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Cluster Development in Practice:Twelve Steps

The Competitiveness Institute11th Global Conference

Cape Town, South AfricaOctober 2007

Ifor Ffowcs-WilliamsCluster Navigators LtdNew Zealand

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Cluster-based economic development

Moving from

clumps & clutter to integrated

innovation systems

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Clumps & Clutter v. Innovative Clusters

Clumps of firms• Local agglomerations of self-contained, stand alone,

vertically integrated, isolated firms; • Little trust, limited interaction;• Little out sourcing, subcontracting, collaboration• Geographic but not social proximity

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Clumps & Clutter v. Innovative Clusters

Clumps of firms• Local agglomerations of self-contained, stand alone,

vertically integrated, isolated firms; • Little trust, limited interaction;• Little out sourcing, subcontracting, collaboration• Geographic but not social proximity

Clutter of public agencies• Silos with individual (divergent?) development

agendas for the cluster• Absence of teamwork, alignment, trust

• Remote from the private sector• Priorities set in isolation;• And ever changing

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Innovative ClustersCommon elements

1. Deep specialisation, competencies• Supported by public investments, academia

2. Local buzz: dense networking • Rivalry yet collaboration, co-opetiton• Rapid movement information • Teamwork between firms• and with university, government agencies• Leadership, tight alignment

3. Global pipelines• Connections beyond the region• Attracting customers, new investment…

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Innovative ClustersCommon elements

1. Deep specialisation, competencies• Supported by public investments, academia

2. Local buzz: dense networking • Rivalry yet collaboration, co-opetiton• Rapid movement information • Teamwork between firms• and with university, government agencies• Leadership, tight alignment

3. Global pipelines• Connections beyond the region• Attracting customers, new investment…

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Innovative ClustersCommon elements

1. Deep specialisation, competencies• Supported by public investments, academia

2. Local buzz: dense networking • Rivalry yet collaboration, co-opetiton• Rapid movement information • Teamwork between firms• and with university, government agencies• Leadership, tight alignment

3. Global pipelines• Connections beyond the region• Attracting customers, new investment…

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Cluster DevelopmentThe How

• Creating a collaborative, demand driven, process

• For starting a clustering initiative, or

• For renewing, revitalising a clustering initiative

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Resource cluster development for the long haul

• Take a 5-10 year perspective• Primary need is the facilitator:

• Relationship builder, broker, neutral corner

• Central to this role is knowledge of key firms and support infrastructure

• Facilitator is much more than a ‘Project Manager’

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Cluster boundariesTake care on two dimensions!

1. Geographic dimension• Clusters don’t respect

political borders• Boundary may be ‘one

hour’s drive time’ 2. Industry dimension• Clusters include support

firms, soft infrastructure… broader than an ‘industry’

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Clusters: Building on specialisations US Baby Silicons: each differentiated

San Francisco ‘Multimedia Gulch’

Internet activity concentrated on digital media and

B2C.

Los Angeles ‘Digital Coast’

Strongest Internet segments:

Content services, alternative media

Chicago‘Silicon City’

B2B segment, leveraging the city’s

strong industrial expertise.

Miami‘Silicon Beach’

Hub for Latin American Internet

companies

New York‘Silicon Alley’

Financial services, new media

leveraging New York’s traditional

industries.

.Quote Courtesy Tom Peters

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OR

Quote Courtesy Tom Peters

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The Cluster MusterHigh profile, kick-off public meetingRounding up the ‘usual suspects’

Objectives: • To publicly announce the initiative

• Explain the reasons for selecting this sector• To introduce the facilitator(s)• To request the cluster’s stakeholders to

be available for an early 1-on-1 meeting

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Step 3 Initial cluster analysisBuilding the base

Two thrusts:1. Initial competitiveness diagnosis,

fact based, understanding cluster’s current situation: structure, scale, opportunities, constraints, culture ...

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Step 3 Initial cluster analysisBuilding the base

Two thrusts:1. Initial competitiveness diagnosis,

fact based, understanding cluster’s current situation: structure, scale, opportunities, constraints, culture ...

2. Establishing platform for action Introducing the process; motivating key

stakeholders to participate; identifying potential leaders ...

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History matters!Understand the cluster’s foundations

• How did the cluster start?• How did it grow? What changes?• What have been the cluster’s

knowledge flows?• Development of links, trust

• Level of social proximity? Subcontracting? Interdependencies? Joint actions? University activity?

• Development of global connections• Exports? FDI? Internationalisation?

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History matters!Understand the cluster’s foundations

• How did the cluster start?• How did it grow? What changes?• What have been the cluster’s

knowledge flows?• Development of links, trust

• Level of social proximity? Subcontracting? Interdependencies? Joint actions? University activity?

• Development of global connections• Exports? FDI? Internationalisation?

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Step 4 Forming the Leadership Group

Active clustering needs:• Public commitment from

preferred leaders who understand and care about the big picture

• A Group with a balance of skills, able to work as a team

Facilitator has a key role in establishing Group

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The preferred futureThe Vision

Building on the cluster’s currentcompetitive position … with a challenge,

a s t r e t c h factor

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Preferred futureICT, Cape Town

Cape Town as the IT gateway and training centre of Africa

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Bangladesh knitwear clusterInitial preferred future, 2010

•Bangladesh is a world-class supplier of quality knitwear.•We have earned a reputation for service,

product innovation, market understanding.•Exports have doubled to $5-6 billion,

with strong growth in the US market.

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Standing in the FutureIdentifying the Stepping Stones

• Looking back from the future:

Back casting

• Not a continuation of the present (Forecasting)

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Example Bangladesh Knitwear cluster workshop

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Bangladesh Knitwear stepping stonesConclusions from two workshops

Export marketing: USA focusTraining programs: leaders to operators

Improved support from banksInvest in joint facilities and services

Improve Utilities (e.g. electricity)

Improve transportation and logistics

Develop culture of co-operation

Comply: US codes of conduct

Develop culture of innovation

$5-6 Billionin 2010

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Cluster launchLake Katwe salt cluster, Uganda

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Benchmarking visitsExample: Norway’s Mountain Tourism cluster visit to Banff, Canada

• Identify an appropriate (model) reference cluster

• Benchmarking visits provide a collaborative learning opportunity• Business + public agencies +

academics sharing their learning• Builds connections, trust, social

capital amongst the travellers• B2B links often develop during a

visit

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Benchmarking visitsExample: Norway’s Mountain Tourism cluster visit to Banff, Canada

• Identify an appropriate (model) reference cluster

• Benchmarking visits provide a collaborative learning opportunity• Business + public agencies +

academics sharing their learning• Builds connections, trust, social

capital amongst the travellers• B2B links often develop during a

visit • Visits can provide motivating

data shocks

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Ocean Technologies(St. John’s)

Ag-Biotech/Nutraceuticals(Saskatoon)Astrophysics

(Victoria, Penticton)

Fuel Cells(Vancouver)

Medical Technologies(Winnipeg)

Photonics(Ottawa)

Biopharmaceuticals,Industrial Materials

(Montreal)

Life Sciences & Wireless(Halifax, Sydney)

e-Business(Fredericton, Moncton,

Saint John)

Aluminium(Ville Saguenay)

Aerospace(Ottawa, Montreal)

Nanotechnology(Edmonton)

Sustainable UrbanInfrastructure

(Regina)

Nutrisciences(Charlottetown)

Benchmarking against other relevant clusters

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Benchmarking against other

relevant clusters

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Step 10 Long-term, strategic agendaMore substantive, more strategic initiatives

Moving beyond the initial activity…the ‘low hanging fruit’ e.g.• Technology & SME related

• R&D centers; Centers of Excellence; Incubation facility• Technology Park; One-stop-service centre• University links; Technology mapping

• Internationalisation• Cluster branding; Export strategy development• Cluster-to-cluster links; Investment attraction

• Skills development• Workforce training; Learning circles • Tertiary course development; Partnership with local schools

• Finance• Equity and debt funding, venture capital, angels, seed funding

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Step 11 Linking the clusterBuilding on a solid understanding of the cluster’s strengths

Three levels of leverage: 1. With neighbouring clusters2. Nationally, with clusters in the same sector3. Internationally, with clusters in the same

sector

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BUILDING A EUROPEAN BUILDING A EUROPEAN FOOD CLUSTERFOOD CLUSTER

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FINE project Food Innovation Network Europe

Objectives:

Building a lasting network of EU food regions

Learning from each other on:

policy,

innovation instruments

regional food networks

Developing interregional RTD and innovation projects

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FINE regionsCollaboration between eight regional food clusters:

East Netherlands (NL) Øresund food region (Denmark/Sweden) Rogaland (Norway) Castilla y León (Spain) Flanders (Belgium)

Wielkopolska (Poland)

Scotland (UK)

Emilia Romagna (Italy)

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Cluster policies

Traditional economic development policy

Individual needs of specific firms and industries

Current policies Firms and industries as a system for regional development

The challenge The international approach in cluster promotion

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Step 12 Review, Evaluation

Two levels of review1. Reviewing the overall contribution of the

clustering intervention: • Is the clustering initiative significantly

adding value?

1. Is the competitiveness of the cluster being upgraded?

• Movement from a clump and clutter to a more innovative cluster?

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Strengthening the conditions for commercialisation?

• Is the cluster becoming a more demanding customer for R&D centers and universities?• Setting priorities for needs-driven R&D?

• And becoming an incubators without walls?

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Cluster evaluation

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Cluster evaluation

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Cluster evaluationElephant & mouse syndrome

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Avoiding the lionsThree tips

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Value of cluster workshopsIdentifying development priorities

• Key element in the cluster process• Transparent, open to all• Gaining broad agreement on the

cluster’s development strategy

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Value of cluster workshopsIdentifying development priorities

• Key element in the cluster process• Transparent, open to all• Gaining broad agreement on the

cluster’s development strategy

• Capturing ‘the wisdom of crowds’

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Move quickly into actionAvoid paralysis by analysis

• Analysis simply provides the platform for action • Businesses, especially SMEs, seek early pay-offs

• Pick the ‘low hanging fruit’• Engage only when there is momentum

• Move at the speed of business• Build a portfolio of initiatives, projects

• Spread benefits and risks

Just do it!

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Don’t underestimatethe central role of aneutral facilitator

• Facilitating linkages:• Between firms, removing clumps• Between government agencies, removing clutter

• Continually moving the development agenda forward

• Requires long term public funding• And high level facilitation skills

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On competitivenessThere is no rest!

• Upgrading competitiveness …no end point…it’s a relentless journey

• Local (micro) not national (macro) focus• Global specialisation; Winner takes all • Distributed competitiveness, internationally

linking local specialisations…local clusters • New competencies emerging where existing

clusters converge• Often combining technologies in new ways

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Upgrading competitivenessCommon responses

• Developing deep, deep competencies• Local specialisations… central role of universities

• Building local connections, the internal buzz• Connectivity - Productivity – Competitiveness• Self-destruct task forces, collaborative alliances

• Building global pipelines, the external links• C2C links, attracting customers, new investment,

new technologies, new people…

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Is the focus on a ‘cluster programme’ ?

Or fundamentally creating a culture shift?• Towards private sector collaboration? • And Private - Public alignment?

With the cluster as the lens to focus other public investments:

• Universities; R&D; training; investment & talent attraction; export development; incubators; industry/science parks…

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Ifor Ffowcs-Williams CEO, Cluster Navigators Ltd22 Examiner St, Nelson,New Zealand

E4@clusternavigators.com+ 64 3548 0606www.clusternavigators.com