Milwaukee Sets the Stage to Grow Businesses
Instead of focusing on start-ups, a new pilot program helps cities identify and support companies that have the potential to grow rapidly.
Milwaukee Mayor Tom Barrett likes to point out that on his drive to work each day, down Highland Boulevard, he passes by two small start-up businesses. "The small one on the left side is Harley-Davidson and the small one on the right is the Miller Brewing Company," he says. The joke, of course, is that these firms are now international icons of America's -- and Milwaukee's -- business success. But they began like every business: small and with a handful of employees, if even that many.
Barrett hopes there are more firms in the Milwaukee area ready to take off like Harley-Davidson and Miller-Coors. "Every day, I'm reminded of the power of start-up businesses," he says. "What we need here is more entrepreneurial activity and we need more entrepreneurs to grow their businesses."
That's the keyword, according to Barrett, "grow." Many cities have plenty of start-ups and plenty of entrepreneurs. What they lack are businesses that can produce the kind of rapid growth that will ensure success in terms of generating wealth and jobs in the region. So Barrett and the City of Milwaukee have joined with American Express OPEN and other private partners to start a unique pilot project called Scale-Up Milwaukee, which is based on a model developed by Daniel Isenberg, a professor of entrepreneurial practice at Babson College. Isenberg has set up several scale-up programs, what he refers to as "entrepreneurial ecosystems" in other countries as a way to spur rapid and sustained growth in high-potential companies.
"Having lots of start-ups doesn't solve this country's economic growth problem," he says. "What does work is having them really grow, and it's not just start-ups, but also established firms that have the potential to grow. That's where the low-hanging fruit lies."
Isenberg's scale-up model is part alignment -- bringing the right resources to those firms that have the best opportunity to grow -- and part engagement -- bringing together the right public- and private-sector leaders, entrepreneurs, banks, universities, civic institutions and investors to create an environment from which small business can get bigger quickly. "We create the environment that makes it much better [for a business] to grow and we create the social values that support and elevate the importance of this kind of growth," he says.
The choice of Milwaukee was no accident. It has a critical mass in terms of population and a legacy of industrial and commercial successes. Besides Harley and Miller-Coors, the city is the birthplace of a number of major companies, including Kohl's Corp., Kohler, Co., Briggs & Stratton Corp. and Manpower Inc., to name a few. Isenberg says the city and region are rich in assets: They have a large creative class, top-rated institutions of higher learning, a low-cost business environment and they are just an hour away from O'Hare International Airport.
Barrett's role in the pilot project is mainly to act as cheerleader and publicist. He meets regularly with Scale-Up staff and the start-ups they are working with, and helps bring attention to the growing companies."There's a lot that a mayor can do to get the language right and to celebrate, congratulate and highlight to the media the Scale-Up ecosystem," Isenberg says.
Barrett also uses his office to help companies navigate the government bureaucracy, making sure "they don't get trapped." While the city hasn't made any financial commitment to the project, it is committing staff time to help make the necessary permit procedures operate as customer-friendly as possible. Isenberg says that financial commitments, whether in the form of incentives or other tax-break goodies, is the least important component to government's role in helping business grow. "Money should be a last resort; it's not the role of government, except in very limited cases," he says. "Government's role has to do with vision, clarity and cheerleading."
In fact, special government tax breaks and laws that favor new companies can have unintended consequences. Isenberg has started similar projects abroad and has seen what happens when government discriminates in favor of start-ups. In Brazil, new companies tend to stay very small because once they reach a particular size, they are hit with a huge regulatory hurdle in order to scale up and grow. Similarly, "in France [you are] twice as likely to find a 49-person company as a 50-person company" because government policy creates a distorted system for growth.
The problem is that everyone believes start-up companies need the most help," he says. And while start-ups exist in large numbers, the real potential for business growth lies with established companies, the ones generating revenue. "It's a small percentage of the companies, but if they are a strong candidate for rapid growth, they can have a big impact on the overall economy."