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Sunday, 25 December 2016 20:12

Embracing Change: Middle-market companies push innovation as they grapple with talent concerns

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Joining MiBiz for a middle-market roundtable were (top left to right) Joel Brandt of Macatawa Bank, Meredith Bronk of Open Systems Technologies and R. Kevin Clay of Pridgeon & Clay Inc.; (bottom left to right) Jeff Lambert of Lambert, Edwards & Associates Inc., Kerri Miller of Fishbeck, Thompson, Carr & Huber Inc. and Mike Stevens of Founders Brewing Co. Joining MiBiz for a middle-market roundtable were (top left to right) Joel Brandt of Macatawa Bank, Meredith Bronk of Open Systems Technologies and R. Kevin Clay of Pridgeon & Clay Inc.; (bottom left to right) Jeff Lambert of Lambert, Edwards & Associates Inc., Kerri Miller of Fishbeck, Thompson, Carr & Huber Inc. and Mike Stevens of Founders Brewing Co. Photos by Katy Batdorff

As they worry about talent and uncertainty, executives from a cross-section of industries voiced optimism in the pro-business policies pushed by President-elect Donald Trump. 

The two issues highlighted a roundtable conversation MiBiz held with leaders from middle-market companies and firms that serve the middle market. Participating in the discussion, which was sponsored by the law firm Clark Hill PLC and held at the corporate office of Founders Brewing Co. in Grand Rapids, were:

  • Joel Brandt, vice president of commercial banking at Macatawa Bank
  • Meredith Bronk, president of Open Systems Technologies Inc. in Grand Rapids
  • R. Kevin Clay, vice president of business development at Pridgeon & Clay Inc., a Grand Rapids-based auto supplier
  • Jeff Lambert, co-founder and president of Lambert, Edwards & Associates Inc., a Grand Rapids-based investor relations and public relations firm
  • Kerri Miller, a principal and senior vice president at engineering firm Fishbeck, Thompson, Carr & Huber Inc.
  • Mike Stevens, CEO and co-founder of Founders Brewing Co.

Here are some highlights from the conversation.

Given the present business conditions in your market and your industry, what do you see ahead for 2017?

Bronk: What’s happening in our industry is a change in consumption of technology. It used to be that companies used technology to run the business, and now it’s all about technology as a competitive advantage. What’s my e-commerce? What’s my total customer experience? How can I make sure that once clients interact with me that they are getting what they want and getting what they need? What can I do to make them smart and connected?

The pace of adoption of smart and connected devices is really just in its infancy if you look at the overall market capability. So we expect in 2017 and beyond that we’re just right on the precipice of that adoption.

Miller: We see 2017 being a lot the same as 2016. We have several different divisions and our divisions are largely different but continue to see growth. In infrastructure, for instance, obviously all of the city, the state and the federal infrastructure is starting to collapse, whether that’s roads or whatnot. So it’ll be interesting with the president-elect and different administration moving in (to see) where that is going to go.

Clay: 2016’s been a big year for the auto industry. 2017’s not supposed to be quite as big, which is actually sort of a relief. When you look at the cyclical nature of the auto industry, you have big launch years and then you kind of have years that are not as big. 2016 was a big launch year. Now that most of the launch activity is done, it’s more on the operational side of stabilizing the business, looking for cost reductions, process optimizations, things like that.

Stevens: We’re seeing challenges in that when we started the brewery 20 years ago, there were 500 breweries in the country and now there’s 5,000. The pie is continuing to grow, but the slices are getting much smaller, so the competition is starting to get a little more fierce. We’re seeing kind of pricing adjustments, and people are, I think, getting a little more cutthroat than what we used to be. We used to be a brotherhood, and it still is, but we’re facing a time where we have to start getting smarter about our business.

Lambert: There’s an integration happening where the traditional ad agency, PR firm, marketing firm are all coming together, and our clients are asking us to do a lot more. Where we’re headed is going to be more full service and being an integrated marketing firm. In ’17, we’re going to be looking at adding creative services, traditional marketing people where we’ve been much more siloed in the PR world, as well as heading down the consulting path. We own the relationships with the senior leadership team, and they’re asking when they do a transaction to not just do the organizational communications, but ‘what’s your view on organizational development’ or ‘how do you roll that out.’ So we’re looking at consulting as a practice that we need to head into.

Brandt: Locally for 2017, there’s going to be a number of customers — with the movement in interest rates — that will look at the fixed-rate debt that they have maybe coming up in the next 12 or 16 or 24 months and approach their banker and maybe pull that forward. It may not be new business to the banks, but it will be activity, and that activity might include checking their bank relationship against another bank. We’ve seen some of that already. West Michigan in general continues to be competitive and there are several new players that have announced they are moving into Grand Rapids, so it’s going to continue to be busy and aggressive in banking.

What tailwinds are pushing your business forward right now?

Bronk: For us, it’s business model change and it’s the idea that we’re having to get creative as businesses in how we serve our consumers. It’s challenging for me to run my business during a business model change. It’s also hugely opportunistic for us externally because all of our clients are struggling with it. And I hear it from almost every business I talk to. They’re thinking differently about revenue sources and how am I doing and how am I thinking about it differently. We are all challenged to think differently, whether you’re in manufacturing or services.

Clay: To us, it’s pretty simple. What’s going to propel us through 2017 really is the strong launch year in 2016. We had some huge programs that launched. Being able to have time to stabilize the business is good. You can focus on your processes and work on the business itself, not just putting out fires constantly.

Stevens: The wind in our sails has been through innovation. We’re the 12th-largest brewer in the country right now in the craft space. We see top 10 in the next couple years and it’s because of innovation. It’s because of All Day IPA, basically. It’s now the number-one-selling craft can in America and it’s the third best-selling IPA. It’s interesting because what the craft industry cut its teeth on were all these big, huge, bold flavors in beer, and now we’re starting to see all of a sudden this shift where, ‘OK, I’ve been in this space now for 30 years, can I just have some really good-tasting beer that doesn’t knock me off my feet?’ We’re riding that wave and we’re already looking at what’s the next thing. So you’re always innovating. You can’t rest, that’s for sure.

Lambert: We’re heading more into being business consultants and the marketing is really the go-to-market strategy. How do you get involved in that? One of my goals for the next year is for us to create a client with an innovation, an idea, a product — something that has nothing to do with PR. I have plenty of ideas that go unexecuted, so let’s pick one and put a business around it and in the process use our talent — whether creative services or marketing or social media — to then support that organization and grow it.

How are you looking at mergers and acquisitions versus organic growth to drive your business?

Bronk: We look at growth from an adjacency. We made an acquisition that was in a competence that was adjacent to us in a way that we thought the market was going. It was small, it was local, it was safe. It’s been awesome. We would do another one if we needed to. Our next acquisition would not come for a couple years and it would be into a new market. We’ll go into a new market in a competence we already have or think we need to gain because expanding geographically is a hard, hard thing to do organically. We’ve been at it for a while in Minneapolis, eight or nine years right now, and we’re getting some traction. It’s a tough thing to do.

Miller: In the past year, we opened an office in Columbus, Ohio. We already had one in Cincinnati that we opened about 10 years ago and have been doing those both through trying to figure out what service offerings we would like to add down in that market, whether it’s civil engineering or architecture. We’re just about to open an office in downtown Detroit and a lot of that was reaction to that market and how much is going on there. For us, I think we’ll continue to add organically, and maybe a couple small acquisitions. Failing infrastructure is kind of a good thing for a design company, so you kind of follow where things are getting really old and there’s going to have to be something happening.

Clay: We’re probably a couple, three years out from a major expansion. This year, as far as acquisition, it’s super unlikely, so the growth will mostly be organic.

Stevens: Our space is fairly dynamic right now. Obviously, we sold 30 percent to Mahou San Miguel in Spain (in 2014) and that partnership has been exactly what we wanted it to be. It’s great. It’s helped us get into the 22 countries that we’re currently in and we opened a little Founders facility in Madrid, more of a retail facility, and that’s going well. 

We’re looking for other opportunities domestically, though. We investigated some opportunities on the acquisition side — nothing that has really surfaced, but there’s a ton of opportunity out there. It’s somewhat obvious who’s going to be able to accelerate and grow through the next wave here, and there’s a lot of them saying, ‘I didn’t sign up for this.’ There are some good brands that would like to maybe not completely exit but hand it off to the next group of individuals that have to take it to different level.

What main challenges are you going to have to overcome next year?

Miller: Ours is recruiting, just finding really good people. We’re at 100-percent employee owned, and so it’s really important to find people that want to be invested in the firm and want to grow within the firm. We have a lot of employees that stay for 25, 30 years of their careers. It’s really competitive to land talent.

Clay: Talent is the biggest thing I worry about. It’s the biggest thing that keeps me up at night. It’s very difficult to find talented people out there. The schools aren’t churning them out. The trade schools aren’t what they used to be. Manufacturing really needs a facelift out there. We have some fantastic jobs … but we are really having a really difficult time selling people.

We’re heard this for a few years now as the economy recovered. How have you adjusted your businesses and training to try to get the people you need?

Lambert: It’s not just finding new talent but retaining the talent you have, and the millennial thing is real. We all used to just show up and work hard and not ask questions and be there until our boss left. Now it’s just a different generation. That doesn’t mean it’s bad, it’s just how are they motivated and having a pipeline for when they inevitably switch jobs every two or three years. … Creating internal culture more intentionally is how we’ve been trying to have better retention, keep people motivated, and have a 10- to 15-year trajectory in the business.

Miller: We’ve really started to spend a lot more time getting down into the lower level of high school, junior high trying to grasp interest in some of the STEM fields for kids because there’s really great jobs. Then it’s really working on retaining that talent once you have it, and that all is driven by culture and how the firms act and how the employees feel.

Bronk: There are things in technology that are going away, so part of what we’re trying to do is take some of the folks who have been around a long time and have skillsets that may be a little dated and we’re training people. We’re doing a lot more cross-functional training and getting exposure to some of the newer technologies for folks who’ve been around for a long time and we’re not trying to hire new if they’re already part of the culture and buy into what we do and have long-time client relationships. 

How might the incoming Trump administration affect your business or your industry?

Clay: For small and mid-sized manufacturers, if the tax breaks come through and the simplification of taxes and the repatriation of capital — if all of those things come through — and repealing some of the issues in the Affordable Care Act, it’d be a huge benefit to manufacturers.

Brandt: We’re really in a wait and see. ... Until something’s done, we won’t do anything differently because it’s a big part of the banking industry to be compliant with the regulations because it’s a big deal and it’s important. We’ll continue to have robust compliance departments.

Miller: It’s the uncertainty. What are the changes going to be? What is the timing of them? We’re just kind of watching to see how that stuff plays out from the health care side and the business tax side. We’re also paying attention to what plans actually get implemented. There are infrastructure plans that directly affect our business. If there’s regulations on manufacturing and others, our environmental side of the business has to be active. It’s a lot of uncertainty for everybody.

Stevens: To what Kevin pointed out, what’s being presented or discussed, if all of that happens, it’s going to be great for the manufacturing companies around the country. And, frankly, it’s kind of fun to watch. Whether you are a Hillary fan or a Trump fan, I don’t really care. But I’m a fan for shaking it up, and at least we’re talking about stuff.

Lambert: For me, as a small business owner serving corporate clients, it was more of me planning for what if Hillary was coming. I don’t have to plan as much for a Trump presidency because the things he is going to be doing are generally in favor of business.

How can the incoming president push for higher economic growth?

Clay: The things that he has proposed are what most people who are fiscally conservative, which obviously coming from a long line of entrepreneurs we tend to think that way, (would want). I think on the economic side, he has a reasonable idea on (what to do).

Bronk: We can’t quell the entrepreneurship and the organizations and the businesses and the companies with ideas that are coming to market. It is a global economy. You have to feed a global economy and ideas are going to drive a global economy. And if we can create an environment that fosters that and supports that, that’s our highest path to growth. Cap that and put restrictions around it, that’s where you get into trouble. And I don’t sense that’s where we’re headed.

Lambert: His best opportunity is to do what we’ve all been told to do, which is to surround yourself with smart people. If he can be self-aware to some degree of his weaknesses, I think he can be a very effective president. But he’s going to need to take a step back from the act, which I think it very much was an act. Once he saw it was working, he continued it. Step back from the act and get some people around him that can be effective.

Miller: And really try to unify. We have great people across the entire country in businesses and everything else. If we try to unify that, that’s only going to make things better.

Stevens: And he’s got to lead that, but we have to suck it up and be a part of it.

What worries you today?

Miller: Talent and retention. That is the one limitation to continued growth.

Clay: It’s not something that’s going to be cyclical. We’re going to have to go and fix this one, and we’re going to have to go and restart the engineering programs at the schools. We need to come to terms with that.

Bronk: For me, it’s about innovation. It’s about making sure that we are totally exploiting the innovative opportunities that are around us and adapting our own businesses as fast as we possibly can to the innovation that is happening. Choose where to lead and choose where to follow. When I wake up at two o’clock in the morning, those are the things going through my mind.

Stevens: The competitive landscape and the industry’s finally matured. Where we used to take price (increases) every three to five years, this year for the first time we’re reducing. We’re starting to see price compression.

Lambert: I think Michigan is still an apologist for the downturn and ‘poor us compared to Ohio.’ We just have to up our game. I’m tired of this stat that ‘we moved from 50th to 32nd.’ I think we have to kind of raise our collective self-esteem a little bit and say we’re going to be nationally dominant. We need to stop saying that we’re in some way inferior when comparing us to the coasts. Talk about who we are and the talent that we have, and I think that’s attractive.

Brandt: If the region isn’t growing, then that means it’s harder for us to grow. That means you have to be more competitive, you have to potentially take market share from a competitor, and that can be a really challenging way to grow.

What’s one prediction for next year?

Clay: We could be looking at a renaissance in American manufacturing. If the tax rates go down, we will immediately put that money in capital, which will immediately create jobs, which will immediately create opportunity. That could legitimately create a renaissance in manufacturing in America.

Brandt: I think for the first time we’re going to see legitimate inflation as opposed to what we call the lack of any. I think it’s going to come back into the economic world and people are going to start talking about it.

Lambert: The Lions are going to win two playoff games.

Stevens: In my space, craft beer will get to a 25 (percent) share. If craft goes to a 25 share, it’s a complete, whole change. Then it won’t end. 

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