Walk down the aisles of the Home Depot at 124th Street and Capitol Drive in Wauwatosa and there are plenty of Milwaukee Tool products on display, but leaving the parking lot there are few, if any, signs those tools were designed and engineered just a few blocks away.
The Brookfield headquarters of Milwaukee Electric Tool Corp. at 13135 W. Lisbon Road would have more visibility under a proposed expansion that would more than double the size of its campus. The $33 million project would be funded in part by $6 million in tax incremental financing from the City of Brookfield.
The company also is in discussions with the state for additional benefits related to its proposed expansion. The Wisconsin Economic Development Corp. has awarded Milwaukee Tool $1.5 million in tax credits since 2011 for creating 360 jobs.
Milwaukee Tool officials say the expansion is necessary after more than tripling the workforce at the Brookfield campus since 2009. There are now more than 700 employees at the site and the expansion plans call for 300 to 500 more in the next five years.
Sales have grown over the last decade, from around $500 million in the early 2000s to $2 billion in 2015. The company has gone from a focus on corded power tools to cordless tools, power tool accessories and hand tools.
The growth has been largely organic, save for the acquisition of Mukwonago-based Empire Level Mfg. Corp. in 2014. The growth has also been sustained, in the double-digits through each of the last five years, including 22.2 percent revenue growth in 2014 and a three-year compound annual growth rate of more than 20 percent, according to filings by Hong Kong-based Techtronic Industries Co. Ltd., Milwaukee Tool’s parent company.
Disruptive innovation
So how has the iconic brand found itself again? Steve Richman, Milwaukee Tool president, says it is important to look at the company’s focus on professional trades and innovative products, like the first right angle drill and the Sawzall reciprocating saw, in the period after World War II.
“That was the foundation that when a new group of us came nine years ago, that we sat up and said, ‘We need to go back to our roots,’” Richman said.
Richman joined Milwaukee Tool in 2007, just two years after Techtronic acquired the company. His career spans more than 30 years in the industry and includes brands such as Black & Decker, Werner Ladder, Skil and Bosch.
There were two main issues for the company in the mid-2000s, Richman said, Milwaukee Tool wasn’t focused on the professional trades and was “dabbling” in a number of areas while “not doing a great job in doing any single one of them well.”
The other problem was where ideas and feedback came from. Richman said the new executive team that arrived with him tried to bring an outside-in philosophy in which everyone was focused on users and distribution partners.
“The problem with Milwaukee is they were focused on what they believed and saw internally,” Richman said. “We had great engineers; (but) we had no marketing organization and no plan to really focus on that user segment.”
“That user segment” is the professional trades. The company’s main purpose now is to solve problems for those in the mechanical, electrical, plumbing, HVAC, maintenance and repair, and remodeling trades.
“We don’t design products for do-it-yourselfers,” Richman said. “Now, a lot of passionate do-it-yourselfers may want a product that performs, but we design products for those professionals and those professional trades.”
With a renewed focus on the professional trades and on solutions to problems, not just new features, Milwaukee Tool set out to provide “disruptive innovation.” Richman said the innovation is most easily seen in the products, but the concept spreads throughout the organization.
Richman and his team ran into a problem, though, when they told their distributors and other partners they planned to change the company so drastically.
“They really didn’t believe us,” he said, noting that Milwaukee was known as a great corded power tool company with little commitment to power tool accessories, no hand tools and about 3 percent market share for cordless tools in North America.
In the years since, Milwaukee has made a major shift toward cordless technology. The company now is No. 1 in market share for cordless power tools in the United States.
The company started doing business as Milwaukee Tool, in part to reflect its focus on being a solutions company. Milwaukee Tool holds patents on lithium-ion batteries for power tools and has since developed 18-volt and 12-volt battery platforms for its tools known as the M18 and M12, respectively. Each platform is compatible forward and backward between generations and interchangeable from tool to tool. The goal is to have an ecosystem of tools to which someone in the trades can turn.
“We’ll invest in a product that’s not going to be profitable because we know that will help that user deliver solutions on their job and keep them in that one battery platform,” Richman said.
The new battery technology, combined with a focus on innovating for the trades, is what set the company on its new trajectory. From 2005 through the end of 2015, Milwaukee Tool was issued 327 patents. Comparatively, the company was issued 96 patents between 1990 and the end of 2004. Milwaukee Tool had been assigned nine patents through the roughly 50 days in 2016, including one for a tablet case that uses a power tool battery.
Richman and chief financial officer Ty Staviski believe the company is positioned to sustain that level of innovation over the coming years. Staviski said there are “more ideas than we can even fund” and a product roadmap has been developed out to 2019.
Collaborative culture
The culture and people at Milwaukee Tool are what make the difference, Richman said.
“This team environment that we’ve been able to create here and been able to really nurture, is really the key to us being able to be extremely innovative, but also be extremely fast to market,” Staviski said.
The environment isn’t exactly what one might expect of a tooling company. The headquarters atrium features meeting areas, product displays, whiteboards, tables with computer monitors, a café, displays with the names and pictures of associates, and screens displaying content from the company’s social media channels.
On a recent morning, the atrium featured a sign welcoming Home Depot. Milwaukee Tool distributes its products through a number of channels, including Grainger and Fastenal stores, but has a partnership with Home Depot that means its products aren’t sold at Lowe’s, Menards or on Amazon.com.
“We view Home Depot (as) being a much stronger partner than a Lowe’s or an Amazon or a Menard’s to be able to deliver the right kind of solutions to our real core users on a global basis,” Richman said.
The idea behind the atrium space is to allow for collaboration, and the feel is closer to something from Silicon Valley than Waukesha County.
“It’s almost a little bit techie, right? And that’s how we kind of view ourselves,” Staviski said.
Richman was quick to point out the culture isn’t a fit for everyone, and that some people have left Milwaukee Tool and been high performers at other Wisconsin companies. He said the company’s culture is centered on high expectations and rewards for performance, but above all, it values collaboration.
“To be able to drive things with the kind of speed that we’re talking about, if you don’t have that collaboration, it doesn’t happen,” Richman said.
The collaboration to develop new products actually starts outside of the company, with conversations and meetings between product managers and end users.
“Some of the most unique things we’ve done have come from our end user research,” said Paige Bovard, a senior product manager on the electrical team.
She said the goal is to get out in the field and do research with end users, but actually observing them on a job site can provide the best insights.
“Users can’t always tell you what they need,” Bovard said, adding that before smartphones took off, most users wouldn’t have been able to tell you which apps they wanted. “People don’t know anything other than what they’re using today,” she said.
The product and advanced engineering teams will seek to address something they think is an issue by conducting research in a variety of environments. It could be making a corded tool cordless, making something demonstrably faster or lighter, or just solving a problem that comes up on job sites.
Milwaukee Tool is now on its eighth generation of lithium technology for batteries and makes it a point to work with suppliers to ensure high-quality battery cells. The company also has a testing area dedicated to measuring not only the performance of Milwaukee’s batteries, but also those of competitors. Richman said there are a host of challenges to creating batteries for power tools, including making them work in a variety of environments and with variations in the load they will have to handle.
“It is more difficult to make a battery work in a power tool than it is to make a battery work in a Tesla,” Richman said.
Advancing tooling technology
While the shift to lithium-ion batteries helped open the doors to innovation for Milwaukee, company officials say it is combining battery technology with advancements in brushless motors and other electronics that helps set Milwaukee tools apart. In 2012, the company introduced its FUEL system, which combined the best of those three areas in one tool.
As the tool industry has become more focused on cordless technology, companies have increasingly turned to electrical instead of mechanical engineers. That has extended to electric motor repair services too. Richman said in the past, all companies basically used the same motor and the same design. Now, Milwaukee Tool designs a different motor for each tool.
The amount of electronics involved in each tool has also increased. Initially, companies offered some level of customization for how much power and torque a tool would use. Milwaukee has gone farther and now offers its One-Key system on some tools, which utilizes a mobile app to offer complete or application-specific customization. There are also capabilities for inventory management of tools and for locating lost or misplaced tools.
“We have to stay in front of the technology in a big, big way,” Richman said, adding that the company is now bringing in software and app developers in addition to engineers.
As engineers develop new products, they have Milwaukee Tool’s rapid prototyping center at their disposal just down the hallway, with the goal of improving speed to market. The company has sought to eliminate bureaucracy by giving those in engineering and concept development the freedom to test new ideas.
“These guys don’t have to ask for an approval from Ty on the financial side to go ahead and do a prototype or do a vision sketch,” Richman said.
Bovard said collaboration and teamwork among fast-moving and entrepreneurial employees is important and it helps that they are empowered “to make decisions for their products on the fly.”
The in-house rapid prototyping means the company is able to make multiple iterations of designs at full size and get feedback from the field on them quickly.
Milwaukee Tool is in the midst of renovating its headquarters to give more room to the advanced concept development teams. Once the renovation is complete, Milwaukee Tool will be able to bring in engineers currently working in a leased space on the other side of Lisbon Road.
Richman and Staviski say having the entire team under one roof would be a competitive advantage, but there isn’t enough space.
Milwaukee Tool also asks employees throughout the company to go through training classes so they understand how to use the tools. They would also like to be able to bring more people through their training area, but they can’t.
“We don’t have enough room for our training and development right now, to be real frank,” Richman said.
Bursting at the seams
The company’s expansion proposal calls for a 200,000-square-foot, four-story office building. It has required zoning changes and the city transferred some land to Milwaukee Tool.
Staviski said despite having strong growth in sales, Milwaukee still has a responsibility to its parent company. Techtronic Industries has a number of other brands with offices in the United States that could house Milwaukee employees.
“There’s a lot of pressure, because we’ve got open capacity in some of our other buildings,” Staviski said.
He said Milwaukee Tool looked at other locations in southeastern Wisconsin and even considered northern Illinois, but wants everyone on the same campus. The problem is the company is located in a generally industrial area and the current headquarters is converted manufacturing space.
“If you were looking to build a 200,000-square-foot office building, chances are you wouldn’t build it where Milwaukee Tool wants to build it,” Brookfield mayor Steve Ponto said, suggesting Bluemound Road would be a better fit.
The proposed development is also in an area targeted for redevelopment by the city. A market analysis done by a consulting firm for the city in 2010 highlighted a number of challenges facing the area and suggested that Milwaukee Tool could be a catalytic anchor for the area.
Even with most of the company’s manufacturing taking place in Mississippi, China and other locations outside Wisconsin, Richman said Milwaukee Tool still has strong ties to the area it is named for.
“We’re proud of the Milwaukee heritage; we’re proud of the fact that we can say that we design and develop everything on a global basis, and all the innovation, from people that are living in Wisconsin,” he said.
The jobs the company plans to add will have an average salary of $75,000, and there are future expansions already included in some of the documents related to the proposal.
“What they’re talking about is adding 100 jobs a year for the next five years. If they do that, they’ll become one of the largest employers in Brookfield,” Ponto said.
Richman didn’t hesitate when asked if Milwaukee Tool would be able to fill those jobs, highlighting partnerships with the University of Wisconsin, Marquette University and Milwaukee School of Engineering. He also said the company has a presence on campus at Massachusetts Institute of Technology, University of Illinois, University of Michigan and others, in addition to recruiting from app developers and other companies.
There are plenty of ideas on which the company’s new hires could work, Richman said. Milwaukee Tool recently expanded into lighting and has plans for other product lines he didn’t want to discuss.
While Staviski said there is always a risk associated with the macroeconomics in the U.S. and around the world, the real problems would come internally.
“To Steve and myself and the exec team here, the risk is getting complacent, not staying on the forefront and not continuing to be paranoid about our competition,” he said.
“The day that we actually believe that we are so good that no one else can deliver something,” Richman said, “is the day that we’re going to fail.”
Milwaukee Tool Timeline
1922 – A.H. Peterson and A.F. Siebert form A.H. Peterson Co.
1923 – Fire destroys A.H. Peterson facilities.
1924 – Siebert purchases company at auction, starts Milwaukee Electric Tool Corp.
1924 – “Hole-Shooter,” portable one-handed drill, developed for Henry Ford.
1949 – Launches first right-angle drill.
1951 – Introduces Sawzall reciprocating saw.
1965 – Moves from Milwaukee to Brookfield.
1975 – Acquired by Amstar.
1986 – Acquired by Merrill Lynch.
1995 – Acquired by Atlas Copco.
Mid-1990s – Achieves ISO certification at all facilities.
2005 – V28 lithium ion battery for power tools introduced.
2005 – Acquired by Techtronic Industries.
2007 – Steve Richman appointed president.
2008 – Introduces first M12 and M18 batteries.
2010 – Hand tool business launched.
2012 – Fuel platform launched, combining lithium-ion battery, brushless motor and electronics.
2015 – Plans for corporate headquarters expansion announced.
