with different companies [like] Marvin Windows. NDSCS (North Dakota State College of Science)

in Wahpeton comes up and Northland Community College too. We talk about different aspects of manufacturing, job opportunities, and what’s out there.” Today Sally, Ben, and Trudy are Ericco’s co-owners. George, now 90, still lives in the home on the property and stops by the shop regularly to keep up on Ericco’s progress. Sally still oversees payroll and benefits and represents the company on the Workforce Development Board for the Northwest Private Industry Council. She also serves on the Regional Alliance Committee. Ben, Ericco’s president, is busy coordinating with Bell Helicopter. Trudy, Ericco’s production engineer, focuses on automation logistics for the Marvin Windows project. Sorteberg’s talents have kept his friend Rick’s hopes alive for Ericco moving forward with exciting new possibilities. And in the pipeline are three young Ericksons — Trudy’s daughter and Ben’s son and daughter — who will determine if Ericco will be a fourth-generation familyowned business.

majoring in a medical field, but when the family learned of Rick’s cancer diagnosis, she says, it solidified in her mind that she would stick to her original plan. She graduated with a degree in mechanical engineering and returned to Ericco. “We were growing really big at that time,” she says, “and I was needed.” Rick was always there, Ben says. “He came to work every day until about a week before he passed away [in 2017]. He loved it here. He was a really great example for us.” The family, Ben says, “has worked together really well over the years.”

EXTENDED “FAMILY”

Sally says she is proud that Rick and Sorteberg always treated employees, vendors and customers like friends and family. Rick recruited Lisa Lowell to Ericco while she was eating a burger with a friend on a Saturday afternoon in Thief River Falls. “I knew nothing about Ericco,” she says. “Didn’t even know it existed.” Rick gave her a tour of the plant that afternoon, and two days later she was working as a machine operator. She thought her tenure would be a few weeks, but today, 16 years later, she is Ericco’s materials manager. “I’d never seen a CNC machine before, didn’t even know what they were. There SPRING 2021 ENTERPRISE MINNESOTA /

Imminent Threat

The

Race to Safety Cyberattacks on small businesses are increasingly common. Manufacturers can minimize their risk by backing up crucial data and being smart about online habits.

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ome of us would like to think cybersecurity is someone else’s problem, that it’s the other guys who need to worry about it, that we’re too smart to fall for the email from the Nigerian prince who just needs a little help depositing $6 million into our bank account.

But the truth is, cybersecurity is a bigger threat today than ever. From major corporations with tens of thousands of employees to job shops with just a handful, cyber crooks are coming for your money and data in increasingly sophisticated and devious ways. How you address the threat to your business may determine if you even have one after the attack: Research shows one in 10 breached businesses doesn’t survive. And for manufacturers hoping to be in the supply chain for companies with major Defense Department contracts, the rules for competing in that space are evolving just as rapidly as cyber criminals’ tactics; soon you’ll be required to prove you’re meeting stiff security standards. Massive cybersecurity breaches with millions of dollars lost or millions of records compromised definitely get our attention. That happened recently when Solar Winds, a major information technology firm with tens of thousands of clients who use its software, was hacked by likely foreign cyber terrorists. The hack implanted malicious code into software updates and created a back door for bad actors to break their way into any client’s network using the software. It affected government agencies as well as major tech companies and touched the data of tens of millions of people. Experts say it will take years to repair the damage. While this breach was unique in its cleverness, major companies have been getting hit by hackers for years. No surprise, right? Deep pocketed companies such as Capital One, Equifax and Yahoo! are prime targets for cashmotivated cyber terrorists. “So you’ll have But it’s not just large companies that are vulnerable to employees saying, cyberattacks. Small- and medium-sized manufacturers have been hit hard too. ‘I don’t want my Focus groups in Enterprise Minnesota’s State of manager to talk to Manufacturing® survey revealed that a startling number of manufacturers have fallen prey to cyberattacks. In me about clicking almost every focus group, someone told a story of geton this link so I’m ting hit with a ransomware attack, a common type of attack where hackers steal data and demand ransom for going to scrutinize its safe return. every email now.’ The threat is ominous. But by backing up crucial data The expectation and being smart about online habits, manufacturers can minimize the risk of getting hacked. is going to be that **** we’re taking this “The week we went into lockdown for the coronavirus we got hacked. It was ransomware. It cost about half seriously.” a million bucks to get up on the other side of that. Thank – Grant Burns, goodness it didn’t cost us. I guess we had insurance for owner of the a big chunk of it. But it was an absolute nightmare.” cybersecurity – A manufacturer, speaking in a focus group consulting firm **** Bound Planet Hassan Asghar, senior vice president and chief infor-

mation security officer for Bremer Bank, which is headquartered in St. Paul, says every business’ security plan should begin with basic individual security hygiene. “Phishing is the most common vector of attack,” says Asghar, referring to attacks that come into a business via emails with suspicious, clickable links. Imagine this: An employee in a company’s accounting department gets an email that appears to be coming from the company’s CEO. The email tells the accounting employee that he needs money transferred to his account so he can make a workrelated purchase. The accounting employee complies, sending money to the CEO using a link he provided. Sound like something your employees would never fall for? Perhaps, but it works more often than you’d think. “Ninety-one percent of breaches initiate this way,” Asghar says, who has worked with customers who have made this mistake. “The accounting person may not carefully look at the entire email and the domain, and they’ll just see the name and then process the payment. Then they find out the payment was actually processed to an account overseas that didn’t belong to this individual.” Security hygiene also involves use of strong passwords that are difficult to guess, include some level of complexity and are lengthier, which could be in a form of paraphrase. Manufacturers should also be vigilant about updating both antivirus and operating system software. Both are critical pieces in putting up a strong defense against cyberattacks. Antivirus software is constantly sweeping your system for malware. Operating system updates often plug holes that have been exploited by criminals. Asghar also recommends making sure your connection to the Internet is secure. Some places are still offering free, passwordless Internet access, which Asghar says is all too easy for bad actors to exploit. The best fix for this issue is something called multi-factor authentication, and it’s a must for companies letting employees work remotely. Home offices may not be as secure as company networks, so logging into the network from home could open up a potential weak spot for criminals to break in. Asghar recommends manufacturers use a virtual private network for remote work. SPRING 2021 ENTERPRISE MINNESOTA /

VPNs use encryption to set up a secure, private connection that is difficult to hack. Finally, Asghar recommends all businesses develop and practice incident response protocols. You don’t want to find yourself in the middle of a cyberattack and then realize you have no plan on how to respond. Get everyone involved — IT, marketing, operations, the leadership team. Every stakeholder should know their role in a cyberattack before the cyberattack. “Then you can respond and recover,” he says. “By giving the key stakeholders a chance to practice those processes in case of an event, you’ll be much more crisp in terms of what you need to do.” **** “Thanksgiving Day last year we were held ransom — all my PDFs and the engineering drive. We got a notification from our server that something was wrong, but by the time we caught it within an hour, it was too late. The ransom was in Bitcoin. And we actually negotiated with the people who were holding us hostage and got out of it for about half of the money they wanted. They gave us all our files back. But it’s real. We had mirrored servers, and we did all the stuff you’re supposed to do. But it just wasn’t good enough.” **** Scott Singer, owner of cybersecurity consulting company CyberNINES, says he’s been working with a lot of companies on their cybersecurity issues lately. And not everyone is as secure as they think they are. In some cases — where manufacturers are in the supply chain of major Defense Department contractors — national security can be at stake. “Our country’s supply chain is built on small business,” Singer says. “A lot of the ways people are trying to attack a Lockheed Martin or a BAE Systems or a Medtronic is through that supply chain where it’s not protected. It’s about, ‘How do I find a way into that larger company because I really want to get into them?’ So, it’s critically important that we protect that supply chain and help that small and medium business be secure.” The core of CyberNINES’ business is helping small- and medium-sized manufacturers comply with Defense Federal Acquisition Regulation Supplement (DFARS) around cybersecurity. Those regulations are 30

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in the midst of an evolution. Several years ago, when the DFARS cybersecurity regulations were installed, the government allowed manufacturers to “self-attest” that they were meeting the cumbersome regulations. But now with cybersecurity concerns at a fever pitch because of ransomware attacks and the Solar Winds breach, a system that once relied on self-attesting is about to get more teeth. As of Nov. 30, any manufacturer in the supply chain of a government contractor has to go beyond the self-attesting and actually post a “score” through the online government website called the Supplier Performance Risk System portal. The scoring system is complicated, but it runs from a low of -203 to a high of 110; you lose or gain varying degrees of points for each line

knew you weren’t in compliance but posted an incorrect score anyway, you’re subject to the False Claims Act. And that can take down your small business.” The False Claims Act outlaws misrepresentations to the U.S. government and says you can be fined three times the amount of the contract plus $10,000 per incident. “You can go to jail if you willfully do it,” Singer says. “It’s a little scary, and they’re starting to enforce it now.” There’s a new system coming online that will replace the self-attesting scores. It’s called the Cybersecurity Maturity Model Certification (CMMC) system, and eventually it will affect all prime and subcontractors working with the Department of Defense (DoD). This system, which will roll out in phases between now and 2026, will require manufacturers to undergo thirdparty auditing similar to ISO certification. “I don’t want people to be paying The CMMC takes a different approach than ransoms because it perpetuates the portal score system, the business model. And if however. It offers five everybody keeps paying ransoms, “maturity” levels (level 1 is the lowest, level 5 is the then it’s not going to go away.” highest) corresponding to – Scott Singer, owner of the a manufacturer’s cybersecybersecurity consulting firm curity preparedness. Which CyberNINES contract you can bid on depends on your maturity level. item on the standard. Manufacturers enter By 2026, any company wishing to work their score and the date they conducted with the DoD will need that certification. their self-assessment. They also must enter “All of a sudden there’s huge teeth in a date by which they predict they’ll be in this,” Singer says. 100% compliance. **** Disconcerting, Singer says, is the num“About three or four years ago we had ber of companies not taking the process a case where it wasn’t ransomware, but it seriously. He says he’s seen numerous was wire fraud. We found out they were cases where companies will make a rough tracking emails between us and customers estimate — rather than conduct a legitiand banks. Since then, we’ve done a lot to mate, conscientious audit of their security make our servers more robust. We’ve done protocols — of what they think their score a lot more employee training. We know it might be. These companies put themselves was somebody overseas. And we lost a lot at risk if the Defense Contract Manageof money.” ment Agency (DCMA), which monitors **** contractor adherence to rules and standards, Ransomware attacks have become questions their score. among the most common forms of cyberatThe DCMA might, in projects involving tacks. Both the frequency and the financial sensitive government data, audit potential damage they cause is growing fast. Accordcontractors, Singer says. So, if a manufacing to the University of Maryland, maliturer posted a self-attested score of 60, and cious hackers are now attacking computers the DCMA audit reveals the real score to be and networks at a rate of one attack every closer to -140, Singer says the government 39 seconds. According to COVEWARE, is going to start asking tough questions. the average ransomware payment in the “They’ll ask if you knowingly entered an third quarter of 2018 was just a few thouincorrect score,” Singer says. “If there are sand dollars. Two years later, the average any emails in your system that suggest you payment was nearly $250,000.

Sobering Stats on Cybercrime ● The National Cybersecurity

Alliance says a recent survey shows 10% of all breached small businesses shut down.

● According to a recent Small

Business Administration survey, 88% of small business owners felt their business was vulnerable to a cyberattack.

● According to COVEWARE, the

average ransomware payment in the third quarter of 2018 was just a few thousand dollars. Two years later, the average payment was nearly $250,000.

● According to Cybersecurity

Ventures, cybercrime will cost the world $6 trillion this year.

● The cybersecurity firm Varonis

estimates 21% of all files are not protected in any way.

While all manufacturers are certainly advised to safeguard networks with anti-virus software, there are a few other methods of protection that could be just as helpful in the event of an attack: backing up your data and purchasing insurance. When Enterprise Minnesota conducted its most recent round of focus groups, many participants who’d said they’d experienced a cyberattack had insurance. One even suggested that, without insurance, they may have lost their business. Singer says that, while insurance is good, the best defense against a ransomware attack is a solid plan to back up your data. Like anything else, a system to do this automatically will vary in cost depending on the frequency of the backup. A system that backs up your data weekly or daily will cost far less than one that backs it up instantly. Singer says backing up data frequently can position manufacturers to never having to pay the ransom at all. “I don’t want people to be paying ransoms because it perpetuates the business model,” Singer says. “And if everybody keeps paying ransoms, then it’s not going to go away.”

By having a really good last-known backup, Singer says, it becomes a risk management process for businesses: How much risk can they accept, and how long can they go without having a current backup? Still, the foundation of any cyber protection strategy needs to be on the socalled “end users”: employees. Almost all breaches start there. Grant Burns, owner of the Bound Planet cybersecurity firm, says he’s seen many horror stories. One case involved an email to an employee ostensibly from the company CEO asking her to purchase Best Buy gift cards for employee gifts. That CEO’s follow-up email asked for the serial numbers and security codes from the cards. Red flag. In another case, shares Burns, an employee clicked on an email link that resulted in a ransomware attack. The company was shut down all summer because of it. The solution to avoid this kind of calamity? “It’s quick and easy to train your end user,” Burns says. “And you can start doing it right away.” One tactic Burns uses with his clients is something called “ethical hacking,” where he sends emails to a company’s employees with suspicious links. He’ll do it to the same company multiple times and gauge progress. The goal is to teach employees to become shrewd emailers, the kind who are able to spot suspicious activity — such as an oddly spelled name of a coworker, a link with a strange spelling of a common name brand, or a bizarre request for money transfers — and eliminate it from the system. “So, you’ll have employees saying, ‘I don’t want my manager to talk to me about clicking on this link so I’m going to scrutinize every email now,’” he says. “The expectation is going to be that we’re taking this seriously.” While there still may be a good number of manufacturers who haven’t invested much in cybersecurity, Enterprise Minnesota Vice President of Consulting John Connelly says the future will look quite different. He predicts that just as ISO grew and became the norm for manufacturers looking to take their game to the next level and grow more profitably, so too will cybersecurity measures. “And I expect it to go a lot faster, like maybe in four or five years,” Connelly says.

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THOUGHT LEADERS

LEGISLATIVE ROUNDTABLE

Legislators Gene Pelowski, Barb Haley and David Tomassoni talk about COVID, workforce issues in manufacturing and negotiating the state’s budget crisis.

tate lawmakers have their hands full this year. From COVID relief funding and remote committee hearings to equitable broadband and budget negotiations, the 2021 legislative session is perhaps more of an uphill climb than other years. Manufacturers — who are also dealing with COVID on top of workforce issues — have a vested interest in the session’s result. Jim Girard, a lobbyist who works on behalf of Enterprise Minnesota, led a Q&A

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session with key lawmakers — Rep. Gene Pelowski, DFL-Winona; Rep. Barb Haley, R-Red Wing; and Sen. David Tomassoni, R-Chisholm — in which they discussed concerns about, and hopes for, the 2021 legislative session. What has been COVID’s impact on manufacturers and on our state’s economy? What will its impact be in the future? Gene Pelowski: If we take a look at

the economic forecast we got last March toward the end of session, we were $4 billion in the hole. Then we got another economic forecast in December and we were plus $641 million. Whatever’s happening with COVID and the pandemic, our ability to track it is, shall we say, a bit erratic. But the interesting part of it is that it didn’t get worse; it got better. Now the last few small economic forecasts we’ve had have also been in the positive. So, I’m more confident that the economy is

recovering during this process than I was a year ago, and I am very hopeful that this latest economic stimulus package by the federal government will also have a huge impact. We’re getting some of the effect of this $4 billion that’s coming into Minnesota from the feds right now, and I’ll give you one example. Winona State University

“I’m more confident that the economy is recovering during this process than I was a year ago, and I am very hopeful that this latest economic stimulus package by the federal government will also have a huge impact.” – Rep. Gene Pelowski, DFL-Winona was running an $8 million deficit all by itself because of COVID and declining enrollment. Because of this latest economic package and the $300 million that’s going just to higher ed, Winona State alone is going to get about $9 million. St Mary’s University is going to get about $2.9 million. My tech college is going to get about $1.5 million. Those dollars would be bigger than anything we could provide at the

state level during this budget cycle. So, I think our current budget cycle is going to be heavily impacted by this latest round of federal money. Barb Haley: My personal focus in the beginning was getting people open and working out the bumpiness of who was essential and who wasn’t. Once we got beyond that, things quickly turned around to the positive, I think, for a lot of manufacturers. The common theme I keep hearing is “innovate and pivot,” and people seem to have been able to do that fairly well. Their business is rebounding, but right now we’re back to the workforce challenge. David Tomassoni: When COVID hit, three of our six taconite plants just shut down. We had a whole bunch of people out of work, and they’ve all since come back. One discouraging thing I heard the president say is that COVID’s going to get worse before it gets better; 1918 was the last time we had a pandemic, so this is all new ground. I think we’re learning something new every day. How will the legislature get its work done this session given COVID-related gathering restrictions? Barb Haley: Our chief job is to balance this budget, and the demands COVID has placed on every area of the budget — whether it’s education or health and human services, etc. — puts us in a tough position. There’ll be difficult decisions ahead. The priorities really are the same things we’ve been saying all summer and fall: get us out of COVID, get people back to work, support small businesses, get our kids back in school, and ramp up this vaccine rollout — all those are so tightly intertwined in getting this economy back on track. Let’s talk about the Growth Acceleration Program, or GAP. A few years ago, the program had a funding level of roughly $800,000. This year it’s been at $400,000. As you know, GAP has been used to help small- and medium-sized manufacturers become more efficient, better utilize their facilities and hire more people. What do you think the

prospects are for maintaining and even increasing GAP funding during this tough budget session? Gene Pelowski: These types of budgets may fare better this session because of the impact of the federal stimulus. When you’re looking at $300 million for higher ed, $588 million for K-12, and $400 million for broadband from the

“The Growth Acceleration Program has a proven outcome of producing jobs and helping small businesses and manufacturers succeed. And that lifts up our whole economy.” – Rep. Barb Haley, R-Red Wing federal government over six years, that offers huge budget relief. That should allow us to say, “We can have more of an impact at the state level by investing in this [GAP].” Which is a relatively small amount in our budget than it would be if we hadn’t had the federal stimulus. And if there’s another Biden one coming, we may be in a really unique situation by the end of session, which I had no way of predicting a year ago.

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Barb Haley: My bias is always toward programs like GAP because it has a proven outcome, and they’re targeted. I frequently say that I do not like spending from the government. That is what I call spray and pray. I like targeted programs that we know where our need is. We know it’s in manufacturing and health care and IT. Let’s focus the money on where the need is, and I think we can even get more targeted than we’ve been in the past. The Growth Acceleration Program has a proven outcome of produc-

“We should focus on making sure these young kids have the option at least to be able to come out of high school at 18 years old and get a job.” – Sen. David Tomassoni, R-Chisholm ing jobs and helping small businesses and manufacturers succeed. And that lifts up our whole economy. So, this is the type of thing that I like to support, and I think that the legislature as a whole needs to do more of this. Two issues that are intertwined are workforce shortages and technical school education. Bolstering education numbers would go a long way to solving workforce issues, but technical college enrollments are lagging. How

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can we find a solution to these intertwined issues? David Tomassoni: We should focus on making sure these young kids have the option at least to be able to come out of high school at 18 years old and get a job. I can tell you about several different kids who went to school with me and graduated the same year I did who have already retired because they went to work in the mines at 18 years old. So, there’s a definite history of this being a successful way to go. Gene Pelowski: Every Minnesota high school senior should have the option of graduating not just with the traditional diploma but with an employable skillset. We recently had a hearing at the tech college in Winona where a bill that we just heard last week in my committee was presented to the biggest group we had out of all the hearings over those three days in southeastern Minnesota. The bill would recreate licensure and certification for what we used to call industrial arts teachers, which we now want to call industrial technical teachers. Thirty years ago, it was common to graduate in automotive, carpentry, electrical, welding, all of that at the high school where I taught for 37 years in Winona. We had nine industrial arts teachers. We’re down to one. When he retires, you can’t replace him because there are so few. Now, I’ve spoken to the Minnesota Chamber and my local chamber and an array of business groups and they’re all for it. I’ve asked them, “Would you donate equipment?” “Yes.” “Would you have internships?” “Yes.” And their only comeback is, “We’d like an employable individual to graduate from high school.” And I think that’s a fair trade. Barb Haley: I’m old enough to remember when we all worked during high school; even in middle school I detasseled corn. Somehow that went away, and kids don’t have that exposure to work anymore. We’ve got to eliminate the barriers to that. We’ve tried, for example, to get schools that have these construction programs to build small houses, but we’ve got a lot of restrictions that don’t provide or enable kids to get on a job site to experience things like that. A couple of bills that I co-authored such as the Youth Skills Training Program

have been wildly successful. We need to do more of that because it allows kids to get exposure to a manufacturing environment while they’re 16 and 17. Obviously we want kids to be safe, but let’s give them an opportunity to see what it’s all about. That then will translate to having their parents understand what it’s all about and will help us get rid of some of the stigma. I also think we have to connect the dots with our high school counselors. We don’t have enough high school counselors, but we also don’t have enough of them who are familiar with the manufacturing setting, so they can’t advise kids on what it looks like. We’re still on this traditional path of telling kids they have to go to a four-year school, and part of that is we’ve got counselors who have more experience with liberal arts than they do with the hands-on trades. David Tomassoni: I attended a bonding tour once at one of the technical colleges in western Minnesota, and we were touring the diesel mechanic program. I asked the instructor how many kids he had, and he said he had 200. And I asked, “Are they all going to get jobs?” He said, “If I had 400, they could all get jobs.” And so, it’s one of those kinds of things that maybe it’s incumbent on the industries themselves to let kids know what’s available and out there.

“My bias is always toward programs like GAP because it has a proven outcome, and they’re targeted.” – Rep. Barb Haley

What’s your assessment of the state of manufacturing in your districts? Gene Pelowski: We’ve seen an evolution of manufacturing. I have not had any closures; I’ve had the opposite happen. I’ve had more things opening. But the one constant we always have is that we need skilled employees. So, we’re on the uptick here. We’ve got a whole slew of graduating seniors every year from our high schools. We’ve got to give them a skillset so they can be employable at 18 and go into that workforce. Barb Haley: In Red Wing we often talk about Winona because Gene and I share the same Minnesota State College Southeast, which has Winona and Red Wing campuses. So, we’re jealous of Winona because they’re a number of years ahead of us. For a time, some of our manufacturing skills training programs moved from the Red Wing campus to the Winona campus. And that was hugely disappointing to our community. So, we’ve been fighting our way back to get some attention from the system. Our folks here have done a really great job of that. Our manufacturers have told us that they have people who they want to up-skill and re-skill — and they’re willing to hire people without any previous experience and do the training. But traveling to a Minnesota State System in Winona

or up to Eagan or St. Paul is too far. So, we need the programs right here in Red Wing. Thankfully, we’re a community that does a really good job of bringing people together to solve a problem. We’ve been successful. Here at Southeast Red Wing, we’ve received a couple of jobs skills training grants, and some National Science Foundation grants. We’re launching a new mechatronics program. You have to have the training local in order for it to benefit a manufacturer. That new mechatronics program is really going to help our local manufacturers. What are your top priorities for the legislative session? Barb Haley: We cannot increase taxes on small businesses in this COVID environment. And we still have to look at the business competitiveness and the environment in Minnesota. We have to keep energy costs low. We’ve got to look at our tax structure. I think it’s got to be revamped because, if we don’t keep the environment competitive to build

and grow a business here, it’s not going to matter if we don’t have the workers. Companies will migrate out, and that’s a particularly important statement in border communities like mine in Red Wing. Businesses can move right across the river to Hager City. And we hear that from our border communities. Gene Pelowski: We had a hearing Wednesday on broadband. It was all about the impact of COVID across the state and the inequities of having a system of broadband that isn’t fair. This is the highway of information of the 21st century. It has to be invested in across the state so that it’s fair, so that everyone has the same upload and download, and so that we’re going to make sure we’re going to keep it. The 21st century is going to demand that information highway be fair for everyone. And the thing I think we’re learning more and more about is that our electric co-ops are now using their infrastructure to carry broadband to southeastern Minnesota. We’ve started to do some things. We just haven’t finished them.

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The Equalizer

Balance of Power

Minnesota’s Growth Acceleration Program (GAP) helps employee-strapped smaller manufacturers afford the tools to sharpen their competitive edge.

By Tom Mason 36

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uccessful manufacturers regularly deploy outside experts to upgrade the efficiency of their operations. They do it to keep customers happy and keep up with their competitors. Those same manufacturers will also say the actual — and underappreciated — managerial artform in this process is knowing when to do it. Rapidly rising sales in boom times can subvert a management team’s instinct to allocate time for continuous improvement; that time could be used to fulfill orders quickly and accurately. Likewise, falling revenues in down economies can coerce them to rethink any expenditures not tied to an immediate return on investment. And then there are unprecedented

“In the end, GAP helps companies grow, achieve success, and generate even more tax dollars back to the state.” – Brandon Anderson, president of Von Ruden Manufacturing times like the current COVID economy, in which political and market uncertainties blur distinctions in the decisionmaking process. These factors are magnified for smaller manufacturers whose tight margins influence their thinking at all times. “It really is a balancing act,” says Doug von Arb, president of Blow Molded Specialties, which is a company that produces a wide variety of custom parts for OEMs, particularly over-the-road trucks and recreational all-terrain vehicles (ATVs). Von Arb says his 28 years in manufacturing taught him the long-term value of incorporating continuous improvement into his company’s culture. The managerial glue that connects his company’s operational efficiencies are the tools required by ISO 9001:2015, the widely-praised

international certification that imposes managerial process standards throughout companies. “We follow our ISO religiously,” he says, “and that forces us to keep pushing those continuous improvement projects, even if it means paying overtime to work on them. You’ve got to figure out how to do it.” He strives to make the time in his plant to pursue various continuous improvement projects, no matter what the economy. Over recent years, Blow Molded Specialties has engaged Enterprise Minnesota to provide several initiatives designed to improve its overall efficiencies. That menu includes: • Helping companies plot out and implement three-to-five-year plans for strategic growth. • Using ongoing lean manufacturing principles to build a culture of continuous improvement that enables employees at all levels to produce efficient, agile operations that reduce time, motion, material and energy wastes. • Upgrading internal cultures to help manufacturers develop talent and leadership strategies that attract, engage, invest in and retain their workforce. • Implementing efficient management systems by achieving an ISO designation — the internationally recognized standard of quality management that provides a technical framework for aligning a company’s business strategy with day-to-day operations. Von Arb has been able to afford the cost of these initiatives in part because of the Growth Acceleration Program (GAP), an incentive-based state-government program in Minnesota that buys down the cost of improving productivity for smaller manufacturers. GAP funding allows companies like Blow Molding, which employs 250 or fewer full-time people, to obtain up to a 50% rebate for services the company receives. Cash must be used to cover the rest. Companies must use GAP funds to help offset the costs of business services and products provided by Enterprise SPRING 2021 ENTERPRISE MINNESOTA /

Minnesota that will enhance operational efficiency. They may not use GAP funds for financing, overhead costs, construction, renovation equipment, or computer hardware. Von Arb acknowledges GAP eases the transition between boom-and-bust economies, but that doesn’t mean it’s an easy balance. At its pre-COVID peak, his Foley-based company employed about 150 people in its 100,000-square-foot plant.

“GAP enables targeted companies to receive highly valued service at prices they otherwise might not be able to afford.” – Bob Kill, president and CEO of Enterprise Minnesota But like a lot of his fellow manufacturers, von Arb saw COVID take a bite out of demand for his company’s products. As plants in the U.S. and Mexico shut down earlier this year, so did their need for parts to maintain their trucks. “Orders just went away,” he says, adding that market uncertainty worsened the challenge. “We had no information about when they might return.” Von Arb devoted time to work on continuous improvement and leaning up his operation, but deeper cuts inhibited those efforts. The downturn eventually forced him to cut his workforce to just under 100 employees, “and then we lost those extra resources to be working on those things.”

WORKFORCE EFFICIENCIES

Von Arb is particularly grateful for how leadership development enabled his company to endure the downturn and then adapt quickly when sales orders came roaring back last year. Despite downsizing, he kept all people who had been in leadership development without pay cuts. The company ran with record efficiencies during the downturn, he says, partly due to that instruction. “That training definitely helped us get through those difficult times. It’s hard to break even when things are down, but when you can perform to that level, you can still survive.” 38

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SPRING 2021

Sales have roared back, von Arb says, with the company currently using weekend shifts to keep up with demand. “Those leadership resources really gave us the ability to expand back quickly,” he adds. Von Arb’s current challenge, which he shares with most manufacturers, is to find and recruit enough hourly employees to maintain production. He predicts he’ll need to increase his workforce by 50% by the end of the year. All manufacturers, like von Arb, recognize that while COVID captures much current media attention, the shrinking workforce persists as the primary impediment to future growth, particularly in Greater Minnesota. That’s one reason why the leadership program at Enterprise Minnesota has earned increasing popularity among manufacturers. “If you are struggling to find new folks, the first place to look is to determine how you can do more with the people you have,” says Michele Neale, a business growth consultant who oversees Enterprise Minnesota’s leadership curriculum, alongside fellow expert Abbey Hellickson. Neale says many manufacturing plants are managed by people who have grown up into leadership without really knowing what to do. Enterprise Minnesota’s Leading for Results program helps them identify skillsets and competencies that they may or may not have and then fill their gaps. You don’t know what you don’t know until somebody shares it with you. Manufacturers can select from two leadership options to upgrade the capabilities of their companies’ internal managers. Enterprise Minnesota’s Leadership Essentials program helps managers and potential managers influence the culture and performance of their companies. They learn to improve team dynamics by understanding behaviors, developing the skills of a change leader, and creating a culture of accountability and engagement. They also learn how to demonstrate the qualities and traits of a leader; evaluate the impact of individual behaviors on team dynamics; exhibit versatility in working with others; display the behaviors of change leaders; develop a culture of accountability; and promote employee engagement. The Leading for Results program

targets employees already serving in management roles. It consists of a series of five instruction classes for existing leaders. They include: understanding their role and impacting turnover and culture and productivity; cultivating the art of influence through coaching; developing effective teams and managing conflict; measuring accountability through performance development; and providing an introduction to the concept of creative problem solving. Leadership initiatives, Neale says, tangibly contribute to a company’s ability to retain valued employees in the increasingly competitive market. “At the very least, employees say, ‘When you show that you’re investing in me, I will invest back in you.’” Employees who see how their company is willing to invest in their own progress will be far more likely to pay the company back through continued loyalty, “typically tenfold,” Neale says. The management team at Duluth-based Clearwater Composites has used GAP to streamline the company’s management capabilities. Clearwater designs and

An analysis of GAP’s effectiveness required by the legislature reveals that the program has been remarkably effective. Since the legislature first funded it a dozen years ago, GAP has helped 427 different manufacturers create or retain 10,040 jobs while generating a $30-to-$1 average return on investment. manufactures carbon fiber composites and parts for OEM customers ranging from consumer products and sporting goods to medical and aerospace. Despite a recent COVID-related downturn in sales, the company has consistently posted solid growth, today employing 30 people. Much of the considerable success derives from the self-aware confidence of

Jeff Engbrecht, the company’s founder. Engbrecht says he knew as early as high school that he wanted a career in fiber composites and realized soon thereafter that he wanted to start his own entrepreneurial enterprise. But he also knew that he wanted to leave the responsibilities of managing employees to someone else. He says the same traits of the Entrepreneurial Operating System (EOS) model that made him a “visionary” work less well when managing people. “We expect to grow in the future. But our biggest growing pain is more related to growing the team and finding good people,” Engbrecht says, adding that he’s in the process of hiring a general manager to take on traditional “people” issues — “things that, frankly, I’m not good at. I’m good at solving problems and being creative and innovative.” The availability of GAP, he says, “definitely convinced us to do it. Without it, it would have been hard to justify the investment, both in terms of dollars and time.” Twelve Clearwater employees attended eight sessions of two to three hours each, including Leadership Essentials, one of Enterprise Minnesota’s most popular offerings. In the end, investment was well worth it, Engbrecht says, particularly the session about social styles, which “was definitely an eye opener.” Likewise, Karen Quanrud at Tuohy Furniture has used GAP to send nine employees to Leadership Essentials, which she considers a game-changer in terms of employee attitudes. Tuohy’s 90plus employees manufacture wood office furniture in their Chatfield-based facility. She says employees who return from the Leadership Essentials program “see a bigger picture. They are open to see beyond their own jobs.” Quanrud sent her employees to multisession programs away from their plant, where it didn’t take too many people off the floor at a given time and allowed them to network with people from other companies. She makes a point of taking Leadership Essentials graduates to job fairs, where she says they do an exemplary job of representing growth opportunities at the company. “The Tuohy Furniture employees have been a fun group to work with,” says Hellickson. The company has created a momentum of developing and building the skillsets of their leaders at multiple

levels, from existing leaders to current managers. “We were able to elevate their thought process about leadership. They have latched on to projects that they have done collaboratively inside. The three groups who have attended separately have created a connection in-house.”

MOVING FORWARD

“GAP enables targeted companies to receive highly valued service at prices they otherwise might not be able to afford,” says Bob Kill, president and CEO of Enterprise Minnesota. “At the same time, part of its effectiveness is that recipients are still required to put skin in the game.” Brandon Anderson, president of Von Ruden Manufacturing, agrees. He has used GAP funding to improve processes within his company and happily promotes

“It’s easy to see why both parties in the Minnesota Legislature view GAP as a government investment that works.” – Lynn Shelton, vice president of marketing at Enterprise Minnesota the merits of the program. “I’m a true believer,” he says. But GAP is more of an investment, he adds. “It’s not like a COVID grant where the government says, ‘Here’s $10,000.’ We don’t really care what you spend it on,” he says. GAP funds help manufacturers invest in initiatives that help them improve, “the kind we know we should do, to either secure current business or grow for the future but aren’t sure we can afford.” In the end, Anderson says, GAP helps companies grow, achieve success and generate even more tax dollars to the state. An audit of GAP’s effectiveness required by the legislature reveals that the program has been remarkably effective. Since the legislature first funded it a dozen years ago, GAP has helped 427 different manufacturers create or retain 10,040 jobs while generating a $30-to-$1 average return on investment.

Anderson also credits Enterprise Minnesota with “stepping up” to take full ownership of managing the effort. “They qualify these projects, document them and report to the legislature on the return on investment. Did it increase sales? Did it increase hiring? Did it increase wages? All that creates more taxable income for the state.” Anderson says he also values GAP’s emphasis on helping small manufacturers. “People in Minnesota realize what life would be like if there were no small businesses around,” he says. “It’s easy to give grant money to a large corporation because the impact is very quick and easy to see. One transaction to one company might save 150 jobs, which looks really good on paper. But cumulatively, there’s still more employment labor in these smaller manufacturers.” Lynn Shelton, vice president of marketing at Enterprise Minnesota, says that GAP represents an investment in communities. “Manufacturers are job-creating engines that sustain their local economies by providing a sturdy base for prosperity across Minnesota,” she says. The legislature is currently considering expanding GAP as manufacturers try to navigate the particular political and economic turbulence created by COVID-19. The program’s initial funding of $800,000 was cut to $400,000 by the 2019 legislature. Advocates are hoping for another increase as many manufacturers still struggle to cope with the double whammy of COVID and the still looming challenge of finding workers. “More and more policymakers understand that manufacturers are essential to create and retain high quality jobs in their local communities,” Shelton says, adding that the number of people employed by manufacturers has grown 9% since 2010, today comprising 13% of all the state’s private-sector jobs. And manufacturing jobs pay well. The average annual wage for a manufacturing job is more than $63,000 — 15% higher than the average wage for all industries. On top of that, each manufacturing job supports 1.9 jobs in other sectors of the economy, she adds. “That means that fully one-third of Minnesota jobs are in, or supported by, manufacturing. “It’s easy to see why both parties in the Minnesota legislature view GAP as a government investment that works.” SPRING 2021 ENTERPRISE MINNESOTA /

Final Word

Automation is a Win-Win An MIT study supports what manufacturing executives have known for years: Automation won’t be a job killer.

f you asked 10 manufacturing employees what they thought of automation or AI, chances are nine of them wouldn’t have good things to say. But new research from the Massachusetts Institute of Technology suggests the fears that automation will steal jobs are unfounded, just as most manufacturing executives already know. That fear might be understandable. For the past couple of decades, these employees have been bombarded by media — and some politicians — that automation is coming and, when it does, millions of mortgagepaying workers will be replaced by robots. We know automation remains on the minds of Minnesota manufacturers, especially during the COVID pandemic. In our most recent State of Manufacturing® survey, 25% of manufacturers polled said they were using automation more than they expected to at the beginning of the year; half of those said the increase was due to the pandemic. But the MIT study gives us all reason to sit back and ponder automation for a moment. Like most manufacturers, I conclude there will continue to be plenty of jobs, more jobs than there are workers, in fact. Automation will help companies cope with worker shortages. From the report: “No compelling historical or contemporary evidence suggests that technological advances are driving us toward a jobless future. On the contrary, we anticipate that in the next two decades, industrialized countries will have more job openings than workers to fill them, and that robotics and automation will play an increasingly crucial role in closing these gaps.” Which isn’t to say automation and robotics will be a non-factor. Advancements and developments in automation and technology will be crucial to a thriving manufacturing economy. They’ll not only improve bottom lines for manufacturers but also push those same manufacturers to develop new jobs that require new skills. If a manufacturer chooses to use robotics 40

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Lynn Shelton is vice president of marketing at Enterprise Minnesota.

in some part of its operation, that shift likely will create new jobs, not eliminate them. It’s not an easy process, but it’s a necessary one. “These technologies, in concert with economic incentives, policy choices, and institutional forces, will alter the set of jobs available and the skills they demand,” the report says. “This process is both challenging and indispensable. Inventing new ways of accomplishing existing work, new business models, and entirely new industries drives rising productivity and new jobs. Such innovations bring new occupations to life, generate demands for new forms of expertise, and create opportunities for rewarding work.” Our own consultants concur. But while they champion automation’s promise of cost and time savings, they also caution that, when implemented without a wellthought-out plan, it could become another source of waste. Enterprise Minnesota Business Growth Consultant Greg Langfield talks about automation as an evolution. It starts with processes being carried out manually,

then evolves to the optimization of those processes. From there, he says, the evolution moves to transitional automation, where the focus is enhancing employee productivity through low-cost modifications or equipment purchases that can keep them working when the machine they’re monitoring doesn’t need direct engagement. The final phase is full-blown automation with use of robots or vision systems. Implementing such systems can be a cost and time saver, Langfield says, but only if manufacturers have taken steps to maximize productivity prior to any implementation. If they don’t, they could be baking waste into their processes. Most of today’s production jobs didn’t exist in 1940. That same evolution will continue as America works to solve critical problems facing the world including, the MIT report says, poverty, malnutrition and disease. Savvy manufacturers will take these conclusions as a signal to proceed and invest wisely in the kind of automation that not only helps them grow profitably but also positions and trains workers to grow with them.

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