In Michigan’s continuing battle to win more than it loses in the nation’s economic wars, competitiveness is necessary — but it’s no longer sufficient.
Just ask Hank Meijer, co-CEO of Meijer Inc., the privately held superstore chain. The steady expansion of Wal-Mart Stores Inc. into Meijer’s Midwest stronghold forced the 79-year-old company to reconsider its mission, streamline its processes and determine how it can beat its Arkansas-based rival at its own game.
“That was sort of an existential crisis to us,” Meijer, also co-chairman of the family controlled company, said in an interview. “Our brand couldn’t stand as the lowest price in the market. We were going to have to share that with someone else. We have to make sure we win store-by-store and town-by-town.”
Now that Michigan and its bellwether auto industry are no longer staring numbly at imminent economic collapse, business leaders are breathing easier about the state’s economic prospects and improving jobs climate. But the state still has a long way to go, as Business Leaders for Michigan will detail today at its CEO Summit inside Detroit’s Westin Book Cadillac.
There, Hank Meijer and fellow CEOs will try to explain what it means to be competitive in the cutthroat 21st-century economy, what it takes to get there, and how the exercise is more a continual process of challenge and reappraisal than it is a destination followed by a slide into complacency.
“We’ve made great strides in the past three years,” said John Rakolta, CEO of Walbridge Aldinger Co., a Detroit-based construction company. “And we’ve got a ways to go. It has to be cohesive. It has to be a team. All of the elements need to be pulling together. Winning these jobs is a complicated process.”
It’s seldom easy — whether the task is reforming the state’s economic and tax policies or responding to the threat posed by a tough competitor. Grand Rapids-based Meijer, which operates more than 190 stores in five states, confronted the central challenge posed by Wal-Mart, doubled-down on the strengths of its brand and crafted a strategy designed for the long term.
A competitive state economy and business-friendly policies can help, too. In Michigan, a notoriously anti-business state during the “Lost Decade,” the verdict is improving but not there yet, according to the 2013 Economic Competitiveness Benchmarking report to be released today by Business Leaders for Michigan.
The headline: Michigan’s economy is continuing to recover faster than most states, partly because it has more recovering to do thanks to the triple whammy of anti-business policies, the auto industry’s existential crisis of 2008 and a recession induced by the global financial meltdown.
Michigan’s corporate tax climate ranks seventh in the nation, according to the study conducted by the East Lansing-based Anderson Economic Group, up from second worst in the latter days of the Granholm years. Overall, the state’s tax climate ranks 12th, but Michigan remains a bottom 10 state in the cost of doing business and “annual unemployment has remained higher than all peers except North Carolina and California.”
Per capita income, which declined in the decade between 2002 and 2012, is improving faster than most of its peers, but its level of $35,298 exceeds only Alabama among critical Great Lakes and southern rival states. And Michigan’s per capita GDP is recovering at twice the national average even as it remains nearly $10,000 below the national average.
The home to the American auto industry continues to be a national leader in research and development and patents awarded. Educational attainment, increasingly a marker for rising incomes and incremental business investment, lags peer states.
Venture capital investment improved to 19th nationwide from 33rd, but business leaders nationwide still perceive Michigan to be an unattractive place to do business, despite tax reform, becoming the nation’s 23rd right-to-work state and Republican control of the state Legislature and the governor’s office.
The bottom line: a Michigan that started in a very deep hole is making progress and perception of the state is beginning to change. But only just, meaning there’s more to do.
Coalesce around a smarter, more realistic economic environment offering more room for improvement. Understand that the confrontational tactics of Michigan’s past alienate outsiders wielding mobile capital. Remember the lessons of action — and inaction — learned during the Great Recession.
Brig Sorber does.
“We were losing business because of the recession, but we were also losing business because of our broken processes,” said the CEO of Two Men and a Truck International Inc., the Lansing-based moving company. “It almost bankrupted us.”
The crisis exposed weakness before to spelled opportunity. A clunky website seldom used by franchisees was redesigned, along with IT services that Plante Moran graded an “F.” Executive skills were reappraised, with the corporate staff cut to 52 from 78 in the spring of 2009.
That was then, says the guy who advises business owners to embrace tough times, not take shelter. Two Men has added 35 to its corporate staff the past year. Revenue has grown 20 percent each year over the past three years, and Sorber expects to close the books this year up another 20 percent.
“If we didn’t change we were going to die,” he said. “Between change and death, it’s pretty easy to make the change.”
Daniel Howes’ column runs Tuesdays, Thursdays and Friday