Enterprise Minnesota Magazine - Summer 2020 by Enterprise Minnesota

‘EYCATCHING’

Next Innovations hopes to exploit increasing demand for American-made products

Helping Manufacturing Enterprises Grow Profitably SUMMER 2020

Special Report

Get Ready toRumble Manufacturers look to ISO to prepare for the post-COVID economy

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Enterprise Minnesota FY 2019 Manufacturing Workshops and Business Events

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9001:2015

SUMMER 2020

GET READY TO RUMBLE Manufacturers look to ISO to prepare for the post-COVID economy

Upheaval An early 2020 State of Manufacturing® survey provides a fascinating look at manufacturers’ attitudes both before and after the COVID national emergency declaration

Don’t Get Siloed

‘EyCatching’ Growth

Maintaining Purpose

Next Innovations hopes to exploit increasing demand for American-made products

Productive Alternatives and state caregivers plan return after coronavirus closures

2 Doubling Down on ISO Manufacturers use the system’s disciplines to prepare for the eventual comeback of a strong and predictable marketplace

A century-old Lake Lillian company succeeds by continually diversifying its range of products to meet the demands of its customers

Printing Success

Show, Don’t Tell

Making Lemonade

An American-style management culture in the Minnesota office of an Italian manufacturer has sent sales soaring

A community museum gives students a hands-on chance to experience manufacturing

Our postponed State of Manufacturing® data will explain much about how manufacturers responded to the COVID economy

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. SUMMER 2020 ENTERPRISE MINNESOTA /

Doubling Down on ISO Manufacturers use the system’s disciplines to prepare for the eventual comeback of a strong and predictable marketplace

hose of us who have endured a snowy winter living somewhere other than Minnesota come to appreciate the smooth precision with which our teams of snowplow operators can systematically clean our streets. They work in short order, no matter whether the snow accumulation is one inch or 20 inches. Nothing rattles them. They have their action plans as they have been through everything. We should think of those snowplow operators when we consider how Minnesota’s manufacturers are reacting to the peculiar marketplace turbulence they’ve had to confront as a result of the government’s response to COVID-19. I talk to numerous manufacturers every day. In some ways, their response has been a discreet wonder to behold. As they did when the Great Recession of 2009 unexpectedly plummeted their companies into all sorts of economic chaos, most of them survey the terrain with calm resolve. We’ve been through this all before, they say (well, not exactly this); they look for opportunities to strengthen their operations to help them compete in the inevitable emergence of a stronger, more predictable economy. Manufacturers that embrace ISO as a business management system know their entire organization will benefit from the effort. They know their companies will be well run through specific and measurable objectives. This preparation increasingly revolves around the management efficiencies required by their ISO certifications. The in-house professionals at Enterprise Minnesota help a lot of companies achieve and implement ISO, including—perhaps especially including— 2

/ ENTERPRISE MINNESOTA SUMMER 2020

audits. We’re so pleased with the way our clients have integrated the assets of ISO into their companies that we have dedicated most of this issue of Enterprise Minnesota magazine to tell their stories. Our clients regularly testify that the benefits of ISO help them improve the efficiency of their operations, which results in reduced costs, quicker product turnaround and an overall competitive advantage. Improved communications across the board lead to happier customers and smoother relationships along the supply chain. And this does not mention how improved communications enable employees to see how their efforts tangibly contribute to a better company. They appreciate their role and maybe see a clearer career path within the company along the way. ISO enables all of its participants to feel a better sense of teamwork and an enhanced loyalty to the organization. We’re especially proud of the team of ISO experts here at Enterprise Minnesota. We’ve never been better. They’ll tell you that their expertise deepens with every ISO assignment. They might say, too, that their work with Minnesota’s manufacturers has helped them adopt that same sense of calm, big-picture resolution that sidesteps blips along the way and focuses on the long-term big picture. Just don’t ask them to plow your driveway. Bob Kill is president and CEO of Enterprise Minnesota.

Helping Manufacturing Enterprises Grow Profitably

Publisher Lynn K. Shelton 9001:2015

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Creative Director Scott Buchschacher Copy Editor Catrin Wigfall Writers Brian Arola Grace Brandt Sue Bruns R.C. Drews Maria Surma Manka Robb Murray

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MANAGEMENT

Printing Success O’Hearn instilled an American-style management culture in the Minnesota office of an Italian manufacturer—and sales soared

n 2013, Gary O’Hearn identified what he thought was a perfect employment opportunity with the Brooklyn Park office of Zanasi USA. Founded by Gianni Zanasi in Modena, Italy in 1978, the commercial inkjet printer manufacturer moved overseas to Modena’s sister city St. Paul in 1995 to take advantage of the larger American marketplace. But without an Americaspecific business plan and corporate structure, the company’s sales floundered. Its search for new leadership caught the attention of 60-year-old O’Hearn, who had been making a living as a management consultant but was looking for a new challenge. With abundant managerial experience at companies like Hughes Aircraft/Raytheon and General Dynamics, O’Hearn saw the opening for a branch manager as the “perfect opportunity” to take the reins from an absentee owner who knew he had a good product and business model but needed someone to take charge. The needs of Zanasi USA meshed well with O’Hearn’s personal goals. Zanasi had been trying to direct the company remotely from Italy but without a firm understanding of American business practices. Although he had no experience with industrial inkjet printing, O’Hearn knew Zanasi USA would benefit from “an experienced leader who could assess the needs of the company, strategize the future, and implement the changes necessary to be financially successful. I had previous experience in business turnaround situations. It was now my time.”

Gary O’Hearn

SUMMER 2020 ENTERPRISE MINNESOTA /

THE DNA OF ZANASI— LISTENING TO CUSTOMERS

Zanasi founded his company after ceramic tilemakers in Italy approached him about using inkjet technology to mark their tiles in unique ways. Before long, Zanasi’s inkjet printers were being used for purposes way beyond tiles—logos, bar codes, sell-by dates and more were printed onto products ranging from packaged food to lumber. As businesses everywhere have transitioned to this automated and more efficient way of labeling their products, Zanasi USA is one company among many that manufactures and markets industrial printers to a huge global market. After opening in Minnesota, it opened additional branch offices in China and Spain and now sells printers in some 60 countries on five continents.

WHAT THESE PRINTERS DO

Inkjet industrial printers can print on virtually any surface. Different technologies allow for specialized print size, speed, and ink type. Generally, the product arrives at the printer on a conveyer system that then triggers an electronic eye to activate the printer. Invoice information, barcodes, logos, QR codes and more are easily printed on boxes and packages; but more diverse products like hoses, pipes, pallets, canned foods—even eggs—and bags of cement can be marked with inkjet print. Zanasi printer systems range in price from $1,800 to $20,000. The machines themselves are fairly small and are shipped via UPS, FedEx, and LTL 3PL (Less Than Truckload— Third Party Logistics). O’Hearn says part of his mission was to infuse Zanasi USA with a culture aimed at American sales. “The company previously didn’t understand the marketing culture,” he says. “They didn’t understand the employment culture. They didn’t understand the employment laws.” His team conducted a SWOT (strengths, weaknesses, opportunities, and threats) analysis, updated procedures and processes, implemented new personnel changes, and instituted a command focus on growth. Within a year of O’Hearn coming aboard, Zanasi, still the company’s sole owner, named O’Hearn chairman of the board, removing himself from the position. Jason Spangler, the company’s most senior employee, was named board secretary. Today O’Hearn and Spangler, as president and VP of operations, lead the company along with Todd Fox, VP of sales. They communicate regularly with the 4

/ ENTERPRISE MINNESOTA SUMMER 2020

After opening in Minnesota, Zanasi USA opened additional branch offices in China and Spain and now sells printers in some 60 countries on five continents.

home office in Italy about marketing and technology, but Zanasi has allowed them to operate the business independently. It has been repaid by seven years of continuous growth. In 2014, O’Hearn relocated the company to Maple Grove where he continues to operate his $3 million operation with two technicians, three sales people, a customer service agent and an office manager—all of whom are cross-trained to meet customers’ needs. Third-party partners represent half of the company’s business. Revenue streams include systems, inks, parts, repair, maintenance contracts, and installation and design services. While larger competitors are bringing prices down on inkjet printers, Spangler says, “Customers aren’t really aware that while the price tag may be down on the front end, it is made up on service. We’ve always focused on service. We answer when someone calls, we offer multiple solutions. Larger organizations can promote more, but as a smaller company, our products are designed differently: simple, and easy to service.” O’Hearn emphasizes customer service. “It is very rare that a call is not answered by a live person during normal business hours. Over 90 percent of the time, repairs are received, evaluated, and quoted to the customer within 48 hours.” Spangler adds that 92 percent of the calls received for tech support are solved over the phone. Joel Scalzo, a business development consultant at Enterprise Minnesota, has worked with Zanasi USA’s leadership team. He recognizes its need to grow revenue and to penetrate the market, but he sees countless applications for the printers in just about every area of manufacturing. Scalzo is impressed by the company’s strong focus on client satisfaction. Not only can the printers

help manufacturers identify and brand their products, but through integration, they help track a company’s critical data as well. “Lots of inkjet companies don’t like to get involved with integration,” Scalzo says. But for Zanasi USA, integration options are just another part of customer service. “From a supervisor’s PC,” O’Hearn says, “he or she can send information to a printer, and once the product is printed, data is loaded to a main computer where enterprise resource planning (ERP) software processes and sorts the data for inventory, record-keeping, ordering, and other applications.” Integrating the printer with ERP software makes data management and reporting more accurate and efficient. And the integration factor brings new customers to Zanasi USA. When companies decide to upgrade or change out their technology, Zanasi USA is attentive and responsive to their needs. O’Hearn says implementing new technology when upgrading is cost saving in the long term. “We identify the benefits as Total Cost of Ownership (TCO). Zanasi USA prides itself on having the lowest TCO in the industry. Every part on every system can be replaced. The competition’s modular systems require more expensive repair costs.” O’Hearn emphasizes that Zanasi USA’s equipment, all manufactured in Italy, “is designed and built with Italian ingenuity.” Think Ferrari. Think Maserati. Both of which also hail from Modena, Italy. After seven years with the company, O’Hearn’s mantra about business and marketing applies both to his personal goal of finding his “perfect opportunity” and the continued growth of Zanasi USA. “Our value is that we bridge the gap between ‘I wish we could’ and ‘Look what we did!’” —Sue Bruns

NATIONAL EXPOSURE

Kill Shares Survey Enterprise Minnesota’s CEO shares State of Manufacturing® data before national audience of state legislators

ob Kill, president and CEO of Enterprise Minnesota, recently appeared on a panel of experts during a national webinar designed to help state policymakers understand how manufacturers are coping with the pressures of the COVID-19 economy. The event, Manufacturing Our Way to Economic Recovery, occurred on June 10. It was presented by the National Conference of State Legislatures (NCSL) which represents state legislatures in the U.S. NCSL’s mission, it says, “is to advance the effectiveness, independence and integrity of legislatures and to foster interstate cooperation and facilitate the exchange of information among legislatures.” Event hosts designed the Zoom conference to help state lawmakers see the government-imposed COVID-19 constraints through the eyes of manufacturers. According to the NCSL: “Restrictions and shutdowns caused by the COVID-19 pandemic have created a major shock in American manufacturing supply chains and production lines. As states begin to reopen, federal and state governments are working to support manufacturers as they return to full production, which might include pivoting products to combat the pandemic.” Other participants included: § Rob Ivester, deputy director, Hollings Manufacturing Extension Partnership, National Institute of Standards and Technology § Scott Paul, president, Alliance for American Manufacturing § Mark Troppe, senior research fellow, Center for Regional Economic Competitiveness Kill used the most recent version of Enterprise Minnesota’s State of Manufacturing® (SOM) survey to illustrate the reactions of Minnesota’s manufacturers. The SOM has been a significant research project, created and managed by Enter-

prise Minnesota, that gauges how manufacturers view their current challenges and opportunities. One of America’s top pollsters interviews 400-plus manufacturing executives and supplements that research with at least 13 focus groups held throughout the state. Kill said the data illustrated that most manufacturers tend to stay calm during economic upheavals and even use the challenges to seek out opportunities to come back stronger. The COVID economy is no exception, he added. Kill explained the unique aspect of this year’s survey is that COVID-19 forced Enterprise Minnesota to postpone the June public release of its annual SOM publication. But by the time he instructed his organization to pull back, it was already too late to cancel the survey itself. In fact, pollster Rob Autry had already completed the research. Because of that, Kill was able to share how manufacturers reacted before and after the national emergency declaration. “This experience, and others like it, is a tribute to how Bob has carved out a national reputation for his leadership and the accomplishments at Enterprise Minnesota,” says Lynn Shelton, vice president of marketing. “But it also is a nod to the national reputation that has been established by our SOM survey project.” She said Kill typically makes as many as 30 public appearances related to the data. He regularly testifies before the Minnesota legislature and has even been called to testify before Congress. “We are all proud that the SOM has become such an essential part of discussions among local policymakers and community leaders, educators, media, and manufacturers themselves,” Shelton says. NCSL recorded the event for those who were unable to attend the live meeting. You can find it at youtu.be/8TWDiWl_b9s. SUMMER 2020 ENTERPRISE MINNESOTA /

The entire process took about nine months, evenly divided between auditing and running the system to ensure everything was working smoothly.

ISO

Showing Their Work Engage Technologies uses ISO certification to show that many of its processes were already in place

or Brooklyn Park-based Engage Technologies Corporation, working toward an ISO 9001:2015 certification was more about documenting the work that had already been done before the process even began. Engage is the parent company of four others—Squid Ink, Eastey, American Film & Machinery (AFM) and Cogent Technologies. Their products range from coding and marking systems to heavy-duty shrink-packaging equipment, along with automated case sealing systems and infrared drying systems. “The ISO certification was simply an extension of our process of continually improving all aspects of our business,” says Engage Technologies CEO David Mylrea, who added that the corporation’s goal has always been continuous improvement. “In order for us to attract business operations from larger, multi-national companies, and to be able to pass their supply chain audits and their manufacturing capacity requirements, we thought the ISO certificate

6 / ENTERPRISE MINNESOTA SUMMER 2020

would be helpful.” The two main forces behind the certification process were Dan Pint, vice president of operations, and Manufacturing Manager Don Palan. Both brought ISO experience from other employers, and had already integrated some of the practices into Engage Technologies when they arrived. In fact, the company’s quality management system was based on an ISO system. “We were a long way down the certification path before we decided to actually get it,” Pint says. “It was just a matter of cleaning things up.” Pint, however, hadn’t been involved in working toward an ISO certification for 25 years, which is why he turned to Enterprise Minnesota Business Growth Consultant David Ahlquist for help. “What we try to do is create a process that’s tailored to a company’s needs and is going to save the company money in the long run and help the business grow,” Ahlquist says.

The entire process took about nine months, evenly divided between auditing and running the system to ensure everything was working smoothly. Despite the COVID-19 crisis complicating the end of the certification process by preventing in-person meetings, the final audit was successfully completed virtually. “Engage Technologies had an employee videotape the facility so that the auditor could see everything that goes on in the facility and ask about orders,” Ahlquist says. “We had to get creative about the online meetings and getting all the information together so people could see what we were doing.” But Engage Technologies passed the final audit with “flying colors,” continues

MANUFACTURING IS VITAL TO MINNESOTA’S ECONOMY

“We were a long way down the certification path before we decided to actually get it. It was just a matter of cleaning things up.” –Dan Pint, vice president of operations Ahlquist, and even addressed the minor nonconformities that were found in record time. The company was officially ISO certified in early May. While Mylrea says that receiving the actual ISO certificate was “wonderful,” the company has been behaving as though it was ISO certified ever since it filed its application at the start of the process. “We’ve had senior management meetings and had been updating and doing our documents as if we were an ISO certified company for nine months.” Because of this, Mylrea was easily able to identify how the company’s processes have already improved. “The efficiency of operations has improved, our quality has improved, and our entire management system is much better [and] much sounder today than it was when we started the process,” he says. “Operationally, I think we were in a really, really good position to start with, but a lot of this ISO certification has made it easier to pitch us as an enterprise to large multinational companies that we would like to attract as customers. It is that seal of approval. That’s what we were after.”

Our programs and services here at the Minnesota Department of Employment and Economic Development (DEED) can help you during these challenging times.

Look to DEED for: ● Business financing programs

Look to CareerForce for: ● Virtual hiring events and online resources

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COVID-19 business information

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Job posting and hiring guidance

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Safely returning to work guidelines

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Workforce strategy assistance and more

Visit MN.gov/deed/business

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We see our neighbors going above and beyond for each other. Let's see what we can do together. There’s nothing ordinary about the challenges we’re facing right now. But there’s nothing ordinary about the places we call home, or the people we share them with. Our bankers are ready to work with you on strategies and solutions that make sense for you and your business. Because going above and beyond is something we do for our customers every day. bremer.com

—Grace Brandt SUMMER 2020 ENTERPRISE MINNESOTA /

The Hunt Continues (or Should) Expert: COVID-19 is no excuse to end your search for quality employees

innesota’s post-COVID economic comeback will likely involve a whole new set of employee-related trials— even though no one can yet tell us what they will be. Most agree that the search for high-quality employees will reappear quickly. We asked Alissa Henriksen, principal and owner of Grey Search + Strategy, to provide her insights about what manufacturers should be thinking about. Here is her advice.

1. Re-evaluate your job descriptions. We don’t revisit them often enough. This is your first impression with prospective employees. Take time to rewrite and redesign your job descriptions so they provide a clearly-defined overview of the position and your culture—and make sure it is eye-catching. 2. Add an employer branding page to your website. More than 63 percent

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Alissa Henriksen

of applicants will go to your website to research YOU. Make sure you help them fall more in love with your company and how it supports your employees. 3. Focus on the roles you need to bring on and don’t give up on the goal of adding that talent. Hiring should continue to take time because you want to bring on the right people who fit your culture—and this market is the ideal time to look for talent. But it doesn’t mean you have to bring them on in two weeks. “This” market

means that you can interview and have access to more people, which will help you make a more confident decision in the hire you want and need for your role. You can also build a pretty solid pipeline for when more talent is available. Never quit searching for good talent. Giving up will put you several steps behind when things turn around. 4. Be transparent with your current employees and with potential new hires about the current situation. They deserve to know what’s going on. Bring comfort to people by providing updates, even if the update is that while you aren’t sure what the next week will bring, you are doing everything you can to keep the focus on your customers

Hiring should continue to take time because you want to bring on the right people who fit your culture—and this market is the ideal time to look for talent. and your employees. The same goes for people you are interviewing. Let them know you have every intention to hire, but the process has been slowed down. Keep your top talent engaged and up to date by setting up a time to connect every two weeks. This will also leave them feeling good about how you communicate and handle yourself. 5. Onboarding can still happen! You absolutely can onboard new hires in a virtual setting. Set up virtual meetings and provide processes, online manuals, systems, etc. to talent to learn. One of the things we are creating at Grey Search + Strategy is a virtual onboarding process for our clients and community to download and use when they bring new hires on in this environment. It might take a few extra steps, but it’s something that will work out and will probably create closer relationships and clearer communication.

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WORKFORCE

Show, Don’t Tell A community museum gives students a hands-on chance to experience manufacturing

he Children’s Museum of Southern Minnesota gives young children a chance to explore a rock quarry, operate a movable crane, handle woodworking tools and design their own circuit boards out of Legos. These are just a few of the fun, educational, and hands-on opportunities that expose kids to the world of manufacturing. Opened in 2006, the Mankato-based museum helps school-age children also explore agriculture, the arts, history, and the region’s culture. Intending to “ignite the natural curiosity of every child through play in a dynamic, awe-inspiring environment,” the museum teaches kids about the world around them. It receives around 100,000 visitors every year and is staffed by 40 fulland part-time employees. Manufacturing is a core emphasis of the museum, according to Sue Larsen, director of community outreach and impact. She says this emphasis is due in part to a Minnesota Legacy Fund grant that required the museum to promote the history and development of its region—in which manufactur-

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ing has played a significant role over the past 200 years. “Manufacturing is a key part of our community’s story,” Larsen says. “From the very beginning, [we] recognized its part in our history and that is why we feature it so prominently at the museum.” Larsen points to “Cecil’s Imagineering Loft,” named after Cecil Jones, a prominent local entrepreneur and inventor. Students use the loft to explore building, cutting, designing, painting, molding and more, and are also challenged to create their own inventions using copies of Jones’ original work notebooks. “Not only do we offer manufacturing experiences, but we share a little bit about Cecil Jones and the importance he played in our community,” Larsen says. About 8,000 school-age visitors come to the museum every year for guided field trips, according to Deb Johnson, senior director of museum experiences and environments. Second graders participate in a “matter in motion” field trip at the muse-

um’s quarry, which features stones quarried only a mile up the road, while third graders participate in an engineering challenge. “They’re using an engineering notebook from a real inventor to experience an engineering process, and it’s really about teamwork,” Johnson says. “Sometimes, when you’re a third-grader, it doesn’t always work, but failure is an important part of the process.” The museum also co-hosts a yearly twoday event called “Dig It!” with area partners in construction, utilities, landscaping and manufacturing sectors. The first day is an “education” day, which gives around 900

students from grades 8-12 the opportunity to talk to experts in the different represented fields, and a second day that is open to the public. Certified operators help children operate heavy machinery, participate in welding simulators, learn how an electric motor works and watch the construction of electrical circuits. All the while, other visitors learn about building sustainable communities and trade industry careers. The four-year-old Dig It! program evolved after the manufacturing and trades businesses in the area voiced a need for community involvement, Johnson says. “It was really the trades coming to us to say, ‘We’d love to provide the funding for you to do this event because we need

Students use a loft in the museum to explore building, cutting, designing, painting, molding and more, and are also challenged to create their own inventions using copies of a local pioneering inventor’s original work notebooks. to get information to high school students and their parents on alternatives to a fouryear college,’” she says. “A trade school or apprenticeship is an excellent way to get into a career.” Museum CEO Louise Dickmeyer says the hands-on experience Dig It! offers is crucial to help kids—no matter their age—learn more about the world around them and the opportunities they have for their own careers. She recalls a high school teacher sharing how the Dig It! event transformed a student’s outlook on his potential. “He sensed that he didn’t have what it took to get through school,” Dickmeyer recalls. “But after exploring a number of different construction initiatives, he went back to his teacher and said, ‘I’m going to do this. I’m going to be able to get through high school.’ It gave him a vision and a purpose and a reason to drive a little bit harder. It was such a testament to how powerful a day at Dig It! can be.” —Grace Brandt

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Pequot’s two high-end laser cutting machines are used to produce sheet metal components and are part of its fabrication department.

The turning department includes multi-tasking turning work centers along with Swiss-style machines.

TWI

Armed with a Plan Training Within Industry helps Pequot Tool & Manufacturing prepare to anticipate the unknown

n 1981, an industrious post-World War II Yugoslavian immigrant named Josef Goerges launched a manufacturing company from his garage in Pequot Lakes. Pequot Tool & Manufacturing (PTM) quickly outgrew its small space and relocated to nearby Jenkins. Now in 2020, PTM is a third-generation family business of 95,000 square feet and 180 staff. And amid a global pandemic, the company is prospering. The medical industry and others have utilized Pequot Tool’s CNC machining, turning, punching, and forming. But the company’s secret weapon is Training Within Industry (TWI)—a manufacturing strategy that dates back to World War II, when U.S. manufacturers scrambled to fill vacancies left by soldiers called to war. Circumstances then, as now, forced every domestic industry to adapt to survive. Enterprise Minnesota has for years offered modernized TWI training. Its fourway approach famously combines: • Job Instruction (JI – training leaders to

12 / ENTERPRISE MINNESOTA SUMMER 2020

be teachers) • Job Methods (JM – identifying and implementing more efficient processes) • Job Relations (JR – fostering healthy, respectful relationships between leadership and staff) • Job Safety (JS – keeping the workplace safe for all) As a long-time TWI advocate, Pequot Tool represents living proof of the reliability of this war-tested, decades-old system.

PRODUCTION PLANNING

Paul Millard is PTM’s assistant manager of production planning. After 15 years with the company, he’s overseen the business from the manufacturing floor to scheduling and logistics and can’t remember a time before TWI. When the coronavirus pandemic began shuttering businesses in Minnesota, Pequot Tool remained open. Perhaps no one could have predicted this emergency, but Millard

and PTM were ready for an emergency. “Thanks to the incredible teams we have here, we’ve not only kept people working, but we’ve also been thriving,” Millard says. “We were able to get ahead of the issues we knew we’d face and become flexible with our staff and workload.” In a time of crisis, the training in job relations in particular has made the difference, he says. Like other TWI companies, Pequot

Like other TWI companies, Pequot Tool learned to be flexible with scheduling or work-from-home opportunities. Tool learned to be flexible with scheduling or work-from-home opportunities. Company managers took the time to understand the needs of team members as well as the company’s goals. Millard says this peoplefirst approach has kept morale high while plotting a path through the unforeseen.

A NEW ‘NORMAL’

Normal may never be the same, but for Pequot Tool & Manufacturing, the pandemic has proved an opportunity to challenge old conceptions and find new solutions. The future is as uncertain now as it was in March, but Millard’s optimism displays the value of having a plan before disaster strikes.

“‘Normal’ will all be relative,” he says. “We all know there is a chance things will never go back to how they were. I think we’ll learn from this in terms of how much we can get done while still allowing individuals to work flexible schedules, especially those in our office environments. The ability to work remotely and maintain productivity opens up opportunities we hadn’t realized before. TWI—specifically Job Relations—plays heavily into that. Ensure good one-on-one working relationships between individuals and leadership will do nothing but benefit us as we move toward a ‘new normal.’” In the end, Millard describes the TWI system as a flexible methodology of putting people first while focusing on best practices and safety. It’s a timely message, and it’s being tested under fire today as it was in the 1940s. “TWI is relevant for all industries, and I’d go one step further and say it’s relevant for everyone—period,” Millard remarks. “I use my Job Relations training in my day-to-day life with friends, family, and even my kids. Using factual information in times of stress is a life skill I wish everyone had. Overall, it’s working on getting out of an employee’s way and letting him or her do his or her best work in an environment where both the company and the individual can thrive.” —R.C. Drews

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ENTREPRENEURS

A Pandemic Success Story How Jim Beam bourbon helped change everything— but not in the way you might think

ost manufacturers have endured the uncertainties of the COVID-19 economy with at least some anxiety. For Danny and Shelly Boudreaux, owners of Cajun Custom Cookers, that anxiety lasted for three weeks. Now, business is booming. From its Moorhead headquarters, Cajun Custom Cookers produces ultra-high-end portable outdoor wood cookers, created especially to withstand the frigid low temperatures of Minnesota’s winters. You won’t find them at Home Depot, though. The price tag on a home model starts at about $5,500; a fully-loaded commercial unit can exceed $50,000. But owners Danny and Shelly say the cookers are well worth the price. The units will work at 40 below zero without requiring any outside insulation because the construction material is a quarter-inch thick. “We designed them to last forever,” Danny

/ ENTERPRISE MINNESOTA SUMMER 2020

says. “It won’t rot through; it’s not going to warp.” Each unit, he adds, is “jam-packed with features.” Unlike less robust units, the Cajun Cookers feature sealed doors that are replaceable and fully cleanable. Plus, the cookers have a patent that covers 25 unique features, according to the Boudreaux. On top of that, the company’s products are the world’s only NSF-certified woodfueled smoker. NSF, once referred to as the National Sanitation Foundation, certifies products for the foodservice industry similar to a UL (Underwriters Laboratories) rating. All equipment in a restaurant must be NSF certified, Danny says. The only restaurant-quality alternative to the Cajun Cookers is a gas-burning cooker, that uses wood chips or liquid smoke to produce the flavor. “We have a clean burn. Smoke doesn’t come out of the chimney once these things

preheat, and the food keeps the pink ring around it. You still taste the wood fire.” By early March, the Boudreaux’s fouryear-old company was outpacing even its most optimistic sales projections. As they disassembled their sales booth following a tradeshow at the nearby Fargodome, they recalled with amazement how just one California-based company had walked up to their booth and ordered four stainless commercial cookers at $32,000 each. The future looked more than promising. But then, a week later, President Donald Trump declared the nationwide COVID emergency that would ultimately grind much of the American economy to an immediate halt. In short order, all but a few customers canceled Cajun Cookers’ onceintimidating backlog of orders. “We had a few hundred thousand dollars’ worth of jobs lined up,” Danny says. “We lost them all in three days.” Dumbstruck, he and Shelly watched as “the world went crazy. Everything shut down. We didn’t know what was going to happen. “For three weeks, we didn’t do anything.” Just as quickly, and without notice, their representative from Jim Beam bourbon changed everything (but not in the way you might think). The Clermont, Kentucky dis-

tillery called on Danny to build a unit Jim Beam could use on the road to showcase its new barbecue sauce. It turned out the rep wanted several cookers. “That was the start of it,” Danny says. Within a few days, other orders started flying in.

Just one California-based company had walked up to their booth and ordered four stainless commercial cookers at $32,000 each. A high-end Minneapolis restaurant group—for whom Cajun Cookers had manufactured a massive food trailer just before the pandemic—called for more units, eventually six of them. The Bourbon Butcher, one of the group’s restaurants, had experienced wild success using a Cajun Cooker to provide pre-cooked packs of barbecued meats to its customers. A report on WCCO television showed that homebound customers were willing to endure hour-long waits to get their hands on the food. “The drive-through really makes a big difference” to the restaurant’s financial health, the owner said in the television

interview. Other high-end restaurants, without natural drive-through facilities, started to order additional units. They were all looking for ways to survive the government shutdown by providing takeout food and, later, to serving customers through outdoor seating. Cajun cookers, they figured, might offer a competitive edge. The company was back, in a big way.

Without any plans to manufacture others,

Danny designed the first cooker unit as a one-off to help Shelly launch a catering business in Moorhead. The young couple relocated from Albuquerque to Moorhead in 1998. They wanted to raise their family in a family-friendly environment and be nearer to relatives. Danny used his training in electrical engineering to launch a 15-year career in transport refrigeration; later, he worked in mobile electronics and then moved into home heating and ventilation systems for new home construction. He sums up his experience like this: “I have a strong background in manipulating air, whether it be through ventilation, HVAC, building sound enclosures, or controlling sound waves.” Once in Moorhead, Shelly, a chef, wanted to start doing catering, including mobile cooking. She lamented that no

Join us for Enterprise Minnesota’s 2020 State of Manufacturing survey release event.

3-7 pm Thursday, November 5 EARLE BROWN HERITAGE CENTER Carriage Hall 6155 Earle Brown Drive Brooklyn Center

SUMMER 2020 ENTERPRISE MINNESOTA /

equipment—anywhere—could withstand Minnesota’s extreme below-zero temperatures without compromising performance. “Everything was sub-par,” she says. “I’m a pitmaster chef. I wanted to do real barbecue here because nobody does.” So, Shelly asked her husband to build her a custom-made cooker. “No gas. No charcoal. I just wanted real wood.” Using his engineering background, Danny designed and built one for her. He devised a math equation that would produce a cooking space with optimal, natural convection, something that wouldn’t require any moving parts to create a consistently clean burn. Part of Danny’s design was personally motivated. While he enjoyed smoked and barbecued foods, his body wouldn’t tolerate it. Something in the creosote—the chemical that comes off the smoke— would make him sick. “It’s the same chemical that’s in your fireplace,” he says. “It’s pretty hazardous, and it’s a big carcinogen. There is a huge number of people

“We had a few hundred thousand dollars’ worth of jobs lined up. We lost them all in three days.” who have trouble eating barbecue because of it.” With his airflow software, Danny could see how big the firebox had to be, the chimney dimensions, and all the specifications to create a cooker with maximum natural convection. His creation maximized efficiency by burning all the fuel and limiting the smoke. Using a CNC plasma table at his current employer, he engineered and cut the parts himself and assembled the unit in the garage that also houses the luxury vehicles used for their limousine service. Shelly took the new portable equipment and launched a traveling smokehouse cookery that specialized in turkey legs made from a longtime family recipe. The only one of its kind in the region, the cookery quickly found popularity at local fairs, events and community celebrations. Until their company confronted its first flu-based foes. In 2015, the avian (bird) flu swept into Minnesota and decimated the production of Minnesota’s turkey industry. 16

/ ENTERPRISE MINNESOTA SUMMER 2020

“Catering was over,” Danny says. “We couldn’t find any product.” Adds Shelly: “It wiped out everything.” Barely lamenting the loss, the Boudreaux quickly pivoted their focus to manufacturing their madefor-Minnesota cookers. “People had been asking to buy them,” Danny says. “We were like, OK, let’s turn this into something.” “We never intended on selling and building units for other people,” Shelly says now. Sales, she adds, “took off immediately.” As Danny continued to work full-time at Home Heating, the couple began marketing their cookers through word-of-mouth and Craigslist ads. “We were just messing around,” Shelly says. But customer interest swelled and quickly became significant. The company rented a small manufacturing area to supplement the space it already shared with the Boudreaux’s limousine company. The growing popularity of wood-fired cooking further sparked interest in Cajun Cookers, Shelly says. “It’s still going strong. People want to leave gas and go

strictly to wood because it’s more of an old-fashioned way of doing it.” “It produces a lot of different flavor too,” Danny adds. “Which gives us the advantage—if anyone wants to do an all woodburning menu, they have to come to us.” The COVID-related demand has set Cajun Cookers back on the track for fast growth. Now with four employees, Danny and Shelly spend their days making two cookers per week as they try to keep pace with their order book. They’re using their nights to prepare a more formal strategic plan to plot the systematic growth of their

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company, and to upgrade the appearance and marketing utility of their website. Space wise, Cajun Cookers is looking to buy a building in a local business park to consolidate its operation under one roof. And to streamline the efficiency of his operation, Danny now orders metal components in bulk to eliminate the often unpredictable wait-time for supplies. In addition, he is acquiring more equipment to enable staff to do more in-house machining. “We’re trying to keep up with the times,” Danny says. “I’m optimistic.”

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Upheaval An early 2020 State of Manufacturing® survey provides a fascinating look at manufacturers’ attitudes both before and after the COVID national emergency declaration

nterprise Minnesota recently released its 12th annual State of Manufacturing® survey to a digital crowd of manufacturers and other key industry stakeholders. The results show that while Minnesota’s manufacturers share broad, long-term confidence about their companies’ prospects, they are strapping in for a tumultuous COVID-19-related economic ride. Rob Autry, founder of Meeting Street Insights and Enterprise Minnesota’s pollster, along with Bob Kill, president and CEO

/ ENTERPRISE MINNESOTA SUMMER 2020

of Enterprise Minnesota, shared this year’s data and fielded questions from the virtual audience on April 20. “Small and rural manufacturers look like they are going to receive the most punitive effects of this downturn, depending on their industry and products,” Kill said. “What we are seeing is similar to 2008-09, when manufacturers led the economy out of the recession. I expect them to drive Minnesota’s economic recovery again.”

What is unique about this survey is that the pollster conducted interviews both before and after President Trump’s National Emergency Declaration concerning the novel coronavirus disease (COVID-19) on March 13. Autry’s team interviewed 400 manufacturing executives between March 2-23. Respondent titles included owners, CEOs, CFOs, COOs, presidents, vice presidents, and managing officers. The survey has a margin of error of +4.9 percent. Researchers completed 58 percent (N=234) of the

MN STATE OF MANUFACTURING – MARCH 2020 |

And, thismanufacturers is especially the case after the President declared a national More feared recession after the th. emergency and the stock market crashed on March 12 President declared a national emergency.

interviews between March 2-12 and 42 percent (N=166) between March 13-23. The complete slide deck and recorded presentation are available on Enterprise Minnesota’s website: www.enterpriseminnesota. org/2020-state-of-manufacturing-survey. Among the results: The Economy. Forty-six percent of post-COVID interviewees now expect the country to slip into a recession, while only nine percent thought so in the pre-COVID interviews. This anxiety stands in marked contrast to the robust forecasts of previous years. In March 2018, 64 percent of manufacturers predicted “economic expansion,” and only four percent thought the U.S. economy was headed for recession. In

“Small and rural manufacturers look like they are going to receive the most punitive effects of this downturn, depending on their industry and products,” says Bob Kill, president and CEO of Enterprise Minnesota.

“Thinking about the upcoming year, in 2020, do you anticipate economic expansion, a flat economy, or a recession?”

March 2 - 12

March 13 - 23

Change

2020 Will Be A Year Of Economic Expansion

39%

11%

-28 pts

A Flat Economy

43%

34%

A Recession

46%

While optimism levels holding, While optimism levels are holding, weare do see a rise in pessimism.

MN STATE OF MANUFACTURING – MARCH 2020 |

While optimism are a holding, wepessimism. do see a rise in pessimism. we levels do see rise in “Thinking about the business climate in Minnesota compared to say five years ago, would you say the

business climate hasingotten better, compared gotten worse stayed “Thinking about the business climate Minnesota toorsay five about years the ago,same?” would you say the business climate has gotten better, gotten worse or stayed about the same?” Gotten Better

Gotten Worse

Stayed About The Same

54% 41%

41% 39%

45%

39% 32% 18%

32% 18%

2017

2017 14%

2018

30%

37% 15%

30% 19%

15% 2019

19% 2020

2019

2020

14%

2018

48%

47%

48% 37%

48%

47%

48%

45%

54%

33% 16%

33%

26% 23%

16% March 2-12

26% 23% March 13-23

March 2-12

March 13-23

We see dramatic drop-offs in expected increases from March 13th on.The data from the last two weeks We see dramatic drop-offs in expected increases from March 13th on. of The March would rank theofsecond-worst in our data from the last twoas weeks March would rank aspoint the second project’s history (a tad better than December 2008). worst point in our project’s history (a tad better than December 2008). MN STATE OF MANUFACTURING – MARCH 2020 |

“And, as you look to 2020, do you project your company’s gross revenue/profitability/capital expenditures to increase or decrease compared to 2019, or will it probably stay the same?”

Lowest Point

March 2 - 12

March 13 - 23

Change

Increase In Gross Revenue

49%

36%

-13

23%

Decrease In Gross Revenue

23%

+17

32%

Increase In Profitability

45%

29%

-16

17%

Decrease In Profitability

19%

+11

34%

Increase In Capital Expenditures

26%

24%

-2

19%

26%

+12

Decrease In Capital Expenditures

Because COVID-19 restrictions prohibited Enterprise Minnesota from conducting its State of Manufacturing® focus groups, Enterprise Minnesota will conduct focus groups in September and will hold survey release events starting with the statewide event in Brooklyn Center on November 5.

+37 pts

MN STATE OF MANUFACTURING – MARCH 2020 |

Gotten Better

2019, those numbers were 49 percent and five percent, respectively. Revenue and Profitability. Post-COVID interviewees also expect to experience a decline in gross revenue (23 percent, in contrast to just six percent pre-COVID) and profitability (19 percent, eight percent preCOVID). The March 2018 survey revealed that 60 percent expected an increase in gross revenue, and 47 percent predicted an increase in profitability.

14%

Smaller manufacturers exhibit the most anxiety about the economic effects of COVID on their companies. • Forty-three percent of businesses with less than $1 million in revenues projected an increase in gross revenue before the government declared a

Dec 2008

37%

national COVID emergency; just 26 percent showed the same confidence afterward. • Confidence dropped even more dramatically among companies with revenues of $1 million to $5 milSUMMER 2020 ENTERPRISE MINNESOTA /

Health care costs continue to be the most pressing concern, but there has been a significant rise in economic Health care costs continue to be the most pressing concern, but there has and global uncertainty. been a significant rise in economic and global uncertainty.

MN STATE OF MANUFACTURING – MARCH 2020 |

Change Since 2019

Concerns Ranked by % Concern (8-10) The costs of health care coverage

Economic and global uncertainty* Government policies and regulations

-6

40%

+24 -1 -4

33%

n/a

24%

Costs of employee salaries and benefits

23%

Developing future leaders

23%

Getting your products to market*

40%

39%

Cyber security

Competition from foreign sources

-8

50%

Attracting qualified workers

Retaining qualified workers

-6 0 +1

14%

11%

* Only half the sample was asked the question, n = 186 and n = 214 respectively

While health care cost concerns stayed about the same after the COVID-19 declaration, concerns While health care costs stayed about the same, qualified worker concerns aboutdipped economic and uncertainty soared. and economic and global global uncertainty concerns soared. MN STATE OF MANUFACTURING – MARCH 2020 |

Concerns Ranked by % Concern (8-10)

March 13 - 23

March 2 - 12

35%

44%

Attracting qualified workers 23%

Economic and global uncertainty Government policies and regulations

60% 39%

Retaining qualified workers

39% 30%

35%

25%

24%

Cyber security

27%

21%

Costs of employee salaries and benefits

24%

Developing future leaders

21%

16%

Competition from foreign sources Getting your products to market

51%

50%

The costs of health care coverage

12% 13%

10%

There has been an uptick in worries There Therehas hasabout been beenananuptick uptickinbusiness inworries worriesabout about the thebusiness businessclimate. climate. the climate.

MN STATE MN STATE OF MANUFACTURING OF MANUFACTURING – MARCH – MARCH 20202020 | 11|

Post-COVID interviewees also expect to experience a decline in gross revenue (23 percent, in contrast to just six percent preCOVID) and profitability (19 percent, eight percent pre-COVID). The March 2018 survey revealed that 60 percent expected an increase in gross revenue, and 47 percent predicted an increase in profitability.

“What “What would would youyou saysay areare thethe one one or or two two biggest biggest challenges challenges your your company company is facing is facing that that might might negatively negatively impact impact future future growth?” growth?” 2014 2014

2015 2015

2016 2016

2017 2017

2018 2018

2019 2019

2020 2020

Attracting Attracting and and retaining retaining a a qualified qualified workforce workforce

21% 21%

29% 29%

26% 26%

34% 34%

49% 49%

48% 48%

40% 40%

Unfavorable Unfavorable business business climate climate

48% 48%

43% 43%

40% 40%

38% 38%

18% 18%

19% 19%

33% 33%

Cost Cost of of health health care care insurance insurance

31% 31%

41% 41%

34% 34%

36% 36%

30% 30%

31% 31%

Increasing Increasing costs costs of of energy energy and and materials materials forfor your your products products

29% 29%

20% 20%

15% 15%

18% 18%

34% 34%

28% 28%

24% 24%

Lack Lack of of clear clear direction direction forward forward

n/an/a

8%8%

Coronavirus Coronavirus (Volunteered) (Volunteered)

n/an/a

2%2%

Regulations Regulations

n/an/a

3%3%

2%2%

Foreign Foreign competition competition

n/an/a

1%1%

2%2%

EDITOR’S NOTE: Full results of the State of Manufacturing® can be viewed at www.enterpriseminnesota.org. There you will find a full rendering of the survey’s top-line findings and a select number of cross tabulations.

/ ENTERPRISE MINNESOTA SUMMER 2020

+14 +14

lion. Their positive revenue forecasts dropped 20 percent after the COVID announcement. While a whopping 59 percent projected increases before COVID, just 43 percent thought so after the announcement. • Positive revenue forecasts dropped just five percent before and after the COVID declaration among companies with revenues greater than $5 million. Notably, however, the number of companies that projected decreased revenues increased from nine percent to 27 percent. Capital Expenditures. Companies expecting to increase capital expenditures

2020 State of Manufacturing® Event Schedule The State of Manufacturing® results will be unveiled at a series of meetings statewide. All are invited. You can register at www.stateofmanufacturing.com. dropped from 26 percent to 24 percent, while manufacturers planning to decrease that investment dropped 12 points, from 26 percent to 14 percent; 32 percent forecast an increase in spending on capital expenditures. Again, the small business owners projected the most significant cuts to capital expenditures due to the COVID economy. While just seven percent of small companies anticipated a decrease in capital expenditures before the COVID declaration, that number increased to 33 percent among executives interviewed after. Costs of Employee Health Care. Economic and global uncertainty topped manufacturers’ lists of concerns, knocking out the costs of providing employee health care costs for the first time in the survey’s 12-year history. While health care cost concerns remained constant (50 percent and 51 percent) in interviews before and after the COVID declaration, “uncertainty” jumped from 23 percent to 60 percent.

About the pollster Rob Autry, founder of Meeting Street Insights, is one of the nation’s leading pollsters and research strategists. The Meeting Street Insights team has over 25 years of combined public opinion research experience and 2,000 research projects under its belt. Autry has conducted all 12 State of Manufacturing® surveys.

Here’s the schedule. Nov. 5

Nov. 19

(Thursday) 3 p.m. to 7 p.m. Earle Brown Heritage Center 6155 Earle Brown Dr. – Carriage Hall Brooklyn Center, MN 55430

(Thursday) 9 a.m. to 12 p.m. Minnesota State Community & Technical College 900 MN-34 Auditorium C101 Detroit Lakes, MN 5650

Nov. 10 (Tuesday) 9 a.m. to 12 p.m. Sanford Center 1111 Event Center Dr. NE Ballroom 1 Bemidji, MN 56601

Nov. 11 (Wednesday) 9 a.m. to 12 p.m. Owatonna Country Club 1991 Lemond Road Ballroom Owatonna, MN 55060

Nov. 18 (Wednesday) 9 a.m. to 12 p.m. Prairie’s Edge Convention Center 5616 Prairie’s Edge Lane Granite Falls, MN 56241

Dec. 3 (Thursday) 9 a.m. to 12 p.m. Blandin Foundation 100 N. Pokegama Ave. Grand Rapids, MN 55744

Dec. 8 (Tuesday) 9 a.m. to 12 p.m. Monticello Community Center 505 Walnut St. Banquet Room Monticello, MN 55362

Date TBD 9 a.m. to 12 p.m. Lake Superior College 2101 Trinity Road Duluth, MN 55811

Enterprise Minnesota produced the State of Manufacturing events through the generous support of its Platinum and Gold sponsors. Platinum sponsors: Bremer Bank; Fafinski Mark & Johnson; Granite Equity Partners; Grey Search + Strategy; King Solutions; Minnesota Department of Employment and Economic Development; Olsen Thielen; PROduction Workforce Professionals; and WIDSETH. Gold sponsor: Iron Range Resources & Rehabilitation Board (IRRRB).

SUMMER 2020 ENTERPRISE MINNESOTA /

Creative Perseverance

Matt, Gregg and Mike Hanson (standing from left to right) pose in front of Hanson Silo’s workers in 2016, when the Lake Lillian-based company celebrated its 100th year. Matt and Mike, Gregg’s sons, are the fourthgeneration of Hansons leading the company, which has had to adapt to changing industries numerous times throughout its history.

Don’t Get

SILOED

A century-old Lake Lillian company succeeds by continually diversifying its range of products to meet the demands of its customers

ew businesses reach their 100th anniversary without an ability to adjust to the changing demands of their customers. It’s no stretch to observe that Hanson Silo wouldn’t have survived if it limited its focus to silo work. Failed former competitors litter the marketplace because they didn’t adapt to evolving customer needs. Founded in 1916, the company endured

By Brian Arola 22

/ ENTERPRISE MINNESOTA

SUMMER 2020

years of ups and downs by continually adapting to meet changing demands and break into new markets. Although “silo” remains in the company’s name, its operations are distinctly different from those early silo-building days. While Hanson Silo once erected more than 1,000 silos per year, it now provides only maintenance to existing structures. As the agriculture industry shifted away from silos, the company moved to manufacturing precast concrete bunker walls, livestock feed storage and handling equipment, and powder coating, among other products. As the industry evolved, so did the company.

New Strategic Plan

As the fourth-generation owners of the Lake Lillian-based company, brothers Matt and Mike Hanson estimate that as much as 80 percent of the company’s current operations didn’t exist a decade or two ago. They think planning a strategic path for continued diversification will help sustain the future of the business and continue their forefathers’ spirit of ingenuity. Although they began developing a new strategic plan in early 2020 with Enterprise Minnesota Business Growth Consultant Steve Haarstad, the COVID-19 pandemic constrained the first steps in

that process. The brothers first discussed their needs with other manufacturing executives at Enterprise Minnesota-sponsored peer council meetings. The meetings allow industry leaders to pick each other’s brains, talk about the challenges they face, and bounce ideas off the group. Matt, Mike, and their father, Gregg, met monthly in different groups before COVID-19. With the pandemic causing so much uncertainty, Haarstad says Enterprise Minnesota began offering virtual peer councils weekly or every other week through Zoom. Hanson Silo and other companies turned to the peer councils to hear how groups were responding. “The COVID-19 situation has somewhat stabilized, but during the first four weeks of the stay-at-home stuff, and the week or two leading up to that, every day there was a new challenge confronting companies,” Haarstad says. “That’s why we went weekly with the majority of the groups.” Even though people who were resistant to change left the company long ago, work-

It’s no stretch to observe that Hanson Silo wouldn’t have survived if it limited its focus to silo work. place practices have become ingrained at Hanson Silo and still require modification. “A 104-year-old business with a culture that’s old and deep-rooted can be hard to control and modify,” Matt Hanson says. “It’s like playing whack-a-mole on culture.” Getting the new strategic plan in place was crucial before the company’s agricultural work picked up in the spring. “Spring is normally their super busy time,” Haarstad says. “They were pushing to accelerate the schedule and get a lot of it done as quickly as we could at the beginning of the year.” Over several work sessions, a company working group established one-year and three-year strategic visions for Hanson Silo. The process spelled out its core values, mission, purpose, and how it differentiates itself from competitors. Haarstad regularly works with companies on plans like these, helping them understand how to

Workers erect a silo on Emil Hanson’s farm in Lake Lillian circa the 1920s. Emil Hanson founded Hanson Silo, which has been in business for 104 years. Silos are no longer the business’ primary focus, as the company has expanded into other areas. SUMMER 2020 ENTERPRISE MINNESOTA /

A worker powder coats a piece of metal at Hanson Silo. A recent investment in new technology has expanded the company’s powder coating capabilities. Bolstering the powder coating portion of the business is part of its strategy to diversify operations.

grow revenue and strengthen their leadership cultures. A lot of the work focuses on ironing out the company’s processes and taking stock of what resources it has and what it might need. Enterprise Minnesota helped Hanson Silo develop a skills matrix, for example, where the company looks at what its 50 to 60 employees are proficient in and what skill gaps the company needs to fill. Many companies in rural Minnesota struggle to find the number of highly skilled workers they need to operate. Some companies have even had to relocate headquarters to alleviate the problem. The Hansons acknowledge that recruiting can be a challenge but have no plans to move. The company’s existing workforce is excellent, Matt Hanson says, and it helps that so many are cross-trained. Having workers with broad skills makes it easier to shift them to wherever they’re most needed. Compared to the challenge of recruiting new workers, the weather is a far more unpredictable obstacle the company has had to overcome. In a business with so many agricultural clients, weather often dictates how well a given season goes. And unfortunately, Mother Nature hasn’t been kind the last couple of years, which has made diversification even more important as a strategy to overcome the variables the company has no control over. When agriculture business wanes, the company’s other divisions can potentially make up for it. “Hanson Silo tends to be seasonal because of its connection to the agriculture market,” Haarstad says. “One of the things the company is trying to do is flatten that out to fill in the gaps.” The company’s investments in new 24

/ ENTERPRISE MINNESOTA

SUMMER 2020

equipment in 2019 showcase its latest example of diversification. The new technology ramped up Hanson Silo’s floor slat manufacturing for hog and cattle barns. The need for the slats stems from an Environmental Protection Agency push for farmers to get hogs and cattle under roofs to contain manure, Matt Hanson says. “That’s been where we’ve seen a growth pattern, and we’re happy we put

The company’s existing workforce is among its core strengths, Matt Hanson says, partly because so many are cross-trained. Having workers with broad skills makes it easier to shift them to wherever they’re most needed. that machine in. Now, we’re running it on weekends trying to keep up.” Hanson Silo boasts of being Minnesota’s first dry-cast slat producer. The process involves using a low water-to-cement ratio to produce a harder, denser slat. Using a higher water ratio leads to more pores in the concrete, reducing slat strength. Another unique production technique keeps the four-inch thick, 10-feet long hog slats flatter. Hanson Silo uses rotoscreed to level the slat’s top rather than hand troweling. Manufacturing slats has become an essential and expanding part of the business. Haarstad says Hanson Silo’s team deserves

credit for its creative approach to problemsolving. “They have been very creative on their own,” he says.

A History of Innovation and Adaptation

Hanson Silo’s spirit of adaptation dates back to the company’s founding. The business began in 1916 when founder Emil Hanson wanted to build a silo on his farm. He wasn’t satisfied with the poorly constructed silos he saw in the area, attributing the poor construction to the fact that local sand was too full of dirt and clay to produce durable concrete. He concocted the idea to use washed sand from the shores of nearby Big Kandiyohi Lake, which is now a common practice in concrete making. His son, Newell Hanson, picked it up from there. The company’s first in a string of new designs and patents was an automatic silo stave machine in the 1920s, which sped up production. Next came a machine that made the first steel dome silo roofs in the 1930s. The innovations continued into the 1940s. Newell and his son, Willard, patented the first self-propelled frozen silage chopper, a response to farmers demanding an easier way to unload feed from their silos. By the 1950s, the business was growing along with its geographical reach. Manufacturing plants expanded into southern Minnesota and central Iowa. More innovation in the 1960s expanded the company’s customer base outside the U.S. Farmers wanted a way to dig out silage during frozen and other tricky conditions, so Willard and Newell made a surface drive silo unloader for their customers.

One of the company’s more creative diversification strategies happened in the 1980s. While the agriculture industry was taking a beating, the company added a golf cart manufacturing plant called Shuttlecraft in Willmar. Hanson Silo got out of the golf game by 1991, but Matt Hanson says he still has one of the plant’s distinct looking carts. Hanson Silo’s first precast concrete plant arrived shortly after in 1995. And more diversification came when Hanson Silo began powder coating a year later. The company also started manufacturing more products,

Hanson Silo’s spirit of adaptation dates back to the company’s founding. ranging from truck beds to electronic scoreboards. More recently, the company supplied 40,000-pound wall panels for a food manufacturing site. The building is one of many structures around the state featuring Hanson Silo’s concrete. The company’s current list of projects includes car dealerships, grocery stores, waste management transfer buildings, truck and diesel shops and storage facilities for state transportation departments. Expanding the company’s powder coating capacity is another of its more recent diversifications. Powder coating is now a sizable percentage of the business, growing from a five-person team that manually painted to a computerized line. The latest installation of new powder coating technology occurred right around the start of the COVID-19 pandemic— and the equipment arrived about a week after. Getting it up and running upgraded 25-year-old booths, Matt Hanson says, which will help the company powder coat more products, including utility trailers, industrial fabrications, icehouse frames, and tractor rims. “You send us an order, and we send back powder-coated packaged parts,” Matt Hanson says. “We’ve been able to use that as a diversity strategy to hit markets that are still going.” The Midwest remains a big market for Hanson Silo. The company’s precast concrete bunker walls, for instance, are popular in Nebraska and other corn-growing states. “We go where the corn is,” Mike Hanson says. Other aspects of the business have international reach. The company’s Easy Rake

silage facer brought its products onto every continent but Antarctica. The Hansons name Canada, China, Australia, Uruguay and Russia among the countries where they have customers.

COVID-19 and Future Plans

The COVID-19 pandemic hasn’t made life easier for Hanson Silo’s team. Contract manufacturing work wasn’t humming like it usually would in spring 2020, but the Hanson brothers are confident the lull won’t last long. “Just like most companies, we’ve experienced some change with COVID,” Matt Hanson says, adding that some contract manufacturing work has slowed down, “but we’re all sure it’ll come back sometime soon.” After all the work to develop a long-term strategic plan before the agriculture season ramped up, COVID-19 also upended the company’s short-term plans. One-year and three-year plans can hardly factor in impossible-to-predict pandemics. But the team at Hanson Silo felt the planning work was important enough to push ahead and adjust the plans. “Many of the goals and priorities had to be revised because the pandemic hit,” Haarstad says. “The short-term priorities changed.” Mike and Matt Hanson grew up in the business, but both worked for Twin Citiesbased companies as adults before returning to their family’s operation. Matt has been company president since 2007, while Mike is the director of business development.

“We go where the corn is.” They credited their father, Gregg, who remains active in the company, with having the foresight to diversify the business during his tenure. The company’s core business, silos, had been declining since Mike and Matt were children, so expanding into other areas laid the groundwork for the company to survive. Keeping a family business going, the Hanson brothers acknowledge, comes with some pressure. They don’t dwell on it, but Matt Hanson says everyone knows most companies don’t make it to the third generation. Even surviving long enough to pass onto a second generation is hard enough for businesses. Research from the Family Business Alliance found only about 30 percent of family-owned businesses make it to the second generation.

Survival chances drop precipitously from there. Only 12 percent of familyowned businesses last into a third generation, and three percent make it to the fourth or beyond, placing Hanson Silo in rare company. Flimsy to nonexistent succession plans often lead to a family business’ demise. As the third-generation owner, Gregg Hanson eliminated that possibility when he took control of the company from his relatives, which led to Matt and Mike taking the helm. More so than feeling pressure at maintaining a family business, the brothers express how having such a legacy inspires confidence. When Hanson Silo breaks into a new concrete market, it’s a good bet they’ve been making concrete longer than their competitors, and they’ve had more than a century to fine-tune the process. “We’ve been making concrete for 104 years on the same farm,” Matt Hanson says. Having more data at their fingertips than their predecessors also boosts confidence, making new ventures feel like less of a leap of faith than in the past. While success is still far from guaranteed, the Hanson brothers say being able to look at market research before diving in provides a higher level of assurance. Over the next 10 years, they aspire to establish sustained growth. Mike Hanson says more acquisitions are expected, and the need for concrete in buildings likely won’t let up. Setting 10 percent to 15 percent per year growth targets is a common goal among manufacturers. Haarstad says he knows Hanson Silo’s leadership wants to see steady growth in its existing markets. Matt Hanson says he’d like to see 20 percent organic growth, along with more expansions in the future. Time will tell how those expansions look. If the company’s history is anything to go by, what Hanson Silo is doing now could be different from what it’ll be doing in a decade or two. Having a Hanson at the helm going forward seems like a safe enough bet, though. During a recent fishing trip, Matt Hanson’s son, age 14, told him he wants to team up with Mike Hanson’s son, age 1, to run the company someday. No matter what Hanson Silo does in the future, Matt Hanson says, his ultimate hope is that a Hanson will be overseeing it. “Passing it on to the next generation, the fifth generation, is the goal.” SUMMER 2020 ENTERPRISE MINNESOTA /

Entrepreneurs

‘EyCatching’

Growth

Next Innovations hopes to exploit increasing demand for American-made products

everal years ago, Next Innovations—a Walker-based company known for custom wall art and eye-catching wind spinners—came up with what it calls its “blanks” program. Simply put, the company created hundreds of pre-cut, mostly rectangular steel shapes, or what it refers to as “blanks,” that can quickly be deployed to fill custom signage orders. Given the necessary graphics and specifications, Next Innovations can turn orders around almost overnight. The program was a nice complement to the company’s already robust line of patriotic wall art products and popular “EyCatchers,” which were once featured on a Twin Cities television station. Then the coronavirus pandemic hit. And suddenly the company’s blanks program became a lot more relevant. A quick glance at one of its product websites, metalartmaker.com, shows a selection of signs that Next Innovations developed to help business customers react to the pandemic. Signs that urge social distancing and signal locations for hand-washing stations were available on the company’s website very early on during the health care crisis. “SuperValu is one of our biggest customers. We do a lot of ‘Curbside Pickup’ signs

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SUMMER 2020

for them,” Arnold Volker, president and owner of Next Innovations, says. “If we have the graphic, we can almost literally make the sign the same day. For us it is pretty easy to do.” While brick-and-mortar sales are, obviously, down with the state being shut down, e-commerce is doing exceedingly well. Volker says the company has seen a 400 percent increase in e-commerce. And that boost in sales wasn’t just because of the pandemic. During the last 18 months—whether it’s due to tariff wars or the pandemic—Volker says he’s sensing a change in the American consumer. They want more Americanmade products. And he says Next Innovations, by strategically cutting down its inventory and embracing e-commerce, is positioned nicely to take advantage of that demand. One move it made emerging from the recession was to reimagine the way it uses space. At one time, about 20,000 square feet of the company’s 50,000-square-foot facility was dedicated to inventory storage. He says that the company stored about $1 million in inventory on site.

BY ROBB MURRAY

“And that’s risky. There are holding costs. And what if it doesn’t sell?” he says. “Since the downturn, we’ve cut back significantly on inventory. We went from $1 million in finished goods to less than $100,000. And we’re turning things quicker by having this blanks program.” That blanks program is one of the key

While brick-and-mortar sales are, obviously, down with the state being shut down, e-commerce is doing exceedingly well. developments in the company’s history, and it’s so simple. In the realm of signage, sizes and shapes are—in theory—unlimited. But in practice, a lot of the signs you see in the world around you are found on a relatively small number of sizes and shapes. So, Next Innovations decided to create a stockpile of so-called “blanks.” “When we cut a shape, we might have 100 different images that can go on that

Arnold Volker

SUMMER 2020 ENTERPRISE MINNESOTA /

particular shape,” Volker says. But Next Innovations didn’t make a name for itself with quick-turnaround signage. The company established itself as one of the premier makers of custom wall art and home decor, and it once held the record for sales on the German version of the QVC home shopping network. The company’s signature product, the EyCatcher wind spinner—a home decor item that comes alive in brilliant colors when touched by the sun’s rays and a light breeze—remains a popular item. You can even find them at Disney World. Next Innovations has also established a major presence in e-commerce; its home decor products can be found online at Amazon, Walmart and the company’s own retail site. And its biggest e-commerce partner, Wayfair, has more than 1,400 Next Innovations products available. On top of that, Next Innovations has become a leader in sign making and has

The company established itself as one of the premier makers of custom wall art and home decor, and it once held the record for sales on the German version of the QVC home shopping network. demonstrated its value to statewide merchants by quickly producing high-quality pandemic-related signage. You may have even seen their “Sanitation Station” or “Curbside Pickup” signs, which they were able to produce, literally, within hours of getting requests. Volker says his company is perfectly positioned to take advantage of what he predicts will be a very profitable future. With consumers increasingly demanding American-made products, and with an impending upgrade to the company’s ISO status, Volker says things are looking up. Both Volker and Next Innovations certainly have come a long way from a time when the company could easily have disintegrated. Through the kind of perseverance that is common in northern Minnesota, Next Innovations has weathered more than one setback. 28

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Founder

Next Innovations was founded by John Zacher. Born and raised in the Twin Cities, Zacher and his wife moved to Hackensack, just south of Walker, in 1993. In 2012, Next Innovations achieved regional acclaim when KSTP journalist Jason Davis visited the plant to record a segment for his “On the Road Again” series. The segment featured the EyCatcher and focused on the unique finishing process Next Innovations uses to create the item’s shiny and, well, eye-catching appearance. The segment gave the company a slight bump in sales. In fact, each time the segment re-airs, the phones at Next Innovations start ringing again. Next Innovations uses a patented “7-Step Infusion” process that chemically bonds colors and details onto a steel surface, creating a vibrant, scratch-resistant surface. The company has also developed a process called “Refractions,” a patented, hand-crafted technique that applies metallic swirl patterns to metal art pieces. Combined with 7-Step Infusion, the company’s process results in a unique 3D effect. But Zacher’s time with Next Innovations would end far too soon. Known for having a zest for both work and life, Zacher loved his family and loved to cook. He also loved to fly. Zacher took flight lessons for both airplanes and helicopters, and on March 4, 2007 he earned his wings—both as a private pilot for single engine aircraft and helicopters. On Thanksgiving Day 2011, Zacher and his wife Vickie were flying from Alexandria to Hackensack when his helicopter lost power and crashed into Ten Mile Lake near Hackensack. Vickie swam to shore, but John couldn’t swim. An army of rescue personnel descended upon Ten Mile Lake to try to save him, but couldn’t. They recovered

his body the next morning. He was just 56 years old. According to his obituary, Zacher found the skies “calming.” In the months and years that followed, Zacher’s heirs settled his estate. And eventually Volker acquired Next Innovations. Zacher’s death, Volker says, was hard on him. “We had gotten to be close since 2007. I lost a friendship, a mentor, a partner,” Volker says. “We ended up selling off machine shops in the Twin Cities and shutting down the business in Annandale. We had another business in Bagley that we sold off. Next Innovations was by far our largest manufacturing company, and I believed it had the most potential. That’s the one I fought very hard to keep open, and I think John would have wanted us to keep it open. “When you’re in the downturn of sales and bank pressure and everything else,” he adds, “it wasn’t the easiest feat. But we were able to stay open and keep our employees.” Volker began working with Zacher in 2007. Volker was a business broker and had approached Zacher about working together. Zacher invited him to join a private equity firm he’d started up called Unlimited Peak, seeking out manufacturing companies that would complement the vision and work of Next Innovations. Between 2007 and 2008, Volker says, they’d purchased four companies, but he says they weren’t relevant to Next Innovations. By the time Volker came into the picture at Next Innovations, the company was already humming along with EyCatcher sales. In fact, Volker says, at one point Next Innovations held the record for sales on QVC Germany with $1,800 per minute, almost all of which was EyCatchers. (EyCatchers, Volker says, were “a hot new item in Ger-

Next Innovations uses a patented “7-Step Infusion” process that chemically bonds colors and details onto a steel surface, creating a vibrant, scratchresistant surface. many.”) The company was making roughly 5,000 EyCatchers daily. And then the recession came. As did competition. “Everybody started (making similar but not identical products),” he says, “and basically the German market fell when the U.S. market fell.” Volker says Next Innovations employed 84 people at its height. By 2013, after lean times and layoffs, it was down to just 11 employees. Today, the number of people in

the offices has been whittled down to four, two of whom work part time. “We hung on to as many people for as long as we could,” he says. “It’s tough to get rid of people, but … you learn to do more with less, I guess. And then some things just don’t get done.” In addition, the company now uses contract designers instead of full-time employees. Volker says this new model is actually better, business-wise. “It’s better for the contractors,” he says. “The trend with COVID-19 and other things is that more and more people in those types of positions are going to work from home. A designer is a tough position to cash flow eight hours a day. With a contract employee, you’re only paying for what you need.”

Beyond the EyCatcher

While the popular EyCatcher may have put Next Innovations on the map, the big seller now is a different kind of product. A few years ago, Next Innovations started experimenting with some patriotic decorative wall art. An image of an American flag on a steel cutout of an eagle has been extremely popular. “We use a dye sublimation process,” Volker says. “So we laser cut, powder coat, and then bake the image into the powder coating. It’s a unique process. And the final product is made for inside or outside. It gives the image a very visually superior look. We have a full patriotic line.” Volker says the fact that the nation is so polarized right now, politically speaking, has fueled sales of the patriotic images, and he’s more than happy to give the people what they want. “I think that’s part of it. The country is

very polarized. That’s why we’re seeing an increase in the demand for U.S. manufacturing,” he says. Alibaba, a huge Chinese e-commerce retailer, told Volker that it has experienced a double-digit increase in companies looking for U.S. manufacturing.

ISO 9001:2015

As Next Innovations looks to the future, the company has realized there are a few things it needs to do in order to capitalize on upcoming opportunities. One of those is completing the process to become ISO 9001:2015 certified. To help them get there, they reached out to Enterprise Minnesota. Keith Gadacz, an Enterprise Minnesota business growth consultant, says Next Innovations is well positioned to meet its business growth goals. And its history suggests the company will do well. “When the recession came, when the China competition came, Next Innovations fought its way through to be where it is today by diversifying its product and improving its process,” he says. Some companies won’t work with a manufacturer that isn’t ISO 9001:2015 registered. Further, Volker says he wanted to upgrade the company’s ISO registration so he could take advantage of a Small Business Administration’s HUBZone Program. HUBZone encourages growth in what it considers “underutilized business zones”—many of which are in rural areas—by awarding at least three percent of federal contract dollars to HUBZonecertified companies. To get that certification, though, a company does not need the upgraded ISO registration. But it helps. “We are located in a HUBZone,” Volker says. “That gives us an advantage when receiving government work.” Enterprise Minnesota is helping Next Innovations examine its planning, processing, objectives and resources so that it can reach that important standard. “We want to poise this company across its matrix of people to be able to grow itself and grow with customers that are diverse enough so that Next Innovations is not going to be locked into one specific marketplace,” Gadacz says. “For Next Innovations, we did a current-state assessment of what it has in place, and then built a ‘what does the future look like’ state map. And we made sure it all looks like the company wants it to in terms of resources, equipment, people and objectives.” SUMMER 2020 ENTERPRISE MINNESOTA /

Non-Profits

MAINTAINING

PURPOSE

Productive Alternatives and state caregivers plan return after coronavirus closures By R.C. Drews

/ ENTERPRISE MINNESOTA SUMMER 2020

uring the first half of the 20th century, large institutions were the de facto standard for the treatment of people with developmental disabilities. In Minnesota, one of those facilities was the Fergus Falls Regional Treatment Center, located near the state’s western border. The sprawling 600,000-square-foot “castle on the hill” once housed 2,000 patients for a diverse range of maladies. Many lived out their lives working and farming on the building’s campus—and then being buried a short distance from the small stone and cement rooms they had slept in at night. But things changed. Social reform and medical advancements brought about a discontent against the institutional model, which became viewed as little different from a prison. By the middle of the century, there was a push to deinstitutionalize mental health care. For Fergus Falls, that meant a large population would soon be out of work, but it also meant the community would need to provide homes and aid in other ways for those no longer under the state’s direct care. Productive Alternatives, Inc.

became one of those ways and has been providing social services to Minnesotans since 1959. Under the leadership of President Steve Skauge, Productive Alternatives is headquartered in Fergus Falls but operates in seven cities across the state’s beltline. Skauge took over the company 20 years ago, transitioning from his career as a teacher in the Fargo school district (where

he watched a similar end to governmentrun hospitals in North Dakota) to administration in the non-profit care of disabled persons. He views his position as an inheritance of the hard work and ingenuity of the organization’s founders, who saw untapped potential in these now-discarded former patients. With support, the founders envisioned helping fulfill the needs of area businesses through manual manufacturing and providing a productive alternative to a life of private care at home. “We want people to know that everybody has some capacity to work,” Skauge says.

The founders envisioned helping fulfill the needs of area businesses through manual manufacturing and providing a productive alternative to a life of private care at home. It took no small amount of grant applications, local fundraising, and even state legislation to finally found a non-profit organization with a name that fit its purpose and that gave life to what was previously only a philosophical position.

Productive Alternatives

Productive Alternatives began as a “sheltered workplace.” Area businesses would contact the company with their basic manufacturing and assembly needs, and Productive Alternatives would hire out their equipment and teams of employee-clients. The operation provided a product, and it also offered those involved a sense of selfworth. But there was a problem. The company had the staffing, quality control, warehouse, and equipment, but it needed a product. The jobs would come, but once they were done, there was a gap to

Begun in 1959, Productive Alternatives was a $16 million operation before the pandemic. Today, the Fergus Falls headquarters awaits a return to normal.

fill. “It was really difficult to have a steady flow of work,” Skauge explains. And tensions wound up as the labor force went without work. Rather than wait for work to come to them, the company’s founders saw a niche for goods designed and manufactured inhouse. And it worked. “Filling in the blanks with our own products gave us that almost-never-ending flow of work—and boy was that huge,” Skauge says. When the community’s needs were high, Productive Alternatives churned out orders. When work dried up, the company produced and stockpiled inventory of its own. Its reputation for reliability and a flexible approach to sub-contracting attracted others. Soon, the company became a beacon for entrepreneurs—home inventors who had an idea but not the infrastructure to manufacture it. Skauge describes the development as a “real incubator for the region.” As Productive Alternatives grew, its model for supporting a workforce with disabilities shifted. The term “sheltered workplace” represented an ineffective approach that isolated a percentage of the community. And while it was easy enough to see that the company needed to leverage its connections differently, it also meant a radical restructuring to how it obtained funding and operated. But despite facing the most significant challenge since the company’s founding, Skauge and his staff of career coaches, support professionals, and care providers were up to it.

Fiscal Implications

Productive Alternatives was, and still is, a holder of a federal 14(c) certificate. Part of the Fair Labor Standards Act, this certificate allows for the sub-minimum

wage employment of persons with disabilities. Because the majority of the company’s revenue was limited to federal and state grants based on the number of clients served, the sub-minimum wage was advantageous. From a manufacturing standpoint, however, the implications on efficiency were backward. Where most companies work to streamline and automate their production lines with only the necessary staffing, Productive

The company became a beacon for entrepreneurs— home inventors who had an idea but not the infrastructure to manufacture it. Alternatives had the advantage of providing as many jobs as possible. It wasn’t about margins or demand; it was about the number of people helped. And the more people helped, the more funding. But if the company’s mission was indeed the betterment of lives, a sheltered workplace only improved on the institutional model. It couldn’t match the social advantages and higher wages out in the community. Productive Alternatives wanted its clients to become a genuine part of society, not isolated from it. So, the company built bridges with employers. Job coaches worked to identify positions with high turn over that are difficult to fill and brought in their hard-working clients to fill them.

SUMMER 2020 ENTERPRISE MINNESOTA /

The Productive Alternatives sign shop delivers custom orders for national firms, community events, or even local politicians.

It’s taken some time, but in the five years since Productive Alternatives transitioned to community-based jobs, it has been a success. The second-chance employment division is a bit of a misnomer, Skauge explains, as the company provides third, fourth, fifth, and sixth chances, too. By working with the “unemployable”—people with chemical dependency history, mental health issues, and even felony convictions—Productive Alternatives not only produces products, it also offers a service in line with its mission. “The vast majority of people want to work and need to work, but they have legitimate barriers that are preventing them from getting a job and keeping that job,” Skauge says. He acknowledges extra steps are some-

For years, the company offered an assortment of ice fishing products, such as the Rattle Reel or the Big Dipper slush and ice scoop, sold at Scheels All Sports, Fleet Farm, and Cabela’s. times necessary to employ this population, but he doesn’t shy away from it. “That’s the challenge, but it’s also the fun part,” he remarks. You’ve likely seen Productive Alternatives’ hand-made products yourself in retailers across the country. For years, the company offered an assortment of ice fishing products, such as the Rattle Reel or the Big Dipper slush and ice scoop, sold at Scheels All Sports, Fleet Farm, and Cabela’s. Its Stratus Rain Gauge is the official rain gauge of the National Oceanic and Atmospheric Administration (NOAA) and the National Weather Service.

Pandemic

At its zenith earlier this year, Productive Alternatives was a $16 million

/ ENTERPRISE MINNESOTA SUMMER 2020

organization with over 300 employees and more than 1,000 clients served. The company operated public transit systems in five cities and provided day training services for vulnerable adults, chemical dependency and crisis intervention, job coaching, sub-contracting, manufacturing, and employment. By early April, however, the company was a ghost town. Like Skauge, Productive Alternatives Director of Operations Mike Burke has decades of experience operating non-profit care services. Until last September, Burke was the executive director of the Alexandria Opportunity Center. After the organization merged with Skauge’s, Burke assumed his new role in operations. “I thought I knew the business,” Burke says. “This is an all-new thing for everyone.” Burke oversees three Productive Alternatives sites—Fergus Falls, Perham, and Alexandria—and all of the Fergus Falls manufacturing. With his role in operations, Burke has worked to increase profitability and efficiency in the company, which until five years ago weren’t a concern. “We’ve gone through a lot of transition in the last few years, and this is our shot at making it work,” Burke says. “It’s not your traditional production situation. It’s unique in the fact that we’re a non-profit that runs a business and needs to make money.” But he’s proud of their second-chance staff and their end products. “The quality’s really

good,” he says. When Gov. Walz handed down the shelter-in-place order on March 28, Productive Alternatives’ clients did precisely that. “Our revenue just stopped,” Burke says. “We’ve never had a downturn that’s so immediate and so deep.” Because Productive Alternatives receives approximately 75 percent of its revenue through government funding that is based on the number of clients served per day, that money dried up overnight. “When they don’t show up to work, we can’t bill,” Skauge explains. “We had to shut down all the way to the very core elements of what we do.” That meant mass layoffs. A staff of more than 300 became 15. Only necessary services, such as the public transit operations, remained open. Tina Soland worked in the Productive Alternatives sign shop when the coronavirus struck. She remembers the meeting at which the company announced the layoffs and the fearful words like “if” and “when” that dominated the discussion of the company’s future. As a veteran employee of the company for 20 years, she was one of the few who still had a job. “I had to get in my car and drive around town for 25 minutes,” she recounts. She didn’t know whether she should cry for everyone they had lost or be thankful she still had work. She remembers thinking, “This is really happening. Everyone’s get-

For 60 years, flexible thinking has allowed Productive Alternatives to carve out a niche in diverse fields like rain gauges, agricultural belting, and ice fishing rods. Whatever happens next, the company and its teams are ready to succeed again.

ting laid off, and there are just a few people left.” In the weeks that followed, as she assumed a supervisory role in the sign shop, she says the building felt empty. Without a demand for the company’s public transit, only some of the drivers would come to help with production.

Red Tape

The legislature determines funding levels for Productive Alternatives and the roughly 100 other care providers like them across the state. That funding determines pay raises, benefit increases, and growth. Skauge says it’s never been enough, and the company has known more cuts than

In the weeks following the shelter-in-place order, a portion of the company’s production staff have returned to work, fulfilling in-house and sub-contracting orders.

growth. But he is quick to point out the benefits the dollars provide: employing the unemployed and generating income tax and sales tax while providing life skills and satisfaction without burdening Medicare services. “You’re getting a pretty doggone good return from that tax dollar when we put people to work,” he quips. The legislature failed to enact a bill that would have subsidized ongoing costs for mortgages, vehicle loans, utility bills, and fixed costs that persisted when the organization shut down. Although the bill’s authors intended the legislation to cover necessary expenses, Burke explains that it became a bail-out for those who otherwise would never re-open. Organizations like Productive Alternatives, which were managing to stay afloat so far, were left without aid. For 24 years, Rep. Bud Nornes has served in the Minnesota House to represent District 8A, including Fergus Falls and the area surrounding Productive Alternatives’ headquarters. He says he wishes he had an answer for what’s happened to prevent the DHS money from being released. Nornes says he has contacted the governor’s office, as has the mayor of Fergus Falls, but there’s been little movement. “Productive Alternatives and programs like it were just overlooked, and I think that’s a travesty,” he says. “It seems very unnecessary to have it idled right now.”

Skauge and Burke say they’re used to working with limited budgets, even if the current circumstances are extreme. In the weeks following the shelter-in-place order, a portion of the company’s production staff have returned to work, fulfilling in-house and sub-contracting orders. The support staff is returning as well, but more slowly—their salaries will only return as clients begin venturing out once more. “We’re struggling because we don’t have enough money to support our mission,” Burke observes. “Something’s got to give here pretty soon, or we’re going to have a lot less of a mission. When the state government and the federal government decide that they’ve overspent themselves, there will be cuts, and we tend to be an easy place to cut from.” Nornes, meanwhile, acknowledges that the state will be tightening its belt. He agrees that funding has never been adequate in the first place and that organizations like Productive Alternatives too often fly under the radar despite their importance. As to the future, Skauge acknowledges that it may take time for Productive Alternatives to return to the $16 million operation it was before the coronavirus outbreak. Still, he has no doubt the company will survive. Its mission is too important not to, and the company’s clients will need support just as before. “We’ll survive it in a business sense,” he says, “but we will not look the same.”

SUMMER 2020 ENTERPRISE MINNESOTA /

Special Report

Get Ready to

RUMBLE

Manufacturers look to ISO to prepare for the post-COVID economy By Maria Surma Manka

/ ENTERPRISE MINNESOTA

SPRING 2020

hen cousins Steve Lewis and Dan Tall took over Lane Company, the family business, they joked about wishing for a boss to guide them on how to run it. Someone who had a plan for the company’s goals and could tell everyone how to execute it.

really about the processes needed to make customers happy. ISO is very much a business management system—there’s no one-size-fits-all, and different companies have different reasons for going after it.”

Navigating COVID-19 with ISO

A business management plan is helpful when business is good, but it’s especially critical during challenging times. ISO certified manufacturers across Minnesota use ISO to provide contingency planning and the mechanisms to strengthen the overall management of their businesses. “ISO standards are built on risk and opportunities,” Langfield says. “There are some businesses that are really concerned about where their growth is going to come from [during COVID-19], while others are super busy. In both cases, ISO gives them the structure to think through

the process. Coming out of COVID-19, companies will need to be adaptable and flexible with their thought processes. Everything starts with having a strategic direction that focuses on customer satisfaction.” While manufacturers have different motivations for seeking their ISO certification, the ultimate results are improved processes that help them take advantage of opportunities and weather uncertainties. Though ISO provides the framework, the successful execution comes down to individual accountabilities and strong leadership that can turn a plan into reality.

Lane Company: Integrated approach is foundation during uncertainty

Doing something right is better than doing something fast, and that was certainly the case for Lane Company, a Minneapo-

Lewis and Tall eventually found what they were looking for. “We wished for a boss, but what we were really looking for was a business management system,” Lewis says. “ISO was the system that made sense for us.” Some manufacturers continue to think of ISO solely as an international stamp of quality, but the emergence of ISO 9001:2015 offers much more. Manufacturers who achieve the newest ISO designation emerge with a business management system that helps define and accomplish company objectives. They have committed to continually improving their processes. They meet process efficiency standards and demonstrate that they can consistently meet customer and regulatory requirements. And, as many large customers increasingly require ISO certification from their suppliers and even from suppliers’ suppliers, they realize that accreditation can also be a competitive differentiator. “ISO isn’t just about product quality,” says Greg Langfield, a business growth consultant at Enterprise Minnesota. “It’s

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system. It gives us a way to accomplish our goals, measure what we’re doing, and improve on it. With ISO and continuous improvement together, it’s a way of documenting ideas and testing them.” Although ISO can be an ambitious undertaking, Lewis says it helps a company focus on the little things, which are often critically important. “If you focus on something, it will change,” he says. “We needed to take care of the little things, and the big things will take care of themselves. ISO and continuous improvement give us the structure for doing these things consistently.” Lewis adds that consistency and structure have brought particular value during the COVID-19 pandemic. For example, weekly staff meetings and other consistent communication, he says, have helped dispel rumors and more clearly lay out plans for adapting to a challenging time. “Having dedicated time and consistency when it comes to communication with employees and among the leadership team has been really important,” Lewis says. “In the end, our bottom line is better, and our decision-making is better.”

H&B Elevators: Continuing the legacy “There are some businesses that are really concerned about where their growth is going to come from [during COVID-19], while others are super busy. In both cases, ISO gives them the structure to think through the process.” —Greg Langfield, Enterprise Minnesota lis-based custom plastic product manufacturer. Lane’s initial path toward ISO certification exposed gaps in the company’s processes. Its executives realized early on that they needed to lean up their approach. “Rather than try to build a system that didn’t have the quality of lean

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coordination, we decided to integrate both approaches and do them at the same time,” explains Steve Lewis, CFO and co-owner of Lane Company. “As a result, it took us longer to get ISO certified, but it created some significant benefits for the company.” Lane used Enterprise Minnesota’s Lean Thinking program to lean up its operation, while simultaneously working on its ISO certification. “The lean sessions and the ISO system together made the company stronger and accelerated its quality improvement and time to market,” says Joel Scalzo, a business development consultant at Enterprise Minnesota. “These programs tend to be sequential for most companies, but Lane addressed both lean and ISO at the same time.” Lean and ISO have given Lane the integrated process and framework the company knew it needed. “ISO is a sales tool, but for us it was more than just being ISO certified,” Lewis says. “Our main goal was to use it as a business management

When Jashan Eison and Fred Poferl purchased H&B Elevators in 2013, they quickly realized that it can be a challenge to retain the legacy knowledge that lives within a long-standing company. Their 44 employees posessed a wealth of operational expertise, but it was mostly locked away in their heads and not easily shared with new recruits. H&B is a Minneapolis-based manufacturer of elevator components such as frames, cabs and doors. The company’s products are in buildings around the world, including U.S. Bank Stadium, the Burj Khalifa skyscraper in Dubai, and Yankee Stadium. As CEO and CFO, respectively, Eison and Poferl looked for a business structure that would enable them to share their knowledge and ensure the company’s sustainability. At the same time, they were thinking about H&B’s reputation domestically and abroad. “We needed something that would show customers we were serious about continuous improvement, training, sustainability, customer expectations, requirements and satisfaction,” Eison says.

ISO certification answered the challenges. After a few attempts at implementing parts of the ISO process themselves, H&B leadership looked to Enterprise Minnesota for help. Langfield says that ISO 9001:2015 is much more flexible in how it can be ap-

“Our leadership team learned that we have to be in sync and that the direction and push toward something have to come from the highest level.” —Jashan Eison, CEO of H&B Elevators plied, compared to earlier versions. “ISO 9001:2015 is very business-friendly,” he explains. “It gives you the structure to manage a business and the flexibility to make it fit; any business can apply it and see the benefits.” Scalzo adds: “ISO can fit a wide range of clients. One company might have four locations with 1,000 employees, and another company may have just five employees. If a standard doesn’t apply to certain areas of a client’s work, he or she doesn’t have to spend time on it.”

While larger organizations may assign ISO responsibilities to a quality control manager, small organizations don’t have that luxury. Eison found that sharing the responsibility among his leadership team worked well—with careful planning. Certification required everyone to work together and think holistically; while the primary responsibility was with the leadership team, a designated individual was in charge of communicating internally to employees and externally to customers and partners about ISO. A senior manager coordinated the project, but decisions were made collectively by leadership. “Our leadership team learned that we have to be in sync and that the direction and push toward something have to come from the highest level,” Eison says. “We had to teach ourselves how to create a system for accountability. Today, that system is still strong, and the process and procedures are still relevant.” Eison says ISO has enabled the company to track reductions in costs for scrap and labor and more easily satisfy customer requirements. ISO has also provided H&B with a process for uncovering the root causes of problems on the shop floor and determining the appropriate corrective action. As H&B responds to COVID-19, Eison says the ISO framework has been critical. “It’s played a huge role in our preparedness and our ability to rely on systems,”

Jashan Eison, along with CFO Fred Poferl, have rebuilt and revitalized H&B Elevators. Today, the company employs 50 team members on projects across the country, all from their riverside North Minneapolis headquarters.

noting that the company’s legacy knowledge is now documented, not merely locked away in people’s heads. “Some people have worked from home; we’re relying on them to understand and do things the same way as someone who used to be across the hall. So, we’ve relied on systems and documents we created; it’s given us some comfort.”

Northwoods USA: ISO propels growth

Most manufacturers with five people or fewer wouldn’t consider ISO certification. Brian Hitt, founder and president of Northwoods USA, is an exception. An engineer who spent much of his past career in product development and working with suppliers, Hitt saw the impact of ISO certification first-hand and knew he needed it for his precision-engineered machining company.

“ISO doesn’t magically make you a high-quality supplier,” says Brian Hitt, founder of Northwoods USA. “It forces you to put the checks and balances in place to have a business management system and quality system that will help deliver a great product.” “ISO doesn’t magically make you a high-quality supplier,” Hitt says. “It forces you to put the checks and balances in place to have a business management system and quality system that will help deliver a great product. It also opens a few more doors for customers who require ISO certification, and it would differentiate us from shops that do similar work.” Northwoods USA, based in Ham Lake, pursued ISO certification for both manufacturing operations and product design. The small size of his company forced Hitt to focus on essential business processes. He established procedures for accounting, HR, purchasing and other elements. Once those were in place, he worked with Enterprise Minnesota to create the documentation.

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“Having established ISO guidelines and procedures set up the longevity of his company,” says Dan Ball, a business growth consultant at Enterprise Minnesota who worked closely with Hitt. Hitt says the flexibility of the ISO process made it adaptable to Northwoods USA’s reality, despite the company’s small size. “It wasn’t a challenge to adapt it,” Hitt says. “If it added value to the business, we did it. If not, we didn’t. We now have a lean and mean ISO business management system. It’s the appropriate size for us and has the right structures and procedures in place to run the company.” Langfield of Enterprise Minnesota explains that ISO certification is like a book with the outline of a company story. It has the setting, the characters, and the direction, and it’s up to leadership to fill in the details based on their needs and objectives. The resulting plan helps them follow a strategic direction while anticipating the risks and opportunities they may face on the journey. Since earning the certification, Hitt recalls an aha moment regarding the alignment between ISO and Northwoods USA’s approach to risk. When an employee alerted Hitt to an issue, Hitt called the customer and asked for approval to ship a particular product. “The customer approved the deviation, and that process strengthened our culture here, telling employees, ‘If you have a problem, don’t hide it.’ It’s important to have those culture-building moments,” Hitt says. “As a risk-based system, ISO fits our business really well.” In the last 12 months, Northwoods has experienced only one non-conformance issue. “ISO helped strengthen our quality system so we can achieve near-zero defects,” he says. “You need everyone thinking about the same priorities and aligning them—that’s a force multiplier. We can do more with five people than others can do with 20.” Even amid the COVID-19 pandemic, growth is on the horizon for Northwoods. The company is expanding from a 5,000-square-foot facility to 12,000 square feet, and ISO’s framework has helped Northwoods work through the COVID-19 uncertainty. Hitt reflects on it this way: “I look at ISO and think, ‘What would happen if we hadn’t done it?’ That’s a grim picture in my mind because without ISO,

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we wouldn’t be anywhere near the level of execution, the risk avoidance, and the culture of where we are today.”

Micro-Trak: ISO and EOS ensure continuity

The benefits of a business management structure are compounded when employees have a clear understanding of their roles and responsibilities. Micro-Trak, a manufacturer of electronics for agricultural systems and road maintenance based in Eagle Lake, discovered this when it became ISO certified shortly after implementing the EOS system. EOS, or the Entrepreneurial Operating System, consists of concepts and tools that help companies improve their vision (getting everyone on the same page with goals and how to get there); traction (instilling focus, discipline and accountability around executing on that vision); and health (helping leaders become more cohesive and functional). “ISO and EOS are standalone elements,” says Dick Pedersen, a business development consultant at Enterprise Minnesota. “ISO brings a lot of structure to an organization in terms of problem-solving. It’s a company-wide structure, not just a quality tool for the shop floor. EOS helps put the people in charge who will get the stuff done. It helps them get organized and

“If you’re thinking about EOS or ISO, my advice is: Do it.” —Steve Vogel, engineering manager at Micro-Trak gives clarity on responsibilities, especially if the company is thinking about succession planning.” Steve Vogel, engineering manager at Micro-Trak, agrees. “Sharing tribal knowledge was a primary driver of getting ISO certified,” he explains. Vogel had experienced the benefits of structure and consistency through his ISO experience at a previous employer. “Micro-Trak has a lot of long-term employees—people who will be retiring—so we needed a structure for getting a person’s knowledge into a process for anyone to pick up. That succession planning gave ISO certification a

sense of urgency for us.” ISO processes documented the knowledge that had been locked in the minds of long-term employees and has positioned Micro-Trak to be more flexible in the face of COVID-19 uncertainty. “It’s all built-in now,” Vogel says, explaining that if someone is filling in for another employee, that person can simply look up instructions for a job. In addition, Micro-Trak created an online technical forum where employees can submit questions or search for answers. “That consistency helps when employees need to pick up another job; they can do that more easily because they can fill in for others. That’s been especially helpful when they’re not in the same location,” he says, referring to adjustments made during the pandemic. Although ISO and EOS focus on separate areas of the business, the work done for EOS made the subsequent ISO certification easier and more efficient for MicroTrak. “Part of the EOS process is defining the purpose, values and objectives of a company,” Vogel says. “That’s part of the management portion of ISO too. We were also already reviewing personnel and supplier performance, so we folded those into quarterly planning sessions. The core processes that EOS requires were already written. We just formatted them for ISO.” The value of both EOS and ISO has been especially apparent during MicroTrak’s busy season, when it uses temporary workers to augment the efforts of its 37 permanent employees. Before ISO, temp training varied depending on the supervisor training the individual. A standardized approach ensures that everyone receives consistent training. Taking on EOS and ISO was a big step, but Vogel has no regrets. “Getting EOS done first helped a lot with ISO,” he says. “It made the ISO process smoother because we’d already addressed communication and management, making it easier to cascade the messages down to others. If you’re thinking about EOS or ISO, my advice is: Do it.”

Ramping up for success

ISO is a living process that companies must revisit and refine, especially as they prepare to emerge from a challenging economy. “When we start getting back to the new

normal [after COVID-19], there will be a rapid expansion at all different levels and speeds,” says Scalzo of Enterprise Minnesota. “We’re envisioning that ISO will be essential during recovery. With the standard in place, you can show a much more trusted history of your quality and how you can change your process to fit a new client’s needs.” Hitt of Northwoods encourages manufacturers to pursue ISO no matter the size of the company. “If you have a small business with good people, good values and good operating principles, and you

“We don’t know what the new norm will be. So, for companies with credibly established procedures in place, they already have that foundation of strength that says, ‘We can move forward.’ There’s going to be a wider gap for those companies that have ISO certification versus those that don’t. You can’t afford not to go through ISO certification now.” —Dan Ball, Enterprise Minnesota want to take it to the next level, ISO is the right thing to do,” he says. “It’s an investment that will pay off for the entire future of the company—and keep your business growing and better prepared for situations like COVID-19. I would be worried if you didn’t do the certification.” Dan Ball of Enterprise Minnesota adds, “We don’t know what the new norm will be. So, for those companies that have credibly established procedures in place, they already have that foundation of strength that says, ‘We can move forward.’ There is going to be a wider gap for those companies that have ISO certification versus those that don’t. You can’t afford not to go through ISO certification now.”

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Final Word

Making Lemonade Our postponed State of Manufacturing® data will explain much about how manufacturers responded to the COVID economy

t should have surprised no one when we announced that the restrictions around COVID-19 forced us to reschedule the 12th version of our annual State of Manufacturing® (SOM) survey research project to November. The new event will be November 5 at the Earle Brown Heritage Center, two days after the election. Prior to postponement, our pollster was already well into his interviews with manufacturing executives when we pulled the plug (as you read in our story on page 5). Still, we knew there would be no way we could convene conducting the 13 focus groups statewide, which were scheduled for three weeks beginning on April 6.

I, for one, can’t wait to hear about the creative ways that Minnesota’s manufacturers plotted their way out of the weirdness. But like the manufacturers we serve, we’re not going to worry about circumstances we can’t control; we have our sights set on things we can control. Moving our SOM event to November will enable us to analyze how Minnesota’s manufacturers worked through one of the most peculiar—and potentially destructive—challenges they have ever faced. We only have to remember how our first SOM poll helped us at Enterprise Minnesota to develop an even greater full-on admiration for the resilience of Minnesota’s manufacturers. It was January 2009, and our original focus group participants were still figuring out how to respond to the unexpected challenges of the Great Recession. They were ambushed by the speed and severity with which the 40

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Lynn Shelton is vice president of marketing at Enterprise Minnesota.

American economy vaulted into free fall without any warning. Yet manufacturers used our focus conversations to talk to us, and each other, about things they could control. It’s true—several participants had their fingers firmly positioned above the panic button. But others talked about how they intended to take time for training, to develop new product lines, and to improve relationships with customers and along the supply chain. Some even talked about investigating mergers or acquisitions. At the time, their calm demeanor and strategic outlook blew us all away. This time might be different. Circumstances might be better, or they might become far worse. No one knows. My guess is that our polling research and focus group interviews in the fall will reveal that most manufacturers didn’t loll around in uncertainty and wait to let circumstances

control their prospects. I, for one, can’t wait to hear about the creative ways that Minnesota’s manufacturers plotted their way out of the weirdness. And trust me, they’ll tell us! One of the rewarding successes of conducting this survey over the past 12 years has been the depth of trust we’ve earned with the manufacturers who participate in the focus groups, a surprising number of whom have been with us every year. They know we’re in the project solely for information (we’re not trying to sell them anything). They know that we will protect their anonymity. Maybe, best of all, they know that they are going to learn something from other local manufacturers. It is appropriate, too, to thank all the SOM sponsors, without whom we could not have tackled such an expensive and time-consuming project.

Your trusted manufacturing advisors. For over 30 years, we’ve been helping Minnesota’s small and mid-size manufacturers achieve sustainable profits and growth. Despite the unknowns in today’s changing marketplace, you can rely on our experienced manufacturing consultants as a resource to help your organization adapt and thrive.

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