No Room for an Education?

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A recent study by Northeastern University Law School yielded an unexpected tidbit of information; many vocational and technical high schools in Massachusetts have a significant waiting list for admissions. What was once a path chosen primarily by those unable or unwilling to go to college, gaining admission to a vocational/technical school has now become a highly competitive contest among thousands of local young people. Unfortunately, most of these schools do not have the capacity to admit all who apply, and many otherwise qualified students are being left behind.

What does this mean for the future of manufacturing-related industries here in Massachusetts? Is it a sign of a rebounding industrial sector or simply an indicator of a bad economy where the less well-off are left with few options for a post-secondary education? Or, is it a basic redefinition of a vocational/technical education that appeals more to a broader spectrum of students?

When asked why he thought vocational and technical schools have such long waiting lists, Peter Enrich, a law professor at Northeastern who oversaw this survey said, “The reasons are complex. A lot of them come back to money. The funding of vocational schools is largely the responsibility of the state. They use a formula that has a couple of big problems with it. [The] first problem is, in our view, it underestimates the cost of vocational education, and so the schools are short of money to start with. The second problem is, to determine how much money a school gets, they look at its enrollment in the previous year. So, if you had a waiting list last year, you’re going to get funded based on how many students you had in the school. [It] pays no attention to your waiting lists, so you’re going to have exactly the same problem year after year after year — there’s no allowance for growth in the funding formula.”

While the overall size of the manufacturing sector here in the Commonwealth declined significantly over the past several decades, the industry is currently undergoing a resurgence and, while numbers may never again reach those of the heyday of the past, there is certainly no shortage of successful manufacturing companies now doing business in Massachusetts. Most that made it through (or opened their business after) the “dark times” maintain their competitive edge by staying agile enough to quickly adapt to changing market demands.  Others survived simply by doing what they have always done – providing their stable client base with a list of standard products that are unlikely to be replaced by a better alternative anytime soon. In either case, many companies have successfully leveraged growth opportunity here in Massachusetts, and a qualified pool of local labor is a critical component in the success or failure of that effort.

Solutions may be more complicated than just opening more vocational schools. With the loss of so many skilled positions in the past, societal stigmas have caused apathy among baby boomers and the following generations. However, most Massachusetts’ manufacturing jobs today are high-paying, highly technical positions and, with 100,000 of these opportunities estimated to become available in the state over the next ten years, training the next generation of students will become even more critical to compete in the global economy.

It is imperative that state politicians team up with vocational school administrators and local industry leaders to find a solution to the growing skilled worker shortage before it’s too late.

3D Printing – Not for the Masses?

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Somerville, MA-based Formlabs, a relatively new company on the scene of 3D printing, stands poised and ready to revolutionize the market. The driving force behind the company’s advancement, Colin Raney, has some ideas about how the technology will change industry in the future, and not all of them are mainstream.

The major advancement made by Formlabs is the creation of a relatively inexpensive and small 3D printer that costs only $3,300 and is of desktop size. This is a sharp departure from the refrigerator-sized earlier models that cost $10,000 or more. Raney said that this will make the advantages of 3D printing far more accessible. He tempered that, however, with a judgment that 3D printing is likely to remain primarily in the professional field. Raney’s reasoning behind this was simple. While 3D printing technology is getting less expensive, it is not yet cheap enough to justify common household use. It would be far more expensive to buy a 3D printer and the resin materials needed to create basic household items than it would be to simply buy those items. Raney suggested that household 3D printing is still a long ways off despite his recent advancements. This view is in contrast to other’s views on the topic and also to much of the hype surrounding 3D printing.

On the other hand, the advantages to the professionals of the more portable and less-expensive 3D printers are great. Raney believes his work will allow professional designers and engineers the ability to work better and faster. It will also be of benefit to smaller design businesses that previously had great ideas and potential but were unwilling to deal with the bulkier and far more expensive earlier models.

3D printing technology allows the creation of structures that would be impossible using any other currently available technology. Raney promises that his technology will allow designers to create incredibly intricate parts without much need for post-processing work. A key advantage to Formlab’s design is the incredible level of detail the device can render, the creation of a 50-foot chain inside a five-inch box being just one example.

While Raney clearly believes his company’s product will bring 3D printing technology to a wider user-base, he also believes the broad-scale commercial potential of such creations will be what revolutionizes the industry and its underlying technology.

Two MA Tech IPOs to Watch

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Buzz surrounding the local tech community has been perking up lately with the recent announcement of two IPOs. Just last week, Boston-based online retailer Wayfair announced plans to raise $350 million in an IPO scheduled for the fall.  Now, Cambridge-based HubSpot has indicated that they also have plans to go public with an IPO to raise around $100 million.

Employing 700 people and launched by MIT graduates Brian Halligan and Dharmesh Shah, HubSpot, an inbound marketing solutions provider, offers products based on a subscription business model. Analytics, blogging, SEO, social media, marketing automation and lead generation are offered under a single, centralized application. The company’s main clientele are medium-sized businesses with employed staff ranging anywhere from the teens to 2000 individuals.

Halligan owns 4.9 percent of the company and Shah’s stake is 8.8 percent. The founders believe in a corporate culture that provides employees with numerous ways to grow and informs them about nearly every every detail concerning the business.

David Skok and Larry Bohn, two venture capitalists with ties to the Boston area have a large stake in Hubspot with 17.1 percent held by Skok’s interest and 27.1 percent owned by Bohn’s General Catalyst. Last February, analysts estimated a potential valuation for Hubspot at around $1.3 billion after the IPO is held which was slightly under the marketing automation software company Marketo’s (MKTO) $1.7 billion valuation at that time.

In 2013, Hubspot generated revenue of $77.6 billion with a 50 percent growth rate over 2012. That is lower than the growth of Marketo which was $95.9 million in revenue and 64 percent growth last year. Since Marketo’s initial public offering a year ago, the stock has weathered with a 33 percent downturn in price. Losses for Marketo were $47.4 million in 2013 compared to $34.3 million for Hubspot. In the first half of 2014, losses for Hubspot were $17.7 million. Typically, software subscription companies are running in the red when they decide to sell shares of their company to the public.

According to their S-1 filing, Hubspot will trade on the New York Stock Exchange under the symbol HUBS.

Are Occupational License Requirements Stifling Competition?

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Thanks to established corporations trying to prevent their customers from jumping ship, U.S. entrepreneurs are facing a barrage of stifling occupational licensing requirements that raise the threshold expense of launching their own business. These requirements effectively curb competition through the constraints they impose. Nationwide, the number of state-licensed occupations has skyrocketed 25 percent since 1950.

Here in Massachusetts, several groups are demanding additional license requirements for those that would otherwise enjoy what they define as an unfair competitive advantage. Specifically, Uber, an on-demand driving service that has cab owners in an uproar, is being targeted – some would say persecuted – by officials in an attempt to shut the service down.

Maggie Donovan, the Vice President of Worcester’s Red Cab, says “Because they are an app company, they aren’t required to be regulated in the same way that traditional taxi companies are. This is a company that wants to destroy the taxi industry and ultimately doesn’t care about the customers that they are providing services to.” She added, “I’m not a bank competing with a bank, I’m a bank competing with a bank robber.”

The issue has led Rep. Sam Graves, U.S. House of Representatives Small Business Committee Chair, to pen a letter to the Office of Advocacy. In it he writes, “We are concerned that occupational licensing laws…could have the unintended consequence of stifling entrepreneurship. Occupational licensing also may impede innovation and business development as would-be entrepreneurs focus their resources on meeting licensing board requirements rather than on meeting the needs of their businesses or customers.”

The committee’s first of two hearings found an interior designer, Patti Morrow, who fought the legislation in two states, stating, “Licensing this industry is nothing more than restraint of trade.”

Melony Armstrong, a hair braider in Missouri, victoriously prosecuted her state’s licensing stipulations, avoiding 3,200 hours of courses to become a licensed cosmetologist just to teach hair braiding. She asserted that “The group that benefited most from Mississippi’s regulatory regime was the cosmetology establishment. Practicing cosmetologists made up the State Board of Cosmetology and could set the bar for entry to their occupation high (and thereby keep competition to a minimum)…I was not about to submit to such naked economic protectionism.”

An official from the Federal Trade Commission said that licensing provisions do safeguard customers from dangers to their well-being, but that frequently the primary result is the stymieing of competitors. Andrew Gavil, who directs the FTC Policy Planning office, said that “In the long term, they [regulations] can cause lasting damage to competition and the competitive process by rendering markets less responsive to consumer demand and by dampening incentives for innovation.”

Currently a case is pending before the U.S. Supreme Court, between the N.C. Board of Dental Examiners and non-dental service providers for teeth whitening. Rep. Graves wrote, “It is likely…the ruling will have significant implications for occupational licensing boards moving forward.”

It’s a certainty that the decisions reached on these cases will have a huge impact on how business is conducted here in the Commonwealth.

Staples to Close 140 Units – Sign of Trouble Ahead?

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As more people enjoy the convenience of online shopping and fewer people are using paper office supplies, Framingham-based office retail giant Staples has announced it’s well on its way to closing 140 stores this year in its effort to save over $500 million within two years.

The announcement provides more details to plans that have been over two years in the works. In 2012, the office retailer said it would examine leases individually as they came up for renewal, with plans to trim $225 million worth of expenses by late 2015. Earlier this year, it was revealed 225 stores, representing 12 percent of Staples’ North American stores, would be closed. As its second-quarter revenue of $5.2 billion was thought to be in line with analysts’ estimates, Staples generated $75 million in net income for the period, which was down significantly from the $103 million at the same time last year.

With same-store sales down five percent in the second quarter, the decline was attributed to smaller-sized orders and a four percent decline in customer traffic to its stores. Wednesday, Staples CEO Ronald Sargent said in an earnings call the company is “working hard to position Staples for the future and to build a stronger foundation for long-term growth.” Much of this work will center on the company’s website Staples.com, and will include adding more products online as well as giving customers the option to buy online and pick up in a local store. This option, allowing customers to pick up an item ordered online within two hours at the store of their choice, is doing well according to Sargent. “Early results are running ahead of expectations,” he stated Wednesday.

Staples is not the only store to have e-commerce sales affect its business. In May, Office Depot announced it would close 400 stores nationwide after it merged with fellow office supply retailer OfficeMax.

What does this mean for brick-and-mortar retail office supply outlets? Is it the beginning of the end or will there always be a need for a retail environment?

TGP Northeast Energy Direct Pipeline – Will it Help or Harm?

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There’s a proposal in place to build a high-pressure natural gas pipeline to run from Pennsylvania through New York state into Massachusetts, where it would join with existing pipelines that connect to the Massachusetts and Canadian coasts. This controversial pipeline is intended to carry natural gas from the Marcellus (and perhaps Utica) Shale field. The voices on both sides of the issue are getting louder – and more contentious – every day.

While no one disputes the need for inexpensive energy, proponents tout job creation and lower energy prices as reasons to approve the pipeline’s construction, while opponents cite both the source of the natural gas itself and the anticipated disruption the construction will cause as reason enough to stop the project. They also dispute the number of jobs the project will create in the long term, some saying the number will actually be in the single digits.

Proponents say that the gas is needed to supply a region where energy prices are already at a premium, thereby substantially lowering consumer costs. Detractors say that an equivalent savings in efficiency could be realized by simply fixing the many leaks in the existing pipeline network. They also say that the pipeline will deliver far more gas than can be used in the region for the foreseeable future, requiring further shipment of overflow supply to other locations.

Proponents say that the pipeline will be built safely, ensuring the environment is protected. Detractors point out that the project has already been made exempt from its legal obligations to follow either state or local environmental laws or restrictions and can simply take whatever land they want – including protected and environmentally-sensitive areas – by eminent domain, and that the company’s past performance does nothing to instill confidence that laws will be respected.

What is the best course? Do we build a pipeline or not?

Worcester, MA Ranked Among Nation’s Worst for Small Business

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Popular Science writer George Iles once said that hope is like faith holding out its hand in the dark. That is pretty much how the small business community of Worcester feels after two recent surveys. One of the surveys, which was conducted by the Ewing Marion Kauffman Foundation in partnership with professional services directory thumbtack.com, indicates that small business owners in Worcester feel that their city is not very friendly when it comes to enterprise and industry.

The gloomy sentiment of the Worcester small business community adds fuel to the fire portrayed in early July by NerdWallet.com, a website dedicated to the technical study of personal finance. NerdWallet.com analyzed Census data to grade 62 cities in Massachusetts in terms of median income growth, demographics and employment figures, and the findings for Worcester do not paint a pretty picture. Whereas Bay State cities such as Westfield and Newton seem to be doing pretty well, Worcester is near the bottom of the list.

How These Surveys May Affect the Business Outlook

Although it may be safe to assume that business owners in Worcester are still hopeful that things will improve in the future, seeing the publication of surveys such as the two mentioned above certainly does not help the cause. Two main reactions can be expected from these surveys, and the most sensible would be for city officials and business leaders to take a good look at the data and work on turning things around. The other reaction would be more capitalistic and devastating for Worcester: Business owners migrate to Newton or other cities where the grass is greener.

Unfortunately, negative economic surveys tend to impact a city’s future in a negative way by discouraging small business growth. A living example of this situation is Detroit, a city that seems to go deeper into recession as a stream of negative reports are published. A more pragmatic and business-minded way to handle negative reports would be to exit the city, particularly if the data offers little to be hopeful about.

Aaron Portnoy to Speak at Worcester Economic Club

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The Worcester Economic Club (WEC) announced today that Aaron Portnoy, a world-renowned computer security expert, has been booked as one of its speakers of the 2014-2015 WEC Speaker Series. Portnoy is featured on the July 21, 2014 cover of TIME Magazine’s “World War Zero: How Hackers Fight to Steal Your Secrets.” In today’s era of privacy concerns and compromised security infrastructure, what Portnoy has to share with the Club is sure to be of interest.As in past years, Worcester Economic Club’s 2014-2015 Speakers Series will feature many of the world’s foremost thought leaders, including nobel laureates, authors, journalists, economists, and business leaders. “I am pleased to announce Aaron Portnoy, one of the world’s leading authorities on cyber-security, will be addressing club in November,” says James J. Paugh, III, CEO of WorkersComp Analytics, LLC and President of the Worcester Economic Club. “Through our prestigious speaker series, we seek to showcase our commitment to promoting insightful, relevant discourse. Portnoy’s Time cover story highlights the security issues facing the economy today.”The 534th club meeting featuring Aaron Portnoy will be held Wednesday, November 19th, 2014 at the College of the Holy Cross in Worcester. Portnoy, who is the vice-president and co-founder of Exodus Intelligence started his career in reverse engineering for vulnerability discovery while still in high school by hacking the network of his school, the Massachusetts Academy of Math & Science in Worcester. Today, he is one of the world’s foremost experts in reverse engineering for vulnerability discovery, having determined major vulnerabilities in the systems of multiple institutions.

About the Worcester Economic Club

Founded in 1903, The Worcester Economic Club remains one of the oldest and largest organizations of its kind in the country. Comprised of professional men and women from the Worcester County area, we are dedicated to providing a forum for the open discussion of economic, civic, educational, and sociological subjects that are of interest to our members. Membership in the Worcester Economic Club is $200 per year with guaranteed access to all events and speakers hosted by the Club. All meetings are networking opportunities with a cocktail hour and formal dinner followed by a speaker. Speakers have included well known public officials, economists, educators, journalists, and business leaders. For more information visit http://www.economicclub.net

Are Employee-Owned Companies the Future of Business in MA?

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Boston-based Harpoon Brewery announced last week that 48% of the company will be sold back to its employees by August 1st, forming an Employee Stock Ownership Plan (ESOP) that will act as a trust for all of Harpoon Brewery’s employees. Harpoon is one of the larger craft breweries and, with a steady annual growth of 12%, is expanding market share across the country.

Co-founder Dan Kenary said that the option to sell back to the employees is a “great fit for our industry” and “will build camaraderie among the employees.” He went on to say that Harpoon has “[…] always been about inclusion and community,” which seems to be an attitude shared by many ESOP’s in Massachusetts.

William DiBenedetto, President & CEO of Lampin Corporation, a precision machine shop and manufacturer of high-performance gearboxes located in Uxbridge, MA, is leading a very successful 100% ESOP. He says, “Lampin’s employee-owners are motivated and empowered to help both the company and our customers succeed.” He went on to say that this “[…] includes not only the daily activity out there on the production floor, but out in the community as well. As employee-owners, we have the truly good fortune to be able to direct community support in directions that make an impact on our local economy and the industry in which we work. We take full advantage of our ESOP culture of INCLUSION and allow it to extend beyond our factory to our supply chain partners, customers and our community.”

Harpoon’s Kenary said that, as part of the process of deciding whether or not to sell shares of the company to the employees, he consulted with other companies in New England that had undergone a similar process. It didn’t take too long before it became clear that inclusion of employees in the ownership of a company can significantly impact efficiency and productivity. It seems that, from an employee’s perspective, being included in a company’s financial reward for success can be an amazing motivator! (Who knew?!)

So, the question remains… will employee-owned companies account for a significant portion of the marketplace anytime soon? That remains to be seen, but it doesn’t sound unlikely.

Has the Massachusetts Economy Turned the Corner?

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With one of the worst hit economies in the United States during the banking crisis of 2008, Massachusetts has had a long slog of it during recent years. However, certain statistics seem to indicate that the economy of the state is turning around.

Currently under 6%, Massachusetts has one of the lowest unemployment rates in the United States.

Venture capital investment in the state of Massachusetts was also higher in the second quarter 2014 compared year-over-year with 2013. The total amount invested around the state topped $1 billion.

The business real estate market in Boston is also becoming quite scarce, with the retail sector leading the charge.

In most cases, this would seem to signal a turnaround. However, because of the performance of the state in past years, one might state that this is simply back to normal for Massachusetts. Many economic experts also argue that the improvement in the economy is focused on those in the top 1% of the community of Massachusetts, with middle and lower class people seeing very little improvement in their lives.

Before the 2008 crisis hit, Massachusetts was one of the most productive states in the United States. The statistics that are being shown now do not necessarily reflect a healthy Massachusetts, but instead of Massachusetts that is still recovering. As home to some of the most successful industries in the world, the economy of the state of Massachusetts still seems to have a long way to go in order to achieve its true potential.