Manufacturing Transcript

Participants:
Bill Brake
Vice President & Gen Manager, ISG Cleveland
Joe Frolik 
Associate Editor of the Editorial Page, Plain Dealer
Susan Helper
Professor of Economics, Case Weatherhead School of Management
Jeffrey Korach
President & CEO, Tremco Inc.
Scott Rickert
President & CEO, Nanofilm
Jack H. Schron Jr.
President, Jergens, Inc. & Tooling University
Fatima Weathers
Executive Vice President of Operations, CAMP, Inc.
Steven Williams
President & CEO, Elsons International

MR. FROLIK: Thank you and welcome to the 13th in our series of Quiet Crisis discussions. Our topic today is we're going to talk about manufacturing. Obviously, one of, traditionally, one of the foundations of the Greater Cleveland economy or one that's undergone a lot of change over the last couple of decades. And all of you have been involved with manufacturing, either as a participant or a student for a good 20 years now. And I would like to ask each of you to talk about what's the biggest change in manufacturing, both if you want to think on a national macrolevel, or regional, or even within your industry. Let's start with you, Sue, from the Weatherhead School.

MS. HELPER: Well, I think one of the biggest changes is the recent decline. If you look at where we were in the just the Cleveland, Lorain, Elyria area, that there used to be 220,000 manufacturing jobs in 1998. There's now, as of March, 160,000. So it's a big decline.

On the other hand, one of the things that's stayed the same, as you mentioned, is that manufacturing is still an important part of our economy. Much bigger, say than biotech, which, maybe is about 8,000 jobs if you count generously.

MR. FROLIK: Okay, Scott Rickert.

MR. RICKERT: I think the big difference is, following up on that, is there is good reason for that manufacturing job decline. We used take, for a given work cell, three people, now to do work with three people, now we do it with one. Automation, enterprise resource planning, software, has really eliminated a lot of the, grunt work, we call it. And the workers we have today are smarter, better paid and fewer of them in the production facility.

MR. FROLIK: Uh-huh. Bill Brake.

MR. BRAKE: Well, I'd like to echo, I mean, with what Scott said, clearly what used to take several thousand people in our steel valley now can be done with 1500 hundred people. Technology, worker involvement, worker participation, lean management, I think all of those things have contributed to a significant shift in the manufacturing manning and requirements in the area. As well as, from our industry, just a significant consolidation over the last few years has gone, continues to go on and is a significant factor in our industry.

MR. FROLIK: Okay. Fatima Weathers.

MS. WEATHERS: I think one of the biggest changes has to do with the, what's happened with quality programs over the years. At one point, people thought it was special to have a quality program, and now quality is a given and everybody has quality programs, everybody is expected to do it nearly perfect.

I think another one of the things that has really changed is that people are expecting, sort of, customization. So rather than these long runs, the same thing over and over and over, you've got mass customization at this point so you've got to have flexible manufacturing cells and flexible workers. So that's a major change over the last 10, 15 years.

MR. FROLIK: Okay. Jeff Korach.

MR. KORACH: From a Northeast Ohio perspective, geography has really played a big part in it. If I go back 20 years ago, a lot of the manufacturing was done in this part of the country and then it seemed to shift down south, into the Carolinas and Alabama and wherever.

Then, we saw another shift that went from there to Mexico. And now, we're seeing another shift, once again, into Asia and China. And it's sending a profound influence on the number and quality of jobs that are available here, in Northeast Ohio, and far different than, say, what we experienced 15, 20 years ago. A lot of reasons for it, obviously, but it certainly occurred.

MR. FROLIK: Jack Schron.

MR. SCHRON: Well, I think that the concept that both Scott and Bill talked about as far as the lean and thinning out of the process, we've become or own worst enemy in that our own productive gains are contributing to those numbers that Susan was talking about, that are dropping because we've become so much more efficient. A lean manufacturing cell today is pushing those items through on a quick-term basis, as Fatima mentioned.

We're doing those productivity runs, those small runs and we're being, all, very flexible in the way we start the process, from the time it's thought of until the time the product is actually coming out the back end of the factory. So with less workers, we're actually being able to produce more product with more flexible basis because we're looking at it at the very beginning of the process, not trying to change the process as the process goes through.

MR. FROLIK: Okay. Steve Williams.

MR. WILLIAMS: I just want to add, Jack, Fatima and Scott have made some great point. I will concur with those. But I think for me it's been one of those having to re-invent ourselves, just in terms of how we approach our markets that definitely have changed, the competition level has changed dramatically here, specifically in Northeast Ohio, because of the heavy industrial market.

A lot of jobs, a lot of products are going overseas and it's been, actually, a fight to keep market share, which obviously drives down pricing and at the same time forces you to do, continue to improve internally by re-organization.

MR. FROLIK: Let's build on, because a lot of people talk about the re-inventing of manufacturing. And on a practical level, with your business, and others, feel free to jump in, how does that work? First, what's the signal that tells you it's time to re-invent and how do you go about doing that?

MR. WILLIAMS: I don't know if you get a single. I think it's trying to look out in terms of your market and determine where, not you, are going so much, but where your customers are going. And try to look at linkages and relationships within your own industry from a competition standpoint and find out how linkages can help you re-invent. Whereas, you may serve in markets that were industrial oriented, we, as a company, now, are going after the food and beverage industry because those jobs and products are not going overseas, they are staying here.

So we had to re-invent ourselves and terminate, in terms of quality programs, management expertise, equipment, because now, when you go after those kinds of markets, you're dealing with a lot more of the big boy competition than our industry. And it forces you to get more and more independent.

MR. KORACH: Joe, I think if you haven't changed over the last 10, 15, 20 years in Northeast Ohio, you wouldn't be sitting here today. I think it's correct, what Jack said a few minutes ago in regard to productivity, the increased productivity is our own worst enemy in regard to the number of people we hire and put to work.

But on the other hand, with costs increasing the way they have, and I'm not just talking about labor costs, I'm talking about operational costs associated with utilities and insurance and all the other costs associated with running a business in this part of the world, had we not gotten more efficient, had we not gotten better, had we not gotten more toward class A manufacturing, more productivity gains, I don't believe we wouldn't be sitting here today. I believe you would be talking to somebody in China or somebody in Mexico.

MR. SCHRON: As Fatima spoke of, in the '80s the wake up call was quality, today it's lean manufacturing, productivity improvements and with those comes a reduced workforce, unfortunately, but it becomes a more efficient workforce and it means a workforce that, today, just like an athlete that got themselves into great shape, I think that U.S. manufacturing is in good shape to take on these challenges.

And yeah, there has been business that's gone over to China, but the business that's here, we are fighters, we've leaned out our process, we've thinned out all of the ways in which we can attack these challenges and there is industries here, today, that are not going to move because they need to have flexibility, they need to have productivity runs, small lot runs, one piece, ten pieces, a lot of customization. And I think those pieces are where we're going to find our niche here.

MR. WILLIAMS: Jack makes a great point, just in terms of outthinking the competition. I'm a big believer in innovation. And when you think about all the jobs and products that have gone overseas, in a big way, the definition basically says those products are pretty much mature and because of our innovation to come up with those products and services. They're gone overseas. What we have to do is outthink the competition in terms of coming up with new ideas, better things and new products that start here and then, over time, as they mature, yeah, they do go overseas.

MR. BRAKE: But getting back to the signal, I'm often interested to see what manufacturers are slow to change or they want to change selected items whether it's quality system or some other selective items but aren't positioned or aren't committed enough to change deeper and to change broader. Because I agree with you, we do need to win by innovation, we do need to take risks. But often, I see people sitting a little too flat footed and not committing themselves to the fact that change is here, the signal has come and it's time to move on every front.

MR. KORACH: And that commitment, I think, has to come from we who run these businesses and do invest in these facilities, but also from government, in the way of cooperation and ease of doing business, comfortable to do business in this area, and from labor, in the way of cooperating in the workplace and providing us with better productivity and better quality. And it's pretty tough to do it one at a time, I mean, everybody is going to have to be involved in the process if we're going to stay anywhere near competitive in this part of the world.

MS. WEATHERS: I agree. You've got a good point there with people being slow to change. Some manufacturers have been very slow to change and there are those who are waiting for the economy to bounce back, thinking that they can, then, just go back to the old way of doing business and those will probably fall by the way side. The ones that survive will be those that develop competitive strategies, globally competitive strategies because globalization is not going to go way.

And similar to what you're doing, they'll get into new markets Steve, and they will get into new products with the existing marketplace, but they'll find ways to innovate and to compete globally. Other ones will fade, fade off into the sunset because they are not willing to change or just not willing to make the --

MS. HELPER: Just jumping on what Jeff said, it is hard to do it alone. And I think there is a whole cooperation that needs to happen at a regional level, that some of my research suggests. In fact, that, even though people around this table have really succeeded by innovation, I am not sure that that's automatically not going to be what happens.

In fact, I have some data looking at small manufacturing firms, that suggests that firms are actually doing better are the firms that do, kind of low-wage assembly work because they keep it here to be close to the market. And if we want to not have those jobs be, you know, primarily the jobs, we want to keep the jobs that are here, things like training individual workers, and also, things like what CAMP does, helping the whole company, the whole plant work better, laid out, things like that, I think is really important.

MR. SCHRON: One of the areas that, if you look at one of the new manufacturing studies that came out from the Department of Commerce, from Secretary Evans, education is the number one issue that Secretary Evans points out. The second one though, is an area that we're not hearing a whole lot of change being voiced out there in the market place and that's governmental change. We're not seeing that, the regulations, all of the documentation, all the excessive environmental issues, not that the environment is not important because we built a building on a brownfield and we know that that's important.

But when you look at the totality of what's going on in the government in the areas, that's the second most important area, according to the Department of Commerce study, that needs to change, an yet, you don't really hear an awful lot about that 15 to 20 percent that's actually sitting in everyone of our products or services in manufacturing, that's actually being built in and cooked into our process that our foreign competition is not building into it. And so, there does need to be an element in government that we all know that we need to have safe operations and we need to be concentrating on the environment, but all these additional costs that are starting to creep into every single aspect of what we do, and how we file a piece of paper, and how we track it and everything about it.

MR. KORACH: Even if they don't help, they got to stop getting out of the way.

MR. RICKERT: You know, Jeff, you are absolutely right. I really think the future in manufacturing from a tax term is really simple. We'll pay a fair share of taxes and leave us alone. Get out of the way, please. We don't need you, we don't want you, just don't bother us.

MR. KORACH: We put up a facility, we put two, three, four million dollars into a facility and, you know, using a number of tradesmen to do that, and you're investing in a facility in the area, and then you can't get an inspector to come out and sign off on it. I mean, there is nobody there. You can't get the guy to do it. So now you're delayed here and you're delayed there, and it's just too tough to do business here. They make it tough. We're not suggesting that they have to be terribly proactive, but they seem to get more in the way, from a governmental perspective, than they help in the way of providing assistance by just letting us go.

MR. WILLIAMS: Jack, what I hear your saying is pretty much what I agree with, and that is, you know, in many ways we need government to act at the speed of business. And when they do act, they need to bring a confidence level within the framework of the bureaucracy of the government.

MR. KORACH: Particularly, if we're going to compete in Northeast Ohio, we've got a lot of negatives going for us in Northeast Ohio compare to the rest of the country. A lot of the -- I grew up in Northeastern Ohio, so you know, I can remember when Cleveland was the best location in the nation and they used to draw that circle around it, and within 500 miles of Cleveland everything happened. I happen to be in the construction products business, we make construction materials.

Well, all the construction in the United States isn't happening in that 500 mile radius anymore. It's now going to Texas, and Los Angeles, and Florida and so forth and we're still manufacturing here in Ohio. So in order for Cleveland and the Northeast Ohio area to continue to prosper in that regard, they are going to have to make it, at least, easy enough for us to stay, you know, and cooperate with us and allow us to invest in this area, which we very much want to do.

MS. HELPER: I guess, I mean, I think that there are clearly a lot of ways the government is an irritant, and as a homeowner, problematic. I think some of that is just mismanagement and, you know, the government needs to get lean as well. But some of the things is what, you can actually trace, some of the businesses want, you know, like low taxes. If you cut taxes, you are going to cut salaries, you are going to cut numbers, and this gets hard.

If you look at some of the other states like Minnesota or even, Madison, Wisconsin, it's viewed as a great places to do business, is actually a fairly high taxed place because, with taxes come services. If you look at, sort of, the average business, we pay about one percent of costs in taxes. So, you know, electricity is way more than that. And if you think about certain things you get from taxes, there may, actually be better services that are provided by a public level. If you think about hiring your own police force, or educating your own workers, that in fact, actually, higher tax for those things lead to better services. It could be a winning investment for you guys.

MR. SCHRON: It's not the taxes. Don't misinterpret the businesses problems, it's not paying the taxes that's the issue, it's all the other additional things that get brought into the package. It's the fact that if you are a small manufacturer and you start exhibiting in a trade show in Los Angeles, now the nexus is, you have now established the nexus that you're doing business in California, you're now under California tax regulations.

You do a trade show in Detroit, you're now under the nexus of Michigan, you're now filing tax returns, now doing things that there was never any intent of anybody that, when you're operating and making your products here in lovely Cleveland, Ohio, that all these long arms are going to be stretching out and causing you to actually file and do all these documentation, and all this information. And it's not the tax, you gladly pay the taxes. It's the fact that you have to hire all these people just to administer the paperwork and the documentation that government is imposing.

MR. BRAKE: But that goes on, that's a part of doing business. Whether it's manufacturing, or whether it's the government, or a supplier. Deal with an automotive supplier and look at what quality documents. Sorbanes Oxyl has come in for public companies, look at the requirements there. I'm a big believer that we're going to have challenges whether it's the government, our customer base, foreign competition or whatever. What's important, I think, for us to remember is that all of our solutions are within our own companies. Yes, we have challenges external, and if those were less, our lives would be easier.

But what we're focussing on is innovation and developing new core competencies, whether it's document control or whether it's answering a, you know, an inspection report from the EPA or whatever challenge comes to us. I feel strongly that what we need to be doing is redefining how we do business. Unfortunately, we can't define what the job requires. The circumstances of the day define what the job requires, and tomorrow it will be different. And tomorrow the government may be worse. And tomorrow, believe it or not, our customer base may be worse to deal with. We have to learn to be, as a large manufacturer, flexible and together.

I liken to a school of fish, we have to move when it's time to move, and then as a manufacturer, we have to stay the course to get repetition and quality and all the other things that we like as manufacturers that bring us home. So it's a real paradox. I feel that developing more core competencies in the plant is going to help us survive the myriad of challenges out there because if it's not the government today, it's somebody else tomorrow.

MR. KORACH: And I think that that's absolutely true, but from a Northeastern Ohio perspective which we're talking about here, today. You know, we have an opportunity to invest in Ohio, in our facilities or go to Detroit or Los Angeles or somewhere else. And for example, in our particular issue, we have five facilities in Northern Ohio, we have 14 facilities in North America and we have invested about 15, 18 million dollars in facility and equipment in the last three or four years here. We have that choice, you know, we don't have to invest it here, we can invest it in Birmingham or Pittsburgh or somewhere else.

And I think from a Northeast Ohio perspective, I think what you're talking about here, in this particular discussion is how do we maintain more of Northeast Ohio or how do we effect that issue. And yes, they have got to try to influence our investment dollars and investment in business here rather than somewhere else. And yeah, certainly we're responsible for doing our own innovation and taking care of ourselves. We're going to have government. We want government. I don't have anything against government I just, it ain't going anywhere.

MR. FROLIK: What's your definition this day and age -- what's a good business climate, particularly for manufacturing? What do you need from the public sector? Not necessarily the government, but the other aspects of, the rest of the institutions and the populous of the region that make it a good place for you to do business.

MR. WILLIAMS: I would like to start with the education. We are located in the City of Cleveland. We operate three manufacturing plants and the skill sets, the workforce readiness of labor is a problem. And I'm not sure if everybody experiences that, but I think most of us around the table, A, either experience it or you're aware of it.

And everybody needs to understand, as the school system goes, so does Cleveland. We're not going to be able to separate ourselves from that. It is a drag in terms of our companies trying to grow, that have to recruit from that pool of talent, and there needs to be, just more of a concentrated effort on education, I think, here in Northeast Ohio to get the skill sets up. Not just an education, but just some of the basic attributes of understanding what it means to come to work and be at work, so I'm talking more lifestyle skills. You know, what it means to be someone on time and when you're there, to contribute.

MR. SCHRON: I sat on the business advisory board for Max Hayes. And Max Hayes is one of our last vocational institutions within the Cleveland City School System. And within there they are trying to re-invent themselves with a new concept that talks about an academy concept that's being sponsored by the Greater Cleveland Partnership. And everybody's coming together saying we've got to change the attitude, and making manufacturing okay. You can feel good about doing things to make stuff.

And we've got to recharge this. So this academy model, which is going to be launched next year, is really something that, think, pulls on the educational concepts that we were just talking about. Cleveland City Schools wants to go back and re-examine this. It's being successfully modeled after what's going on up in the Toledo School System with an academy. And there, the students have to show up on time. It's a requirement that they actually do some selective identification of which students will actually go into the program and actually care about it. They want to re-invigorate the whole concept. And with, the taxpayers voted to do the re-invention of all the new buildings throughout the Cleveland School System through that bond fund, Max Hayes is going to have physical property that is going to be updated. And now they're doing, looking at doing the whole curriculum. So, I think everybody needs to take a part in that move.

MR. RICKERT: Jack, from a high-tech company perspective, we principally recruit people with a college degree and there is excellent colleges here. They are creating excellent talent. We find that it's a really exciting place to hire. We don't have a problem at all. They are well trained at all the universities around here, and colleges. I think you're really referring to people who do not have a college degree and there there is an issue. But again, it doesn't effect the technology sector very much because we don't hire very many of those folks.

MR. KORACH: Another thing, it's an issue of cooperation. You know, once you get the labor, whether it's mandatory or hourly labor, we really need to get more productive and we need to get better quality. That's the only way we're going to compete in this area, in this region, in a high-cost area like we are. And we've got to get better at process.

So we need a cooperative effort, not only between government and business, certainly, but between labor and management. We need to take, like I'm sure you're experiencing, probably better than the rest of us, quite a resurgence of complete industry here in the steel business. So, and a lot of that has to do with cooperation between management and labor that didn't exist before.

MR. FROLIK: You guys have, I think, a great story to tell.

MR. BRAKE: We do. We're very proud of our partnership with the United Steel Workers of America. And, I guess, to blend, maybe, some of the responses to Joe's question over what can a region offer. What a region can offer for us is an employee that's more sophisticated than a high school graduate of 20 years ago that comes into a large manufacturer and works on an assembly line or works in the mill.

A key component of our success at ISG has been the ownership, and accountability and responsibility of the hourly worker and they have truly taking an ownership of it. In order to make that successful, they have to be aware of business basics. They have to understand the costs. We explain EBIDTA to them to make sure we all understand what our key metric is for us. We share sales prices, we share costs of materials, things that weren't done as recently as five years ago. To explain to a worker, do you know that roll costs us X thousands to get refurbished, is that the right decision to make and let that individual make the decision. To have that successful, I need a sophisticated worker that cares about his business.

MS. WEATHERS: I think that's an important point that you're making. What I want to build on though is that it's not only important that you have a sophisticated worker or someone with experience but that you invest, as a company, that ISG invest something in that worker, by giving them some shared responsibility or some inside knowledge about why these quality programs are important, or why our processes are important so you get some buy-in from your workforce. And that you take some ownership as a company in developing that person, too. I mean, after all, I don't really expect the public school system to turn out a sophisticated worker at 18, 19 years old. I don't expect that.

MS. HELPER: I actually have some experience with the old LTV and a couple of stories that, I think, illustrates, kind of, some of the differences in what you guys have done, Bill. One is, I remember going through the plant in around '98 and asking somebody, well, you know, how much does one of those widgets cost if you mess it up, you $100, 1,000, 10,000? I don't know, you know, I was asking the quality inspector. How could that person make a good decision, you know what I'm saying, not given the other information.

The other, I think, is sort of a long term commitment. I mean, I've studied employee involvement and it sort of seems like this no brainer. You get all these heads on the floor working with you, but yet it's a really hard thing for companies to implement. And where I see problems are, one is just being prepared, particularly for small companies, being prepared for the flood of suggestions you're going to get and responding to every one. Cause people have -- if you don't respond, they don't feel like they want to, you know, what's the point.

The second, I think, and a mistake, maybe, that LTV made was understanding it as a partnership. And I think if they had had a, sort of, short term successful partnership yielding millions of dollars in savings, and then went opened a nonunion joint venture, which, you know, LTV had it's own reasons for doing so, and in their own mind it was a fine thing to do, but it wasn't agreed upon with the partner and so the steel workers pulled out.

MR. BRAKE: But, as you pointed out it wasn't a partnership, therefore there was no need to agree upon it. The fact of the matter is that our industry like many is an age-old industry with legacy behaviors, legacy structure, legacy costs, both real and figurative. The fact of the matter is is that we have been changing just exactly what you say as far as worker involvement. But what's very different about ISG than all the other approached we did at LTV and all the other companies is worker involvement.

For example, it's not a normal, let's have a problem solving team meeting, or let's have a suggestion box and then, let's hire a staff of supervisors to sort through the suggestions, that can't work in our environment. What does work, in fact, is here is the problem, what do we want to do about it, or what can you do about it to take ownership and solve it yourself. What tool do you need? Here's a phone number, here's the vendor that can give you that part.

MR. RICKERT: Exactly right, Bill. You're paying them better, you expect more and you're getting more. You don't have as many, but they are smarter. They are smarter workers, smarter manufacturing, fewer people and you can find them and I can find them.

MR. BRAKE: And we've gotten out of their way as managers and supervisors. We've gotten out of their way and let them run it.

MR. KORACH: From a Northeastern Ohio perspective, if you go back to the issue of Northeast Ohio. How do we accomplish, Bill, with you getting ISG to invest in Cleveland versus Bethlehem for example?

MR. BRAKE: Well, we did both.

MR. KORACH: Okay, you did both.

Well, you know, as you move forward, there are facilities here in Cleveland, expandable facilities here in Cleveland, I assume as there are, I'm sure, in Bethlehem. So we, from a real parochial perspective, in Northeast Ohio, want the investment here. We want to grow it here. So what events need to be done in order to get that to happen?

MR. BRAKE: We just, today, announced the results of a $10,000,000 capital investment, another $10,000,000 in working capital to open up the west side of Cleveland. How did that happen? And as I was telling the employees last week when I was there on the floor, we made this happen. We controlled our destiny. We showed the corporation the bottom line. End of story.

We, being labor, management, the plant. The east side plant that's been running for 2 years showed through their efficiency, we proved ourselves. We went to Rodney, we went to the board of directors and said, look, we want to sped another ten million to increase our capability.

I can guarantee you if our numbers weren't where they were, there would have been a different result here. The fact of the matter is our workers and our management together earned this opportunity. That's why I'm a big believer in, at the end of the day it wasn't an external cause so much. Yes, things are much more attractive, perhaps in Minnesota or other areas, but at the end of the day, our workers created their own destiny and that's what's most important, that an empowered workforce can change the results.

MR. SCHRON: There is no question that the workforce and the whole team coming together is going to solve whatever your problems are as an organization. The only alluding to the outside factors are those have become distractions that are not part of what your solution is. That's the only reason that the distractions need to be -- leave the distractions out of the way, then you can even accomplish more exciting goals.

MR. BRAKE: And let's face it though, my business model isn't the same as anyones. I require blast furnaces and hundred million dollar capital equipment that just aren't laying around or being built new. So the decision of Cleveland was made a hundred years ago. So that's -- we don't, as ISG, don't have the choice to go to any new city we want.

MR. KORACH: You do have a choice of other cities within your grasp though.

MR. BRAKE: That's right.

MS. WEATHERS: I don't think, Jeff, that we need to broaden this conversation so that it really is beyond Northeast Ohio in some respects, particularly for the industries like the steel industry or the automotive industry. You really have to think regionally. Now, for other industries where it's more of a niche in manufacturing, like Nano film or MIMS technology, and we do have some new high-tech companies that are pretty unique to the area, and are focussed in the Cleveland area, that's a sort of different scenario.

But when you think about manufacturing, and you think about it in all it's complexities, you really can't focus it down to a few counties. You really have to think about it in terms of where are the resources, where are the capabilities, where are the skills, whether you are in an aging industry, a mature industry, or a new industry. So you go to a place where you have, like you were saying, where you have, Scott, where you have the work force that is already trained and prepared. So that's what drives where you're located.

MR. RICKERT: It's amazing to me, in the nano area, The Small Times is a magazine that tracks the companies involved. Well over half the companies in the U.S. are located in what's called the nano belt, which runs from Illinois to Massachusetts. The miles are pretty much in the middle and they are all near major university and they are all making flexible manufacturing sites. And we're right in heart of it. That's where the action's occurring, right here.

MS. WEATHERS: So that's why I'm thinking, Scott, when you think about your business, you can't focus it just on Northeast Ohio --

MR. RICHERT: On the whole belt.

MS. WEATHERS: We have to broaden the way we think about our client base, our customers, and think in much broader terms than localizing it to a community, or even a region like Northeast Ohio. We're trying to maintain whole industry sectors. So when we think about an industry sector, we have to definitely look beyond Northeast Ohio. We have to start to think regionally.

MR. SCHRON: And I understand you've got great access to some terrific universities but that's, as far as the employment potential of supporting, even the region, the base gets awful big at the bottom of that, and I don't mean bottom as though there is a priority to it, but the size of where the rest of the workforce is. And therein lies where we still have, after we look into the future, I think, education, and why we need to say this is an important part. And it's great that we have such great institutions such as Case, and Cleveland State and all the private institutions around here, but we clearly need to be focussing on that bulk of the workforce that's needed over in steel and at the trim coat.

MS. HELPER: Well, I think that's one of the strengths of manufacturing. I mean, if you just look at the average wage, within Cleveland the average wage in manufacturing is about 49 thousand, that's including all levels, from management on down to employees. The average wage total is 41 thousand. And I think one of the things about manufacturing is that's good is it can provide a job ladder career path, take somebody who maybe didn't do so well in school and, you know, if you can set in motion, set training experience and stuff, make that person into a person who can earn a family wage, that makes life around here in Northeast Ohio better for all of us because we have a lot of unemployed people.

I think we have some institutions here that help do that. Fatima talked about CAMP, but there's this group called Wirenet on the West Side, an organization of small companies that, just one example of what they did, took about $345,000 and with that trained some workers, placed others, about 130 employees and ended up with $2.6 million added to the payroll. So it's a pretty, seven to one return and that's the kind of thing you can imagine scaling up, expanding beyond the west side and helping provide good workers.

MS. WEATHERS: What's equally important on that, Sue, is that once you train a worker and they get placed in a position, whereever, even if that company should close or if they need to move to another area for whatever reason, they take those skill sets with them. So if everyone invests in training and development, it raises the whole ship so to speak. It's an investment that everybody wins on. So at CAMP we focus on training incumbent workers, those folks who are already employed. And we know that, should they stay there or decide to move on, they are taking some skills that are valuable whereever they go.

MS. HELPER: And one of the things about CAMP, is you also train management. And I've, nobody in this room, but I've certainly been in plants and companies where the management is not, is the one not thinking of new ideas, not implementing the quality initiatives.

MR. BRAKE: That's been a big challenge for us, is really redefining the value of our front line managers. And that has changed, you talk about 15 or 20 years, it's changed drastically and that is a challenge.

MS. WEATHERS: We have to even take the word training out. We talk about developing managers and developing supervisors to get them up to speed on things like six sigma and quality programs, lean manufacturing processes and all those kind of things. Even from the shop floor to the highest levels in the office, you have to have an awareness and some deep skills in those areas.

MR. WILLIAMS: Tri-C has a wealth of programs relative to the workforce readiness and development or retraining, both for those people who would like to stay a shop floor but get new skills and some as far as management, being able to access that kind of education to help themselves up in management level.

MR. SCHRON: And I would be remiss if I didn't mention the business to which we have actually launched for this very issue is the tooling university which uses graduates from all the local colleges to do the classes, but we teach classes at Tri-C as part of the on-line education. When you go into Polaris Joint Vocational High School and you see something exciting, those students are all taking new classes on laptop computers where they walk anyplace along the campus, flip it open and they are taking manufacturing classes on lean, on six sigma, on all the new, exciting concepts. And so, those students, when they see that, they see that they are no longer talking manufacturer as this dirty, smokey environment. They're seeing high technology and everyone of our people going through our apprenticeship programs are coming out with associate degrees and some coming out with four year educational -- in the environment people, years ago didn't think was where you needed to be putting education.

MR. WILLIAMS: I want to make one other point, too. I don't think anyone has touched on this yet but, when you speak about manufacturing, I want to make sure that we all understand that, I think, to grow the region, the area, we need to focus on entrepreneurship too. There are many companies, manufacturing companies in this region that are sleepy, tired, that just don't have the umph at the top. From an entrepreneur standpoint to get things going again.

And from where I sit, being a small manufacturer, I think that's the seed that drives it. And whether it's Case or CAMP, or whether it's in, even our own organization, if we're not focussing on teaching people, whether it's the management level or shop floor level, to think entrepreneur, I don't think we're going to get to where we are going at the end of the day.

MR. KORACH: So with all these things that we're doing right. You know, with education, these great universities, and all this good stuff that we're doing, training, and all us smart entrepreneurs and everything else, why is the fact, and I don't know the statistics, maybe you know them, Sue, but it appears to me the number of years I've been doing this, more and more manufacturing leaves Cleveland and goes to North Carolina, then it goes to Mexico, then China and then it goes to Asia. And yes, we do get fortunate once in a while and do get, maybe somebody like Bill here that brings it back, and some of that's because maybe there is a blast furnace here, and historically that's where they have to go, but you know, if you really look at it, and whether you talk about it as Cleveland, or regionally or whatever, this part of the world, I think, is less prosperous today than it was 20 years ago. Now, why is that happening and what do we do to return that back?

MS. HELPER: I have a couple, actually, I guess, three answers. So I think there's three reasons. One is, that we talked about a lot is increase in productivity without a lot of increase in demand. The second is, in fact, trade deficit. There is a studies by the Economic Policy Institute that suggests that about a third of the manufacturing job loss over the last three years, actually has to do with trade deficit.

MR. KORACH: In this region?

MS. HELPER: This is nationally. There is no reason to think the U.S. is different, I mean, that Ohio is different. Actually, there is a study for the State of Ohio that suggests a similar number. And then, let's see, so trade deficits, productivity and lack of increase in demand, I guess, is like productivity. The third thing is government policies, I actually agree with you guys. I think one of the things we do a lot, both at the national level and at the state level is really subsidize sprawl in some sense.

You know, we built an interstate highway system. We give huge tax abatements to people to go to green field sites. We impose costs to people who go to brownfield sites, and so if we really think about some of the policies that the government does do, and think about re-orienting them to providing sort of high wage, long term jobs at both the companies benefit and the region's benefit. So I think that's kind of a really good reason.

MR. KORACH: Sue, a lot of the disappearance of industry from this region to another region is cost related.

MS. HELPER: Absolutely. And part of what this government involvement has done is to make it cheaper to go set up an entirely new factory somewhere else. It's not clear that that's socially beneficial. If we're just sort of building a highway, so we all pay in some sense for that new plant in North Carolina.

MS. WEATHERS: But again, Jeff, if you're competing on the base of low-cost labor, for example, then you're going to be always be chasing the cheapest labor. So you'll go from here to research triangle somewhere in South Carolina or North Carolina to Mexico to whereever the lowest cost labor is. So if you're producing a commodity product or something that can be done with very few skills, you're sort of in a no win situation because you are always going to be going after the lowest price wage group. That won't come back. I don't necessarily want those workers for those jobs.

MR. WILLIAMS: That's exactly what we talked about earlier. Yeah. Those jobs are going because they're going after the low cost labor. Where is the result of innovation here?

MS. WEATHERS: I'm glad you brought that up.

MR. WILLIAMS: Where is the fuel that sparks the innovation?

MS. WEATHERS: I think that innovation is the key. Once you get all of the waste out of your systems and all the quality programs are in place, you've gotten all of the excess expenses out of your businesses, it's time for you to think about innovative products, new markets. The same thing you were talking about, about going after the beverage market, et cetera. And entrepreneurship can't happen to be incubating at the moment. 12 or 13 new companies right here in Cleveland, Ohio. Some of them use new technology, some of them are coming out with products that are totally new to the world and some of them are re-inventing older products and making them more efficient.

But again, these are entrepreneurs. This is, as far as I know, the only manufacturing technology incubator in this region, so we're still trying to look toward the future talking about new companies, new ideas, new products and that's the way to grow. If you're trying to compete on low cost labor, I think you are going to lose.

MR. KORACH: It's that we're a high cost area to do business. It's now just labor. Utilities are high, insurance is high.

MS. WEATHERS: They all have these incentive programs where they'll bring you down to one state for a couple of years and you're doing okay and then another stay will bring you in and lure you in with incentives.

MR. KORACH: They're pretty successful in luring our business away. That's all I'm saying. I'm not -- the fact is that we don't have the base that we used to and so something is happening.

MR. WILLIAMS: Are we talking about just a lack of leadership from a government standpoint?

MS. WEATHERS: We can cure the darkness or we can light a candle. I mean if the cost of doing business is high, it's high for everybody. Other people are figuring out new strategies, new methods, new products and services, whatever it is. The same thing happens everywhere you go. It's not just here. It's not like manufacturing is booming somewhere else. The labor costs are up.

MS. HELPER: I think what Fatima is saying if you're going to adopt this high innovation strategy, you may need to change some other business practices along with it, so one of the things I have seen is companies that still have accounting practices that are based on coming up with figuring in detail what the cost of direct labor is. So if you think that direct labor is a couple dollars an hour or even $15 an hour cheaper somewhere and you forget maybe it's only 5 percent of your total cost, so if you do a better job of accounting and really understanding what costs may be cheaper here, maybe you can get a really great engineer, even though you pay them more, these are all costs that may be intangible, harder to figure, but a lot of times, not always, but a lot of times sophisticated accounting can help you figure out some other ways to save.

MS. WEATHERS: But it's not just the cost of labor. I don't mean to simplify the situation. A lot of times companies move because their primary customer has moved, so if your primary customer is located in Mexico or Taiwan and they insist that they have their service providers or product piece parts providers nearby, then you are going to relocate. I mean, sometimes it's driven by your customer base. It's not always like that but many times it is.

MR. WILLIAMS: This is a conversation that I tend to get in that I don't necessarily like, but over the past two or three years, we all will be shopping at Wal-Mart for everything.

MS. WEATHERS: I heard a statistic the other day that 7 cents of every dollar is spent at Wal-Mart.

MR. WILLIAMS: What happens is the conversation that you just started off with, you know, jobs are going overseas and one of the manufacturers of sales to Wal-Mart says who cares where my product is made. As long as it's quality and I get it there on time and I'm able to sell it in a marketplace that dictates that, that's good for everybody because that firm then goes to a location that employs people you have a triple effect of 7 or $8 an hour jobs. Now, is that where we want to end up? I think there's a big argument that says if that's where this thing is going, it's kind of like a downward spiral.

MS. WEATHERS: We all pay our tax dollars to pay Medicaid for the Wal-Mart workers health care.

MR. WILLIAMS: It was just an interesting conversation I get into all the time. I'm not sure what side I take.

MS. WEATHERS: Do you shop at Wal-Mart?

MR. WILLIAMS: I have been to Wal-Mart.

MS. WEATHERS: So have I.

MR. WILLIAMS: But I'm just not sure big is great and that's the way things are going.

MR. SCHRON: I think there's been a recognition by an awful lot of, and I'm not trying to pick on the politicians, but they haven't acknowledged, until recently, that there is a multiplier effect that takes place in the manufacturing process that as somebody adds value and then the next person mines it and brings it out and then you start to do something with it, that adds value to it and the next person does something with it and they add value, that all that adds into our regional economy.

As we move those sectors out, and not to pick on Wal-Mart, but when that happens, and the only value is unopening the box and taking the item and putting it on the shelf, all those value-added steps have now moved to China. So when people say it's okay to go to Wal-Mart and it's okay to buy that Chinese lamp, Chinese radio, Chinese whatever, they have to understand that if we continue that path, that all those things that used to pay for the dry cleaner, pay for the food and pay for all those things, that value added proposition is going away and eventually we are even going to start sacrificing potentially our safety and security in our defense department if eventually manufacturing keeps lowering to the point where we're not --

MS. HELPER: I think there's an issue if you think about a regional cluster, one of the reasons that manufacturing, and I've done a study that suggests manufacturing is more productive in urban areas like Cleveland, and one of the reasons is there's a lot, kind of a dense network may think it's a mature product, it doesn't matter, but there is, in fact, an exchange of ideas that goes on. So when the customer leaves and the supplier leaves and you guys no longer have your die repair or container supplier nearby, then the shipping costs rise, the ability to get ideas. So there's this kind of spiral effect that can really take a toll.

MR. FROLIK: We were talking about students and young people and the image of manufacturing, maybe even the region's image of manufacturing, the image of itself, there has been this discussion about are you new economy or are you old economy and it's sort of this false divide that we seem to try to create here.

I've been to your shop. One might say you would be an old economy. You're making pieces for machinery, but look at how you do it where everybody at the machine has a computer terminal in front of them. It's not. Talk a little bit about how technology has transformed what you guys do and especially in the businesses where people say, well, that's old economy stuff.

MR. SCHRON: When we build our buildings, we build them specifically with a mezzanine so when third graders, sixth graders, college students come through, they can stand in the mezzanine and see computers everywhere linked to the machine, linked to the design department, linked to the programmer who makes that computer work.

We've had classes from Case come by and we had classes like University School which I never would have thought they had a manufacturing program. They have one of the most involved manufacturing programs in this area. Every student has to go through it in the seventh and eighth grade and we tried to convince them that it's probably harder to replace our machine computer operators than it would be to get our college graduates to work in our marketing department, much easier to get those folks because they are working on half a million, million dollars worth of computerized machines tools and these people know that they're having an impact. It's exciting. We want their involvement. We want their excitement.

And I'm not just trying to push the fact that every student is expected, every person is looked upon as a student as they continue their educational process. It is a continuous process, and when you talk about re-inventing, I like to think of it not so much as re-inventing because that means you went from here to here. I think it's a continuum line that says it never begins and never ends, so we expect that. And the students today, actually, people on our factory floor are taking classes electronically right on their machine tool being pushed right down to them electronically as they are making parts.

MR. KORACH: Our manufacturing people are doing the same thing. We have to be on SAP and we have computer terminals all throughout our facilities and shop floor people are entering production information and receipt information all day long. It's a, you know --

MR. WILLIAMS: Also, just a massive capital equipment upgrade, whether it's equipment and/or computers both internally from the management side as well as the shop floor, and to your point, we're seeking a knowledge worker.

MR. RICKERT: You don't need as many. They just have to be very good. I think that's the secret to manufacturing today.

MR. SCHRON: Tri-C knows it. The Polaris and the Cuyahoga Valley and Auburn career centers, but I do say that an awful lot of the high engineering students don't understand what's really going on and they still think of it as probably the smoky, dirty environment.

MR. BRAKE: As a Case alumni, I was surprised to see LTV recruiting on campus back in '87, and after interviewing at General Electric and other cleaner employers, Proctor & Gamble seemed very clean, went to talk to LTV, and what I came to find out I tell people all the time, it looks smoky and dirty and people have images of the hard work that people do in the steel mill or have done in the steel mill, but they don't realize that there's automation, computers, math models, state of the art equipment, terminals throughout the operation that people think -- don't think about. They think about the molten iron and molten steel.

The fact of the matter is, this mill in particular is one of the most technologically advanced in North America. You just have to stop and look what's behind it. We have a number of Case grads, number of Carnegie Mellon grads working down there that have great technical background and are loving every minute of it. What I try to explain to my friends and family sometimes, there are actually talented engineers that like to do things with their hands and it's here.

MR. SCHRON: It's here. It's not a problem. Our phrase is there is a whole group of people that it's okay to say you can make a living using your brains and your hands. We need someone to break that story.

MR. RICKERT: They do have a college degree. They can get the Associate's degree or they can take extra courses, whatever it takes for their job. They don't have to give up just because they don't have a college degree, but they have to keep working at it. They can't sit there and think they demand or they're owed something.

MR. BRAKE: And we often underestimate the value of wisdom. Bring some wisdom to the job.

MS. WEATHERS: When you think about old industries, people might think of Ford as an old industry working at Ford, and we just saw an article on the front page of the Plain Dealer about the new engine plant. There's nothing old about that and those processes that they'll be using and the technology that they'll be using. So even though manufacturing is still talked about as if it's an old thing, we are always going to need things, so things will always need to be manufactured.

It's the way we manufacture them, the processes that we use, the technical skills that will be required and the description that they gave of what's going to be going on in the Ford engine plant is just phenomenal. They are going to bring in 200 people to work in that plant. They are going to have to have some pretty new skills and they're going to be highly technical. They're going to be computer illiterate and it won't be your old manufacturing jobs.

MR. BRAKE: Those jobs haven't been around for a long time.

MR. SCHRON: Bill's operation, I'm sure, it was not a new job. It's convincing people it's okay to do those jobs and your innovation is coming from the people. It's the same people you probably had before, a good chunk of them.

MR. BRAKE: I'll go one further. You have businesses like SAP or you have operating systems like Microsoft and others and that can strike somebody on the outside as very high tech. I work on a deck or whatever type system and people think, well, that must be a high tech job. The fact of the matter is the people at Ford, the people at General Motors, the people at ISG are actually creating their own technology, managing it, writing their own code, writing their own systems, developing their own systems, in fact, in a more technological utilization than buying something off the shelf and implementing it or having a team of consultants come and implement it.

You can argue that on a day-to-day basis, heavy manufacturing and those utilizations are more technologically advanced than sitting at a computer.

MR. RICKERT: It's no longer stand alone.

MR. KORACH: On the other hand, with all this technological improvement and all these issues that are happening on the plant floor and the different kind of plant labor we have today which is much more technical, much more qualified, it puts other pressures on because, for example, communication today, with E-mail and the way we communicate.

In the past, you couldn't have made the product you're making in Taiwan today. It was impossible. You couldn't get it there in time, you couldn't communicate what you needed, you couldn't do all that was necessary. But today, it's one of the negatives, too, because this advanced telecommunication system that we have today makes it easier for people to move facilities or make manufacturing decisions or production decisions outside of where their core business is because of the ability to be able to manage it with the communication system we have today which is so significantly different than what it used to be.

MS. HELPER: I think we need to think about organizing ourselves differently as a region to really take advantage of the face to face proximity that we have. There's certain kinds of things that when you're exchanging tacit knowledge or things that aren't well written down, then it's hard to send an e-mail about it, and if we're constantly innovating, creating new products that require the skills of a number of firms, that's how we can continue to compete.

MR. FROLIK: How do you mean reorganize ourselves? How would that work out? Is there a prototype of it?

MS. HELPER: Well, one kind of example is if you think about Silicon Valley, some of the most expensive real estate in the world, yet people think that at least part of their software business needs to be there, so what can we do with Cleveland. Keep that as a place that people have to be.

MR. RICKERT: One of the things, you just look at the nano belt. Why is it here? Northeast Ohio. Expertise in ceramics, metals, polymers, where else in the world? We're all here. We're material specialists. We can work together. We can cross fertilize and create incredible products. It is the Silicon Valley for materials. You've got everything. I don't know any other place that has that kind of expertise in the three basic building blocks.

MR. WILLIAMS: What do we need to do to get that done?

MR. RICKERT: I think we need to first network. I know in the nano community, there is a nano network here in town and we're just starting to get organized. I can't believe how many nano technology companies there are in this area. You just can't believe it. They are coming out of the woodwork here everywhere. You never knew them because there was no way to network.

And there are all sorts of ones involving ceramics to metals, plastics. It doesn't matter. We all have that common bond and we're trying to build an industry and we're starting to network, starting to work together to partner. I think maybe we need more specific niche type of networking groups or labeled or focussed ones, and if we did that, we would find some amazing entrepreneurs and companies, small, medium, large, all working together. It really is happening. Ferrell is a big nano company now and they are just down the street from us. I didn't know that. Now I do. We're starting to work together. So you just have to network. I think that's step one.

MS. HELPER: And I think some of it is kind of managing a portfolio of businesses that we need to be promoting this new thing that's coming along, nano technology. We need also to be -- continue to help the existing businesses in even what you think of as low tech manufacturing. And one of the things you get here is you've got a problem with the stamping and how to make a deep draw stamping.

I was visiting one of the Wirenet companies and I was able to locate a guy a ten-minute drive away who could help who had experience in doing that particular kind of stamping which is unusual for his business. That kind of networking also helps, and it's something -- I think there's been a lot of feeling like my competitor's across the street rather than my competitor's around the world.

MR. KORACH: We've got to leverage our winners. We've got some winners here. Certainly one right here. And this whole nano issue is obviously a winner because of some of the assets that we have in the area. And again, if we would recognize when we have something that someone else doesn't have, when we have some real talent, we can start leveraging that rather than chasing, as you say, all that stuff that we're not going to keep necessarily.

We are going to lose some stuff. We have lost stuff and we're going to continue to lose stuff, but it's an add-some game. At the end of the day, we need to add more than we're losing and we haven't done that very well. We have to get a lot better at that.

MR. SCHRON: I can tell you in our own company, when Susan talks about reorganizing, Joe, one of the things that we're doing is we're getting closer to our processors, and they are coming to the factory one or two times a day for special heat treat processes and we're taking businesses away from -- maybe you don't see the plant moving from California to Cleveland, but I can guarantee you we've got about 12 people working in our factory that are a direct result of taking business away from California manufacturers because of the fact that we have taken an aggressive approach, we're even talking with some of our processors to reorganize the part where they put their process inside our factory to cut that cue time down, to cut that leaning down. So instead of using their eight to ten week delivery time, we're delivering in eight to ten days. And this is how we're doing it and we physically have taken chunks of business out of California manufacturing.

MR. FROLIK: Some of you have mentioned customers and stuff and the relationship -- how your relationship, perhaps, with your customers has changed over time and what they expect from you and maybe what you look to them to do, especially on the product and the innovation type of front.

MR. WILLIAMS: As far as the customer side, we talked about re-inventing ourselves or improving our relationships with our customers, look at new markets. And one of the things that we had latched onto is the focus and commitment that consumer product companies have with spending dollars as it relates to diversity issues across the country. We certainly, as a small manufacturer, couldn't do that by ourselves, so we essentially went down to one of our big suppliers, which was Warehouser, and said, help us do this.

We have since come up with a business model on a national basis we partner with a Warehouser and what that's done for us, it's opened up a brand new market, customers like Coca-Cola, the Master Foods of the world, the Nestles, and they say it's very important that we do this from a grocery standpoint because that, in fact, is our market, we want to serve this, but at the same point in time, we're not going to put the resources there to do it. So Warehouser, you're going to get a national contract. What are you going to do to help us meet our goals.

And we have, in fact, become very successful working with Warehouser in our top line. And to Jack's point, we have taken work from Indiana, we have taken work from Cincinnati and we have brought it to Northeast Ohio. Along with that has come a new skill set that we've been required to achieve because the equipment we produce on now is different, our quality systems have to be different because these are food companies versus doing work for a stamper, let's say, or someone else that says get me the box. I don't care how you get it here, just get it. So our whole -- the dynamics of how we do business has really changed.

MR. KORACH: The customer is the boss. The customer pays the bill, so if you can't relate to the customer, if you can't provide him what he wants, if you don't know what he wants. If you think he wants what he wanted 20 years ago and that's what you're providing, you're probably not doing very well.

This whole relationship issue with customers and developing an ability to relate to customers and understand what they need and what they want and what they will pay for and what they won't enables you, I suppose, to stay competitive today. And without that, I think you're in deep trouble. If you think you're going to tell them what they want rather than hear what they're willing to pay for, I'm not sure.

MS. WEATHERS: Well, Jeff, building on that, we have a lot of customers who have one product that they sell and maybe they have one customer that they provide it to and they'll come to us and they realize that this is a risky place to be and they'll say to us, can you help us come up with a new product or new idea that we can sell to a new market, and we have a team of engineers that will help them design a new product based on the capabilities of their work force, the capital equipment that is in their plant or facilities and the markets that they dealing in. So we'll have a brainstorming session. We'll say with those kind of capabilities, with that kind of equipment, you can also manufacture and develop this product, and we've come up with a number of new products with new ideas for companies. So that's our take of innovation. We have a whole product innovation or product development group.

MS. HELPER: We did a survey of small manufacturers across the U.S. and found that about well over half, about 52 percent, said that they were having to do more design work for their customers, customers delegating more and more sophisticated processes towards them.

MS. WEATHERS: It's particularly a problem in smaller companies because smaller companies don't have a design engineering staff on board. So they look for others to help them design new products or test and build prototypes and then once they can get the new prototypes and prints and that sort of thing worked out, they can bring it in-house and have a new product that they can take to the marketplace. It's particularly a problem in smaller companies, but even some larger companies have processes that are just not functioning. They just need new ideas, so they'll come to us and say, help us think of a new idea.

MS. HELPER: And it can be quite tricky because often the customer wants the small company to incur pretty big cost up front which may or may not yield a contract, so again, it's a different way of managing, a lot more risk but a lot more potential.

MR. FROLIK: Scott, you are a manufacturer because you listen to your customers. You have a different sort of business model when you started out.

MR. RICKERT: I think a lot of the companies, technology companies, they come up with a product or something innovative and cute and they fall in love with it and they try to force it on people. And really from day one, we've been different. I think that's why we're number one in this business because we don't create anything that someone hasn't asked us to create. And when we create it, it's usually twice as good as they asked for at the same price, and I think that's a simple business model and it works.

In the nano space, it's really interesting because manufacturing can be our smallest product is an ampule, glass ampule. It has about 20 microliters of material in there and we sell that for many dollars and you cannot see the material in there. And we ship that by air anywhere in the world, anywhere in the world and we get it there next day. But we create -- the ampule is worthless unless it's delivered into a system that's easy to apply, safe, effective and convenient for the customer, so we deliver the entire system. We do the training videos. We tell them how to sell it. We tell them how to use it. We have to give the whole thing. The customers want it all handed to them on a silver platter. And we learned that early and I think we're the only nano company that actual knows that. Now they do. That really works. Total dedication to a customer, everything they need.

I don't look at the market and see what size it is. I look at the pain the customer has and that's how I determine the size of the market. I don't care what the competitors are doing. I'm sure you feel the same way. It doesn't matter what the competitors are doing.

MR. KORACH: You have to hoe your own row. Customer component. The voice of the customer is very important and if we're not listening to what the customer is saying, we're missing it, totally missing it.

MR. SCHRON: The customers that we took away from our California competitor, they were experiencing some problems in delivery and we started listening to what they were saying and we kind of proputed as an industry because it was entertainment and entertainment is California. That's not Cleveland. Only to find out how big the entertainment industry is for positioning, holding, lifting, clapping, all the things that we do over in manufacturing and all of a sudden this company is a speaker manufacturer. Until you get involved with how many speakers are at concerts or in churches, at Carnegie Hall. I met with the president and he said, when you get to your quality issue, Fatima, he said, our quality issue is that they are the high end, the creme of the creme speakers. And they do the Three Tenors concerts. They only broadcast the voice and they said, we only have one chance to get those speakers right for this concert, so guess what, have one chance to get your product right and if you make one mistake, that's it.

So we package it with their numbers, we bar code it, we pack it, we do everything, and we have inventory sitting at all points and we turn the thing around because that's what the customer is telling us. You don't get second chances. It's exciting. It's really exciting.

MR. FROLIK: I want to expand a little more on the product development side because a lot of people say that's really one of the keys to staying ahead is to constantly be innovating new products, new ideas, because once you become sort of the row, you will find somebody to go do it somewhere where it's a lot cheaper to do it.

Given that, here is what you do manufacturers. How do you really do that? How do you come up with -- Fatima talked a little bit about the brainstorming. On a practical level with your businesses, how do you come up with a new product?

MR. KORACH: We have three laboratories, two in Cleveland, one in the UK, and we employ about a hundred people in our laboratories. Some of our work is this QC type continuous sort of improvement work, but there is an innovative process and it's a very difficult process, and I always wanted to maybe spend a few days with the pharmaceutical companies who really spend big money at this and seem to really get some answers every once in awhile. It's very frustrating at times.

In our particular business, we're in a niche business. We make construction materials. We have to make it different and better. We also have to listen to what our customer wants and listen to what he's willing to pay for. That whole process of being able to connect those dots, and in our case, we spend about $10,000,000 a year in our laboratories creating. You know, you don't need, as I often say, 80 projects half done. I would rather have three or four where I can put a bow on them and get them out the door once in awhile. And you've got a lot of this innovative thinking and you get off on tangents. It can be very painful and a real problem. However, you've got to be successful at that part of the process. If you're not successful, even in your business, where would you be.

MR. RICKERT: You have to have a vice president of research and development that says, why not, not no. Says, yeah, I can do that. I don't know when, but I'll get it done. You need to have a marketing guy that works with him and says, you need to do that because I just talked to our customer and he needs that in three weeks and the R&D guy says, I can't get it done in three weeks, I can get it done in three and a half. That's how you get new products done, at least in our business.

MR. BRAKE: In our business as well, it was mentioned earlier that commodity businesses or commodity markets can migrate away from you as the economic balance changes. One of the things the steel industry has done very well is develop new products for new applications, very demanding applications, lightweight vehicle crush resistant vehicles and look at the cars that are coming out in this year's models. There are some drastic draws on some of these parts. One of the things that's important to us, clearly, is working very, very closely on a technical level with the customer. As Scott said earlier, don't make it unless there is a need.

We go fishing sometimes. We go drilling for some oil wells and try some different products and see what we can do, but we've got a group both centralized in Pennsylvania and here at the plant that really specialize in trying to go out there and do something that can never be done and then do it economically. And working closely with the customer is key and for us, that keeps our customers satisfied and not looking overseas or looking too far afield for the product.

MR. KORACH: That customer really has to be part of that innovation process. If you go without the customer, it's a really --

MS. WEATHERS: It's a no win situation. One of the things I was going to say, Joe, is it's really easy to come up with a new product. What's hard is coming up with a new product that somebody wants and something that works. We get people that come to us all the time with the latest in perpetual motion machines. Look at all the patents that are out there.

So we focus on helping our clients figure out what's the research that needs to be done in terms of the market, the feasibility. Even if you develop this product, how much is it going to cost for you to actually build it, how much, you know, what is your price point on this product, all the patent search that has to be done. It's a process, as you were saying. It's a process and it's a long one. It's a very costly one. Most small manufacturing companies don't have a vice president of innovation or marketing. It's just that CEO. He's been building whatever that product is that his grandfather handed down to him and they have been doing that for 50 years and they expect to continue doing it. You have to really start to talk to people about, okay, let's break out of this thinking and try to come up with a new idea using what you already have, infusing maybe some new technology, getting a couple of new pieces and parts going on in here and coming up with something totally different for your organization. It works but it's a long process.

MS. HELPER: The product development piece is a really important part of developing a new regional manufacturing economy. Our research shows that it is done more effectively in urban areas because you can get all these people together, you can get people who want to live in an area sort of on the supply side, you can find designers that want to live in the City with urban amenities. You've got the customers here. You've got a variety of suppliers here, because I think what Fatima is saying is a new product design often brings together a lot of elements. Maybe there were even pieces that were out there and existed before but hadn't been combined.

MR. KORACH: We use the universities to a great degree in helping us through these processes.

MS. WEATHERS: The Cleveland Institute of Art is a great resource for this region. They have design engineers there that are top notch.

MR. FROLIK: I keep hearing that one of the untold stories of this region or one of the maybe unappreciated assets is CIA, Cleveland Institute of Art, for those folks listening at home, and the industrial design, the product design. Can you expand a little on why that's important and how that fits and how we could exploit or use that expertise that exists maybe better than we have in the past?

MS. HELPER: I think the reason that this new product design is so important is that it allows you to get away from competing as a commodity with five other people making the same think, so you're making something new and you've got the environment. Fatima said, it's a hard thing to do, but if we can do it better as a region, that's going to be a competence that's hard for other regions to imitate.

So as far as ways to involve CIA better, I think networking is the key and I think one of the things they are starting to do is to actually do this in a more organized way. I know one of the things I'm involved in at the Center for Regional Economic Issues at Case Western is trying to involve those students directly in some of the programs that we put on.

MS. WEATHERS: We have used Cleveland Institute of Art students in brainstorming sessions where we would have an entrepreneur, an inventor describing a product and what they think it ought to be able to do and at the same time that they're describing it, the students from the Institute of Art are actually sketching what this thing might look like. So at the end of the session, you will have a sketch of it. The engineers will take that sketch and turn it into a 3D CAD drawing and do all kinds of analysis on it, so the design phase of it is very important. We just happen to be lucky or fortunate to have the Cleveland Institute of Art here.

MR. SCHRON: Fatima's comment about your grandfather's product, I do come from an organization my father and grandfather started that, so I can speak to it. If my dad is listening, I'm proud of the organization he created, but for innovation, sometimes I think we confuse that new design and new concept is the definition of innovation, but innovation can be just as exciting and just as dynamic to innovate what's going on over at ISG and their whole corporate philosophy. That's as innovative, as a matter of fact, it's probably more difficulty to innovate than a new widget out there.

So I think we need to break that mold that innovation is purely product. Innovation can be process. Innovation can be the thought process that goes on in the organization and innovation can just be taking a product that might be out there 30, 40 years and you've got to think about a new way of making it, a new way of marketing it. How many times have we seen the new Tide and the new Crest toothpaste for the past 50 years.

MS. WEATHERS: It's a new way of training people with a new tool and you. That's innovation.

MS. HELPER: And a new way of delivering. If you take a product that you can get in eight days instead of eight weeks, that's a different product.

MR. SCHRON: Well, what started that, Fatima, we were just going to innovate by putting on our Web to educate people on our new tools and we presented only to find out that the custome