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Milwaukee – Water Technology RETHINKING CLUSTER INITIATIVES CASE STUDY MILWAUKEE WATER TECHNOLOGY Brad McDearman July 2018 HIGHLIGHTS GEOGRAPHY The water cluster covers eight counties in southeastern Wisconsin, including four comprising the official Milwaukee metro area, with a population of 1.57 million (39th among all U.S. metros), and four neighboring counties that bring the regional population total to 2.15 million. CLUSTER SIZE AND GROWTH TRAJECTORY The water cluster is composed of 175 firms, with $10.5 billion in revenues and employing over 20,000 in the region. The global market for water technologies was estimated to be over $600 billion in 2016. CLUSTER TYPE The water cluster is technology-based, focused on firms in water technologies involving instruments, equipment, and services. ORGANIZATIONAL STRUCTURE The water cluster is led by a staffed, well-resourced, and self-described industry cluster driver (The Water Council, a 501(c)(3) entity), with core collaboration and investment from academic institutions (University of Wisconsin-Milwaukee (UWM) and Marquette University), the state (Wisconsin Economic Development Corporation (WEDC)), the city of Milwaukee, and Milwaukee Metropolitan Sewerage District. Early stage support also came from the Greater Milwaukee Committee and M7 (regional economic development organization). RESOURCES AND KEY ASSETS Key resources include a strong mix of firms, a location on the world’s largest body of freshwater, The Water Council (11 full-time staff, 188 members, $2.84 million operating budget), and a robust array of associated programs, such as a $50 million School of Freshwater Sciences at UW- Milwaukee, the $22 million Global Water Center (GWC) building, and a city water district funded through an $11.2 million TIF. BROOKINGS METROPOLITAN POLICY PROGRAM 2 BACKGROUND AND HISTORY ueled by abundant water (Lake Michigan Milwaukee. Today, MillerCoors is the only large Fand its local tributaries), wheat (Wisconsin brewery remaining in the city. The rise of foreign was the world’s biggest exporter in 1860), and a competition and declining demand for leather set of savvy businessmen who were part of an due to new synthetic alternatives also eventually influx of German immigrants (27 percent of the led to the demise of Milwaukee’s tanning city’s population in 1880), Milwaukee could stake industry by the late 20th century. a legitimate claim to being the “Beer Capital of the World” in the late 1800s. Frederick Miller, Beginning in the mid-2000s, local leaders, Joseph Schlitz, Frederick Pabst, and Valentin convinced they were at a critical point in the Blatz each established what would eventually region’s history and determined to confront become four of the nation’s largest breweries. this hard reality head-on, began to search for By 1890, Milwaukee had also become the world’s an economic “phoenix” that could rise from largest supplier of tanned leather, the processing the ashes of the region’s decline and begin to of which requires a large amount of water. position Milwaukee for an economic rebirth. Boosted by large federal government contracts Somewhat by accident, one of the surprising making boots, belts, and leather products for the potential answers lay right before them: water. military, the local industry prospered from the Left in the wake of the decimated brewing and Civil War through World War I. tanning industries were an abundance of firms in the region specializing in water technologies. At the start of the 21st century, however, Milwaukee’s water cluster came into being based Milwaukee’s brewing and tanning industries were on the realization that by organizing themselves symbols of the region’s broad economic decline. under the theme of water, these firms, and Changing market dynamics, major marketing the region itself, could reimagine their roles mistakes, and labor-management strife led and partner in the start of a new economic to the slow demise of the brewing industry in trajectory. RETHINKING CLUSTER INITIATIVES CASE STUDY: MILWAUKEE WATER TECHNOLOGY 3 CLUSTER IDENTIFICATION AND PRIORITIZATION IDENTIFICATION potential industry clusters for business attraction. Upon completion of this second The identification and confirmation of water study, M7 invited Meeusen to share his concept technologies as a cluster took place over a at a meeting in which the consultant findings three-year period from 2007 to 2010 through a would be presented. combination of highly deliberate, action-forcing events and a bit of happenstance. The spark According to Pat O’Brien, CEO of M7, the water that catapulted water from an obscure concept concept was initially greeted by the national to reality occurred for Rich Meeusen, CEO of consultant, and by the local audience to some Badger Meter, and Paul Jones, CEO of A. O. degree, with a great deal of skepticism: “People Smith Corporation, during a joint tour of A. O. laughed. What do you do with water?” Water Smith’s research facility. The men were struck by was not an industry. There was no industry the fact that while they operate in two different designation (NAICS code) for water, and it simply industries (Badger Meter in water meters and didn’t fit traditional guidelines for identifying an A.O. Smith in water heaters and filters) and were industry cluster. not competitors, there were a lot of similarities and potential synergies between the two firms. In the audience, however, was Julia Taylor, CEO Would this finding prove true and resonate with of the Greater Milwaukee Committee (GMC, a other local firms in the region? private sector civic group focused on spurring vital economic and cultural projects), and Following their own initial internal assessment, Dean Amhaus, CEO of the Spirit of Milwaukee Meeusen approached Milwaukee 7 (M7), (a Milwaukee promotion group), who were Milwaukee’s newly formed regional economic intrigued by the idea. Taylor took the initiative to development organization (EDO), and other introduce Meeusen to Sammis White, a professor organizations with the idea for a water cluster. A at UWM who taught a graduate course in urban founding principle of M7 was the belief that the planning. Meeusen was invited to present the region should focus its economic development concept to White’s class and sought their help efforts on driver industries, those in tradable in answering two basic questions: 1) How many sectors that exported their products and water firms are there in southeast Wisconsin services outside the region to other U.S. and and in other regions in the United States and global markets. By coincidence, and separate around the world, and 2) are we among the from the Meeusen and Jones discovery, M7 largest? White agreed to lead a class project had hired a local consultant to undertake a to fulfill this request. The water cluster team strategic review of Milwaukee’s industries and stressed that the project should be very strict assets. This consultant also raised up this unique on the definition of a water technology company cluster of water technology companies. These (i.e., those focused on commercializing products joint discoveries of the water cluster formed and services) and not inflate it to include, for the genesis for exploration of a coordinated example, large water users, utilities, and lawyers. industry-based economic development program, under the leadership of Meeusen. The survey confirmed the potential of the cluster. It revealed about 120 local firms with BROOKINGS water-related expertise in instruments and METROPOLITAN In an effort to ratify the discoveries, M7 hired a equipment (such as fixtures, valves, controls, POLICY national site selection consultant to once again sensors, meters, and heaters) as well as services PROGRAM evaluate the region and identify its strongest 4 (such as purification, sewage and treatment, and expertise in a specific topic related to pumping, delivery, and conservation). global health and development. This recognition provided early legitimacy and further validation To determine the level of interest among firms, for Milwaukee’s water cluster and proved critical Meeusen and Jones convened the first annual in opening doors with peer water technology Water Summit in 2007, which drew over 60 leaders in Singapore, Israel, Sweden, France, and local business and civic leaders. During this the Netherlands. Further, it spawned interest in event, they realized that while the region’s and visits to Milwaukee from around the globe. history in tanning and brewing had resulted in many firms operating in disparate industry Despite this early progress, The Water Council sectors, they were all fundamentally focused realized that it would need further and more on different aspects of the same theme: water credible research to back up its bold claims technologies. The group agreed to convene that the region was a top global water hub quarterly meetings and, in 2009, adopted a and that water represented a major economic dues-paying membership structure. In short opportunity. A grant from the U.S. Economic order, Meeusen and Jones began to realize the Development Administration (EDA) funded a region was sitting on a hidden gem and came joint report from The Water Council and UWM away from these early activities with a vision that was released in November 2010. This paper to position Milwaukee as the “Silicon Valley of corroborated Milwaukee’s extensive expertise water technologies.” and position in the global water market and confirmed among all audiences not only the At around the same time, the water cluster notion that water technologies was a legitimate team, led by Meeusen, approached UWM regional cluster, but that it was highly relevant Chancellor Carlos Santiago with a proposal for a on a global scale. new school focused on water technologies that could be commercialized and would produce the According to Dean Amhaus, an early champion talent needed by the cluster. UWM’s Great Lakes of the cluster who later became CEO of The Water Institute, which had quietly and somewhat Water Council, “If somebody says we are going invisibly existed for nearly 40 years, was to go out and create a cluster, it’s a red flag.
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