Data Wonk

Can Wisconsin Democrats Rebuild Their Brand?

Maybe the party needs to think like a business and rethink the product it offers.

By - Mar 23rd, 2015 12:09 pm
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The challenges facing the Democratic Party are not easily solved, but its possible the party could learn lessons from business. Successful businesses add value. That is, the value to the customer of the product or service they offer exceeds the cost of offering that product or service. Thus there are two basic strategies for increasing the amount of value added: cutting costs or increasing the value of the product to the customer.

The first strategy, generally called cost leadership, has been used by very large and successful businesses, notably Walmart and McDonalds. The big advantage of the strategy is that it’s easy to describe: relentlessly chipping away at costs. But that’s also its big disadvantage: there are always others looking for ways to drive down costs even more. Walmart is feeling pressure from on-line retailers and dollar stores. Most of these potential competitors will likely fail, but Walmart’s management must worry that someday it will suffer the fate of its predecessors — Kmart and earlier discount chains. The very obviousness of the cost strategy is a key danger to its continued success. Someone is always trying to figure out how to make and deliver things more cheaply.

The second business strategy goes under a variety of names. Some authors call it a responsiveness strategy—to respond quickly and flexibly to customers’ needs. For others it is an innovation strategy—keep bringing out new and improved products before competitors do. This approach can also be built around a trusted brand. The variety of names is telling because the second strategy is not really a single strategy, but a variety of strategies, all aiming to differentiate a business from its competitors in a way that’s meaningful to its customers. I will group them all as “differentiation” strategies.

It turns out it’s very hard to combine a cost leadership strategy with a differentiation strategy. Businesses trying to do a little of each end up with higher prices than those pursuing a pure cost leadership strategy and less interesting products than those concentrating on differentiating themselves.

One strategy that has sometimes proven successful in the short run is to switch from a differentiation to a cost strategy—often as a result of a hostile takeover. For instance, the new owners might cut out research, live on products already in the pipeline, and drive short-term profits higher. I think of this as a “Kalmanowitz” strategy. The late Paul Kalmanovitz would buy declining brewers, including Falstaff and Milwaukee’s own Pabst, cut out all marketing expenses, and watch their sales decline. In the meantime, without the marketing expenses, profits surged and Kalmanowitz became one of the richest men in America.

Another example is Carly Fiorina’s regime at Hewlett-Packard in which she substantially cut the research budgets. This did not work out as well for her as for Kalmanowitz; after the stock price tanked, the board fired her. Currently she is running for president, suggesting that business incompetence is no barrier to a political career.

The strategy to attract business adopted by the Walker administration for Wisconsin falls solidly into the cost leadership mold. It is a strategy promoted by numerous conservative think tanks that claim this approach is guaranteed to bring economic success. The underlying assumption is that reducing labor costs, the size of government, and taxes—particularly on the wealthy–will attract businesses and jobs.

The widespread advocacy for this strategy points up one obvious limitation. The more states adopt this strategy, the lower the odds that any one state will see success. As I’ve previously shown, the data shows this approach really isn’t working very well.

In a global economy, there is a limit to how much any American state can win through a cost leadership strategy. At one time the labor and other cost differences between New England and southern states was sufficient to induce textile and furniture manufacturers to move their operations to the south. With globalization, these operations have moved to countries with far lower costs than offered in any American state. While Apple designs its phones in California, it manufactures them in Asia, not Mississippi. Unless Wisconsin is prepared to accept wages competitive with those in Bangladesh, there is no way it can win global competition based purely on costs.

One can point to special cases where a relative cost advantage between states may win the day. One reason Amazon’s distribution center was located in Kenosha rather than Lake County was probably to avoid the Illinois sales tax on sales to the Chicago market. However, such cases are pretty rare.

The Republican fixation on a cost leadership strategy for Wisconsin offers an opportunity for Democrats to develop a coherent differentiation strategy. Democrats could start by looking at the traditional strengths of Wisconsin and exploring how to build on them. These include:

  1. An emphasis on environmental protection.
  2. Leading edge regulation.
  3. High quality and advanced education and research

Such a strategy would emphasize investment in tomorrow’s technologies such as those that offer alternatives to carbon-based energy, in sharp contrast to the present state policy aimed at protecting the primacy of coal.

Locally, this strategy would emphasize enhancement of Milwaukee’s lifestyle to better compete with cities like Portland.

In many ways such a strategy would be a natural fit for Democrats. It includes issues that Democrats—particularly those in Wisconsin—have supported traditionally, such as environmental protection. In contrast to the very ideological offerings of the Walker administration, it fits with the pragmatic liberal tradition, as expressed by Franklin D. Roosevelt: “It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”

By contrast, Republicans have given up competing as pragmatic problem-solvers. The few remaining pragmatic Republicans are marginalized as “RINOs,” Republican in name only.

Unfortunately, this pragmatic tradition has been rejected by a good chunk of the local “progressive” establishment, as a quick look at the Milwaukee County and Milwaukee school boards makes clear. When it comes to approving charter schools, the ideology of the charter supporters carries more weight than the quality of the proposal or the applicants’ record. (Heaven help a proposal endorsed by Howard Fuller or developed with support from the Walton Family Foundation.) The decision by the county board to legitimize illegal pension payments plays into the hands of those who believe that government cannot do anything right.

Nationally, at least, the data shows that business and the economy has fared much better with a Democrat in the White House than a Republican. So why have Wisconsin Democrats failed so badly at convincing voters they are better trustees of the economy? One reason is an underlying hostility towards business among some in the Democratic base.

Another is the largely successful effort to narrow the Democratic tent by purging those who differ with the base on certain issues. Ironically the effort to get rid of “DINO’s” in the Wisconsin legislature took place at a time when, because of gerrymandering, Democrats needed to win around 55 percent of the vote to win control of the legislature.

In an interview the recently-retired congressman Barney Frank summarized the challenge facing the Democrats:

The critical element we have are middle- and working-class white people, who actually do believe in government as a force for good, and are very bitterly disappointed that the government has done nothing to improve their economic situation. At the same time they see the Democrats and liberals caring about gay people, caring about black people. So we’re now in a vicious cycle. The more disappointed they get in government, the more they vote in people who don’t like the government. The more they vote for people who don’t like the government, the less the government does.

If one believes there are problems that only government can solve, one should be particularly intolerant of bad management of these programs. Too often, however, Democratic supporters of government react hostilely to any proposal to improve the operation of government. To successfully advance an alternative to Walker’s cost-centered economic strategy, Wisconsin Democrats need to become the chief advocates for improved government operations.

Categories: Data Wonk

29 thoughts on “Data Wonk: Can Wisconsin Democrats Rebuild Their Brand?”

  1. Fran says:

    “The critical element we have are middle- and working-class white people, . . . are very bitterly disappointed that the government has done nothing to improve their economic situation. At the same time they see the Democrats and liberals caring about gay people, caring about black people.”

    This description is of me. I am middle class, white and (surprise) not a racist! Yet, I feel the Dems offer me absolutely nothing except a free dose of guilt trip for my unrecognized “white privilege.” Unfortunately, white privilege wont help my kids get into college, especially with affirmative action doing everything it can to hurt their odds. Also, white privilege wont help pay the bills, especially with my sky rocketing health insurance premiums (thanks Dems) But who knows, maybe I am not listening to Al Sharpton close enough, is that hidden white privilege at work?

  2. Nicholas says:

    How does Affirmative Action hurt your kids chances of getting into college?

    Do you have evidence to back this up? Or do you just feel it?

  3. PMD says:

    Of course she doesn’t have evidence, because affirmative action did not prevent her kids from getting into college. And no one is trying to make her feel guilty. I’d love to hear about all the ways the party of old rich white people is helping her out. What say you Fran?

  4. PMD says:

    You also seem obsessed with race Fran. You mention you’re not racist but then gripe about guilt over “white privilege” and affirmative action. Why the race obsession?

  5. Neal Brenard says:

    Is there a Democratic Party in Wisconsin? Anything beyond the label? Haven’t seen them much over the past 30 years or so…I’d say since Thompson took over the governorship in 1987. The question comes up a lot at the national level as well these days. With no distinct defining ideology, the Democratic Party has been reduced to a label applied to Republican opponents. The Democratic Party doesn’t exist any more beyond that.

  6. Fran says:

    When the African American down the street, who I like btw, gets into the college my more accomplished niece was rejected from. That is how AA has affected me personally. When my nieces friend jokes about putting “Guatemalan” on his resume to boost his odds of getting in (over another applicant), that’s how AA negatively affects me. I’m not race obsessed at all. I have spent more time talking about race the last 6 years than I have the rest of my life combined. Why? Because that’s what the Dem party has chosen to focus on. They are a party of identity, be it gay, black, whatever else. Nothing about helping all citizens equally. Dividing the populace and making them all victims; except for white men of course. They are the bad guys.

  7. Fran says:

    “the Democratic Party has been reduced to a label applied to Republican opponents”

    This is very true. See it in practice by reading any Democratic pundit. They never talk about qualifications of the left, just about how bad the right is.

  8. PMD says:

    You speak in Fox News Channel talking points Fran.

    Of course you aren’t biased in favor of a family member. And your extremely limited anecdotes don’t prove a damn thing. It’s hardy evidence of a widespread problem. And aren’t you playing the victim by moaning about this? Sure sounds like it. Pot, meet kettle.

    Again, what does the GOP do for you? Democrats are just the worst and so icky, I get it (bad guys? ha) , but what have Republicans done for you?

  9. PMD says:

    Says Fran: “They never talk about qualifications of the left, just about how bad the right is.”

    Which is exactly what you are doing now, just insert left for right. You are such a massive hypocrite.

  10. Fran says:

    I am of course biased, but I also know their comparative qualifications. His was worse than hers in every way. So bias, yes, wrong? no. I am the victim in the fact that there are laws on the books that discriminate against me due to my race. Can the same be said of any other race/gender? From the amount of crying you hear from these groups its ironic only white people can point to active laws of discrimination….

    What has the GOP done for me? Let me rephrase this question by asking Why do I plan on voting for Scott Walker, as the original question is too broad. Fair? I support Walker because he wants to transfer power from the Feds to the States. I believe that walker wants to lower taxes. I support right to work legislation. I support his abortion requirements. I support shrinking government in general. Mind you, there are things about the GOP I despise, ie Americas war machine.

  11. Fran says:

    I am commenting on the negative aspects of the democratic party because this article is how will they go about building back their brand. I am one of their old followers who has become disgusted with their brand and commented as such.

  12. PMD says:

    So the GOP has done nothing for you. You can’t name anything. You think Walker wants to lower taxes, and you support his stance on abortion and right-to-work, but you can’t name a single thing they’ve done to help you or make your life better. That’s pretty telling Fran and not exactly an endorsement of the GOP.

    When you accuse minority groups of “crying” all the time, you really come across as a narrow-minded, clueless, and heartless human being. As a white male Fran, I can tell you with confidence, I’ve got it pretty damn good in this country. I am not under attack. I am not being discriminated against. You live in Fox News Land as opposed to the real world.

  13. David says:

    @Fran…. ” Mind you, there are things about the GOP I despise, ie Americas war machine”. So you’re ok with the right wing American war machine as long as you have your $50 a year in tax savings, right to work and somewhat more difficult to obtain abortions? It’s just my opinion, but I think your priorities are backwards. I respect that you’re opposed to abortion, but they’re not going away anytime soon. Maybe we should adjust our stupid foreign policy in the meantime. That would reduce taxes and the size of government. You can vote for the Republican Presidential candidate, but just to let you know that means more war….. with more taxes/debt and bigger government. As long as you’re ok with that.

    Also, one only needs to look around to see that African Americans are not doing well, especially in Milwaukee. I know you don’t want to talk about it but you have to. We can’t keep sweeping it under the rug. You say you’ve discussed race more in the last six years than you ever have before….. GOOD. Just drive around, open your eyes…. we have a real problem. I personally agree with you on affirmative action, but I don’t think its keeping your niece from getting into her school of choice. I think the program should be based on income. Wealthy blacks and wealthy whites are doing just fine…. its poor blacks and poor whites that need a leg up. I’m guessing that doesn’t apply to your niece. But that’s just a guess…. I’m playing the odds.

  14. Nicholas says:

    …How do you know that he didn’t deserve to get into that school and your white niece didn’t deserve to be rejected?

    How do you know he was accepted based on his race?

    Or do you just assume?

  15. Nicholas says:

    What laws target you because you are white??

  16. Homer Jay says:

    Fran is a textbook example of the divide and conquer strategy. he or she complains that no one supports him or her AND supports right to work? There’s a reason it’s commonly referred to as right to work (for less). And you are not voting for Scott Walker, you are voting for the Myth of Scott Walker. The image he has crafted is nothing like the record he has developed while in office.

  17. PMD says:

    I would also add that no one is playing the victim card like Christians are right now. The Indiana House just passed a “religious freedom” bill. Many other states are debating similar legislation. Arizona had their big battle over it a year or two ago. Fox News runs a month or two of “War on Christmas” nonsense every year. No one, not gays nor African-Americans nor anyone else, plays the victim card as loudly or as frequently as Christians do these days.

  18. Cassandra says:

    I think the point of the article (and, tellingly, of Barney Frank’s comment) is that if the party wants to retain these votes, we can do something different, or if we don’t mind losing them as they we been, we can keep going the way we have been going. Nicholas and PMD, you know who Barney Frank is, right? Is it okay for him to say that? Is it okay for Fran to agree with him? I guess I’d rather work with Fran, earn her vote, and win the election, than insult her, heighten mutual antagonism, and lose the election.

    The easy trap to fall into is saying “good riddance” — which I don’t think it’s ever a good idea to think or say about anyone, regardless of your approval or disapproval of what they say — not just because it’s better to speak respectfully to people, but because the more hostility you sow, the more hostility you reap. Live by the sword, die by the sword.

  19. PMD says:

    So how would you sway Fran then Cassandra? How would you earn her vote? Present your argument to her and see what she says. I don’t think you’re wrong when you argue for civility, and countering the ideas as opposed to attacking the individual is always the better approach, but I’d like to see you attempt to sway Fran and earn her vote.

  20. Nicholas says:

    Frank is right of course, but the solution isn’t to cater to racial resentment.

  21. Gary says:

    “Bruce Thompson for Democratic Party Chair”

    I’d vote for that.

    The Democrats need to respond to the predictable actions of Wisconsin’s conservatives to turn those actions on their head.
    For instance, we’re nearing the time to respond to the vindictive voter ID law with and ramp up a campaign to get ID’s into the hands of all potential voters, along with getting all of them registered.

    “I would also add that no one is playing the victim card like Christians are right now.”

    It’s always been beyond the liberal ethic of Wisconsin Democrats to point fingers at a fellow citizen based on religious and so-called morals, right? I hope there’s an active task force or standing committee in the Dem. Party that’s keeping tabs on this stuff. I continue to see it in subtle ways, even in something as innocuous as Wisconsin’s statewide library services: the online site called “NewspaperARCHIVE.com” had/has direct conservative religious ties and an “F” rating with the Better Business Bureau. I assume that the site is raking in fees including funding from the State of Wisconsin since they’re featured at Badgerlink.org.
    You can read more about “NewspaperARCHIVE.com” at http://www.cluewagon.com/2014/05/want-a-full-refund-on-your-newspaperarchive-com-subscription-just-ask-about-their-charity/

  22. Cassandra says:

    So let’s not cater to racial resentment. Let’s focus on win-win policies that are good for everyone, like (to quote)

    An emphasis on environmental protection.
    Leading edge regulation.
    High quality and advanced education and research

    and let’s promise to treat with respect and hospitality people who don’t toe the complete party line but would like to vote with us. Sure, if we were machines, someone could go ahead and vote for a party who just slammed them as an immoral idiot, but people are not machines.

    I think the last item has more impact than you might imagine; Fran can speak for herself on this, but she is definitely not the only person I know who has been driven away from Wisconsin’s Democratic party by being hammered on hard because they agreed with only 80% of the party line instead of 100% of it.

  23. PMD says:

    @Cassandra… You think those “win-win policies” will sway Fran? She wants less government, so how will more environmental protection and regulation convince her to vote Democrat and not Republican? And why do you think those are win-win issues? The GOP generally does not support any increase in regulations or environmental protections.

  24. Chris says:

    Leaving aside the Fran issue. I just wanted to say that I think this is a very interesting and stimulating piece. It takes a concept from outside the political world and applies it to the brand of the Democratic party. The results are quite interesting and useful to both parties. Keep ’em coming.

  25. AG says:

    PMD, that’s not necessarily true regarding the GOP being against environmental protections, especially at the state level where you have many republican voters who are hunters and users of many of our natural resources in the state. The problem comes when you over regulate and then try to work it back to a workable state. Case in point, the democrats locked down our state mining laws to the point where it was literally/effectively impossible to open a new mine. When the republicans try to work back that policy to one that allows for mines while still protecting the environment then the left cries the destruction of our wilderness.

    Anytime the government governs and it is then worked back, even if for practical reasons, it is so easy to claim the right is against those ideals. Another example, when foodstamps were extended and increased temporarily during the recession they were always supposed to be temporary. However, when the program ended you saw the left crying foul that benefits were being “taken away” and “stolen” from those in need.

    So just because there are groups trying to work to find regulations that also allow for commerce, doesn’t mean they’re against the environment. (OK, I’m not saying that’s everyone… but lets keep this as a general comment)

  26. PMD says:

    @AG… Not against all environmental protections. I said generally the GOP is against more environmental protections. I believe that is true.

  27. AG says:

    OK, I’ll give that one to you.

  28. Dan Wilson says:

    Dems need an affirmative message. See my posting on uppitywisconsin.

    http://www.uppitywis.org/blogarticle/wisdems-should-adopt-family-values-mantle

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