Ecolab CEO dampens water cluster enthusiasm

Transforming Minnesota into the Silicon Valley of water technologies will require more than just a loose collection of businesses working in the same field,EcolabCEO Doug Baker told an economic development conference this week.

It will require "thought leadership" and tangible benefits that make the costs of moving or expanding here worth the risks, Baker said during a speech at theInternational Economic Development Council's spring conference at theRadisson Blu Mall of America.

While Minnesota is billed as a hub of water technology companies, Ecolab offers an example of the limits to such claims to fame: Its 2,760 workers in Minnesota comprise only 3.5 percent of the company's workforce, while just 1 percent of the company's sales are in Minnesota, Baker said. Most of the company's water research is in Chicago and the Houston, Texas, area.

"Somebody's going to have to create a magnet and change gravity because right now gravity says I leave it there," he said. "We have, if you will, a number of companies, but I don't know that that alone creates a cluster because we don't all have our research here."

Baker's comments came in response to Minnesota's push to become a so-called "water cluster." He and other leaders in the effort say the above average number of water technology companies in the Land of 10,000 Lakes gives the state a competitive advantage in creating technology for a resource that's only going to become more limited.

The concentration of water and wastewater treatment technology in Minnesota is about 39 percent greater than the national average. The state's industry had about 900 entities employing 16,334 people in 2012,accordingto the Minnesota Trade Office.

St. Paul-based Ecolab produces wastewater treatment products, membranes and other water technology products for a variety of industries. Chaska-basedAeration Industriescreates technology that aerates water.

The state's companies do a good job of seeking one another out when necessary, said Steve Riedel, an international trade representative with theMinnesota Trade Office. But he agrees with Baker about a need for leadership to make the most of the opportunity.

"There are all kinds of ingredients to an industrial cluster, and it's usually driven by government for economic development reasons," he said.

Still, there's a reason those companies are here in the first place, said Lee Munnich, a senior fellow and director of the State and Local Policy Program at the University of Minnesota'sHumphrey School of Public Affairs.

Back in the 1970s and 1980s, Minnesota companies developed products centered on water issues. Minnesota's water industry also grew as companies recognized that water use and conservation is likely to be a big issue in the future, and the university had researchers involved in water technology. The result is what Munnich describes as an "emerging cluster."

"It's not completely clear how the cluster is going to evolve over time, but there are a lot of companies already here," he said.

But the mere presence of other companies won't be enough to persuade out-of-state companies to move here, Baker said. Relocation is a risky proposition. Not all of a company's employees will make the move, and those who don't are apt to wind up working for competitors.

It's a tough decision for companies looking to retain the most talented workers, and they need to see some clear advantage before making the leap.

"I don't believe it's economic incentives, in this case, that's going to drive the formation of a cluster," Baker said. "I believe it's got to be thought leadership, and you've got to create a center of gravity that makes it smarter for us to, over time, move our research here versus somewhere else."

Riedel pointed to Minnesota's medical device industry as an example of what could be done.

Companies like Medtronic invented successful products, and the university offered cutting-edge research. Employees eventually launched their own businesses; supporting industries and services started. In 1984, the statehelpedlaunch a trade association called Medical Alley to market the region and bring people in the industry together. The association eventually became strong enough to stand on its own and now exists asLifeScience Alley.

The state is exploring whether there's sufficient interest to do something similar with water technology, Riedel said.

In 2012, the state ranked 10th in the nation with $729 million in foreign sales of water and wastewater treatment technology, according to the Minnesota Trade Office. Neighboring Wisconsin, with $647 million in water technology exports, is ranked 11th, and Milwaukee leaders have organized aWater Council, partnerships with universities and more to boost the industry.

One way to compete is to focus on a subset of the industry, Riedel said. On-site water reuse is one option because sustainability is becoming such a big issue.

"This is not an original idea," he said. "So in order to get noticed and get attention, you need a niche, something to set you apart."

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