News
The CLUSTERING ALLIANCE Number 61 – January 2005
In this edition
§ Ireland – new focus on commercialising research
§ Clusters are about relationships, not one night stands
§ Smart building for Queensland?
§ Regional grants – problem was predicted!
§ ‘Collaboration-ready’ firms, says Hugh Forde
New project on regional development agencies
The OECD LEED Directing Committee has agreed to launch a project to examine the performances of city and regional development agencies. The project will start early 2005. Organisations interested can contact Debra Mountford ([email protected]).
Ireland – new focus on commercialising research
Last month, Dr. Roy Green, Head of the Department of Management, National University of Ireland, Galway gave an interview on Melbourne radio. Excerpts follow.
In the 1980s, Ireland was essentially a basket case in Europe – 17% unemployment, 20% inflation, national debt higher than annual GDP. It was really in a serious predicament. It therefore developed a social partnership involving government, unions and business, and a framework in which new economic policies and an emphasis on education and research could take effect.
It opened itself to the international economy, looked for international investment – any investment, anything that would create jobs. This led to large companies setting up to manufacture (with cheap labour, low corporate taxes) for the EC market, especially in computer hardware, pharmaceuticals etc. By the mid 1990s, Ireland was the world’s biggest software exporter, and also exporting PCs. But it was becoming evident that Ireland was not a technology maker, it was a technology taker.
Thus in the mid 1990s economic policy became more discriminating. Within the context of the social partnership, some very far-sighted civil servants, with leaders of business and unions, formulated policies that targeted areas of global growth that were not simply dependent on duplication of American software for the EC market or the production of PCs.
There is a high degree of government intervention in Ireland in the context of making firms competitive in global markets. While there is a healthy respect for the market environment in which Ireland operates, they’re not going to leave their industry policy to chance. The Irish government set up the most significant review of industrial policy since the Telesis and Culliton Reports of the late 1980s/early 1990s, which established such very effective institutions as Enterprise Ireland, which has developed supply chains and industry clusters and identified areas of growth for Irish industry.
The new review, released in 2004, concluded that Ireland had not done so well in developing its own R&D and innovative capacity. It is suggesting very large increases in funding on top of previous funding in basic and applied research (this level of investment is huge for a small economy). However a weakness in the Irish economy (and in the Australia) is the lack of the ability of institutions to translate successful research into commercial products and processes. Again, the Irish government is not leaving this to the market. It is intending to bring the universities together to cooperate. It doesn’t necessarily have the critical mass of big research-intensive universities in the US like MIT and Princeton – so it’s bringing the universities together via a pooled approach to technology transfer and commercialisation of research. It sees this as the key to competitiveness over the next ten years.
More info – http://www.nuigalway.ie/management/roy_green.html
CAP pushes forward thinkers – let’s hear from you!!
CAP members share experiences – across disciplines, industries and regions. We seed ideas and push forward innovative thinkers. Are you one? We assist students grappling with cluster-related issues and access best practice experience – from the OECD, World Bank, TCI, the UN, industry associations, universities etc. We get to know each other, and the spin-offs happen more or less naturally.
‘Clusters are about relationships – not one night stands’ says UK expert
Bill Wicksteed of SQW Limited in Cambridge UK writes to say that he recently had the somewhat daunting task of explaining clusters to a conference of Ireland’s amenity horticulture businesses and consultants. Their lack of familiarity with the concept forced him to go back to first principles and he kindly forwarded overheads of his presentation. Below are some of his main points.
There is, naturally, a good deal of variation between clusters in the nature and scope of the interconnectedness. The scale of the cluster, and how widely it is dispersed, are variables that impact on this. There are, however, some aspects that typify the ways in which most clusters operate:
§ a general, if sometimes cautious, sense of trust in business dealings. Clusters are about
§ relationships rather than one night stands, and reputations count.
§ collaboration between firms in order to compete more successfully (often in export markets).
§ an emphasis on networking between firms and the supporting infrastructure e.g. educational and training bodies, research institutes, providers/operators of hard infrastructure).
As a heroic generalization. I suggest that the key drivers towards collaboration within a cluster include:
§ changing customer requirements that challenge established business arrangements.
§ the need/desire to tackle new markets
§ a recognized opportunity to share the costs of accessing market intelligence.
§ other issues in which scale is important for competitiveness (e.g. purchasing)
§ challenges from new regulations or rapid advances in Science and Technology.
§ the perceived advantage in building a shared brand (e.g. Scottish food).
When is a cluster initiative appropriate? Cluster development initiatives are just one of a number of possible approaches to helping improve business competitiveness…Clusters cannot be grounded in aspiration alone – there needs to be substance as well. It is possible to start with very little, but in that case a commensurate level of investment must be committed over a long period of time. Singapore is seeking, through government intervention, to build a biotech cluster and may well succeed, but the level of investment devoted to achieve this ambition is staggering.
Moreover, there has to be a strong private sector commitment. The public sector can provide catalytic resources, but unless leadership soon switches to the private sector (with continuing support from other stakeholders) there must be doubt as to how relevant the cluster approach is to be business success. The key question is whether there are significant benefits to be gained from closer collaboration.
Bill’s website is http://www.sqw.co.uk
Smart Building for Queensland?
Kim Sheree of e-Net in Brisbane has contacted us about this exciting proposal. If you know of similar proposals that have proceeded, please drop us a line.
The Queensland ICT Clusters and e-Net Limited are collaborating to gain support from the Queensland Government for a project that would see the development of an industry showcase and ICT skills centre. An Australian first, the facility would put Queensland on the radar globally, with the view to be promoted as a destination for trade delegation and overseas investment attraction.
The BLUE SKIES FACILITY project concept is a high tech venue designed to showcase market ready products and services, particular the software from the Technology Clusters.
Early interest has been shown from Microsoft, Sony & Vodafone. They await the Minister’s approval for funding the feasibility study and intend to announce the project at a high profile ICT Cluster Showcase at the Brisbane Entertainment and Convention Centre on 2 March.
The 2005 Qld ICT Cluster Showcase – March 2nd 2005
A gala showcase event highlighting the innovation and collaboration projects of the Queensland ICT Clusters. It involves a dynamic presentation from each cluster group reflecting on the successes of 2004, and featuring the project initiatives and major events for the ICT Clusters for 2005, including the establishment of e-Net – the corporate and secretariat support organisation. Confirmed special guests include the Lord Mayor Campbell Newman and Steve Vamos of Microsoft Australia. Tickets are on sale now – please contact e-Net Limited for details Ph: 07 3405 6610
Regional grants – problem was predicted!
We do not expect much to come out of the Australian Senate’s Enquiry into regional grants. DOTARS’ administration of the program is very tight and painstakingly laborious – to avoid any criticism of ‘whiteboard’ decisions. But we did predict that the heat would be on the politicians for holding back the announcement of grants until the election was looming. There is nothing illegal about this, but back in August, I wrote in Local Government Focus magazine as follows:
"The compression of expenditure commitments into a narrow window, and the accompanying uncertainty for those with funding applications in the system, raises the question of some sort of Code of Practice to govern the processing and announcement of government grants. From where I sit, there is a case for a cap to be placed on the percentage of program expenditure that can be announced in the run-up to elections. Another option, which the Department of Finance has surely ruminated over, is the introduction of quarterly expenditure allocations without rollovers – this would mean that if Ministers don’t spend their budgets within a specified period, they would lose it. A bit radical perhaps.’
‘Offshore Outsourcing – what’s working, what’s not’
The move to off-shore manufacturing as a means of reducing labour costs hit Australia and New Zealand more than a decade ago – so it’s old news.
Interestingly, the National Dialogue on Entrepreneurship says that while the international outsourcing debate has cooled a bit in the US, the issue still warrants public attention. A new series of reports from ‘Knowledge at Wharton’, an on-line newsletter from the University of Pennsylvania’s Wharton School, examines new trends in offshoring. Experts predict that closer collaboration between US and overseas partners is likely, and that new hybrid organizational forms will emerge. It may become difficult to make clear distinctions between the parent company and the outsourcing partner. Others predict that India will face increased competition as the primary locale for IT offshoring e.g. from Eastern Europe.
Optimizing for innovation – US Competitiveness Council
The final report of the US Competitiveness Council has been released. Called the Innovation Initiative (NII), it examines how America can compete in today’s more connected global marketplace.
It argues that the US remains the world’s innovation hub, but its dominance is not guaranteed. Indeed, many warning signs, such as declining immigration of skilled scientists and engineers, are emerging. The report’s basic message is that, for the past 25 years, the US economy has succeeded, through innovative management and smart investments, in optimizing itself for efficiency and quality. It must now focus on optimizing for innovation. The report contains numerous insights and important recommendations. Among its proposals are:
§ Build 10 regional Innovation Hot Spots in the next five years.
§ Designate a lead Federal agency and an inter-agency council to coordinate economic development programs around innovation-led growth.
§ Increase the availability of early-state risk capital with tax incentives, expanded angel networks and new seed capital funds.
The report is available at http://www.compete.org
Pundits Corner
One of our CAP members, based in Queensland, observes that Professor Michael Porter refers to “regional clusters of related industries”, yet does not refer to:
§ Infrastructure providers, business service practitioners, etc – all part of a contemporary cluster.
§ Cluster governance.
§ The social dimension of clusters and the need to create ‘trust’.
‘Important Notice: About this newsletter
§ Distribution is to CAP members, plus special contacts, particularly overseas.
§ We are continually streamlining the distribution. New readers replace those not in recent contact. If clusters and collaboration are not your scene, please tell us – you will not offend.
§ Contact us for advice, to make connections, to let off steam, push a point of view etc. Readers’ views are not incorporated in this newsletter unless authorised by the author.
‘Current models of globalisation not working’ says Bob Brown
Bob Brown (no relation) is a former CSIRO division chief, now tracking S&T and development issues for the MuNet network. His recent editorial is worthy of serious reflection…
Notwithstanding all the technological developments, human skills and human frailties remain at the heart of all industry. Human ingenuity conceives and refines products and processes. Human needs, desires and persuasion skills establish the market for the goods produced. Political, social and economic constructs determine if the manufacturing enterprise (or parts of it) will be profitable and sustainable.
In the 1970’s there was considerable emphasis on robotics, automation and flexible manufacturing systems, leading to a proposed utopia of the "lights out factory". Since then attention has concentrated on just-in-time manufacture and, in the last decade, attention has focused on LEAN manufacture – the minimalist approach to all elements of production and management. These and other management methodologies are all fine, but the bottom line is to pay attention to what we are manufacturing and why. We are in danger of going into the ridiculous situation of making products obsolete almost as soon as they are marketed and releasing products that are obscene in their size, performance and cost – recognising that a large part of the world’s population lives in subsistence conditions.
I have a vision that globalisation will lead to closer cooperation between industrialists, researchers, decision makers and the community for the benefit of the world’s population. Current models of globalisation and the instruments of global control – World Bank, IMF etc. – seem incapable of reshaping "Market Forces" to achieve this vision. In fact, internationally and within most nations there is a growing disparity between rich and poor.
I don’t have any simple solutions, apart from a need for people to go back to basics and consider human values and aspirations. People often seem to expend huge amounts of energy (their own and non-renewable resources of the planet) on trivial and pointless activities. It is here that manufacturers
and researchers can surely provide some rational advice and guidance for a more sensible resolution of the problems facing the world. Weapon manufacture is unlikely to bring rational development; armies are not going to bring peace; irrational or fundamental religious beliefs will divide people into bitter enemies. You might silence opposition by punching an opponent in the face, but this is unlikely to convince him/her of the correctness of your case.
OECD Hub
In our December newsletter (pre-Tsunami), we argued that we are paying lip service to bridging the rich-poor gap. We have had a good response from readers. An example:
‘Your musings about the need for greater OECD, WB, UN engagement in this part of the world are right on the money, I look forward to hearing more about this’. – Paul Spence, Innovators Online Network, NZ.
The Economics of European Integration
Miroslav N. Jovanovic, Economic Affairs Officer in the UN Economic Commission for Europe, (Geneva) has completed a major textbook – one of the first to cover the subject of the economics of the EU, including its 25 member countries and potential candidate countries.
It argues that monetary union and eastern enlargement have amplified existing discrepancies among the member countries. For example, the introduction of the euro highlighted the different speeds at which economic policy in the EU moves. Twelve member countries joined the eurozone, but more than half of the 25 EU member countries remain outside this most profound economic project, either by choice – Britain, Denmark and Sweden – or by ineligibility.
There is also the added complication of general public suspicion about the EU and a number of its projects. With this in mind, this book looks at the origin, development and potential limits and prospects of the process of European integration by considering the principal EU economic policies. The book also discusses topics such as foreign direct investment, transnational corporations and the location of firms and industries.
[email protected] or http://www.marston.co.uk
Email: [email protected] Sales: [email protected] Web: http://www.e-elgar.com
Trento
The OECD Centre for Entrepreneurship, SMEs and Local Development and the International Entrepreneurship Forum is holding a conference at the Trento Centre on 23-24 June 2005 on the role that higher education institutions play in fostering entrepreneurship, with a particular focus on Central, East and South East European countries. Two main questions to be addressed:
· How can higher education institutions best provide entrepreneurship education and training and hence contribute to the promotion of successful new firm starts and small business management?
· How can higher education institutions best promote knowledge transfer to SMEs within the regions in which they are located?
The conference will lead to an OECD publication setting out the issues and recommended policy responses. The Call for Papers is at OECD LEED Program website – papers on the experiences of Central, East and South East European countries are especially welcomed.
Contact [email protected] or http://www.oecd.cfe/LEED.org
Salteri speaks on partnering for innovation – Sydney & Melbourne
The Warren Centre’s 2005 Innovation Lecture is noteworthy. To be delivered by Paul Salteri, MD of the big defence/technology contractor, Tenix Group. Will provide insights into how Tenix is using innovative technologies, partnering arrangements, and commercialisation initiatives to build and transform itself. 8 March (Melbourne) & 9 March (Sydney) Go to http://www.warren.usyd.edu.au/events/IL2005rego1.pdf
‘Collaboration-ready’ firms, says Hugh Forde
Last month we featured Hugh Forde (Director, Cluster Program at Business SA – CAP member) who has vast experience in generating collaborative outcomes. The economic literature talks about investment-ready and export-ready firms. Hugh has extended it! See below.
The function of the collaborative process is to enable firms and other participants to appreciate a wider industry and global context in which they can expand their competitiveness and market growth.
Firms can achieve this by discussing, in an industry or international context, their respective contents with other firms and/or institutions i.e. research organisations, universities, government agencies, service providers. Industry clusters are a proven mechanism for initiating and facilitating this process.
Alas attempts to facilitate this approach across clusters in South Australia have been captured and constrained by the content syndrome. People are reluctant to practice what they preach and to talk with each other about the respective content of their programs. A ubiquitous barrier is protection of intellectual property.
The challenge for clusters is to develop tools and strategies to facilitate implementation of their own collaboration strategies. These should focus on ‘collaboration ready’ firms. These are firms:
§ Exporting as a key element in their strategic approach to business.
§ That have reached maturity in their domestic markets.
§ That are entering overseas markets because there is no market space or application locally.
§ firms already using alliancing successfully.
For more information on the tools developed under the auspices of the Business SA Cluster program, contact Hugh Forde at [email protected]
Optimizing for innovation – US Competitiveness Council
The final report of the US Competitiveness Council has been released. Called the Innovation Initiative (NII), it examines how America can compete in today’s more connected global marketplace.
It argues that the US remains the world’s innovation hub, but its dominance is not guaranteed. Indeed, many warning signs, such as declining immigration of skilled scientists and engineers, are emerging. The report’s basic message is that, for the past 25 years, the US economy has succeeded, through innovative management and smart investments, in optimizing itself for efficiency and quality. It must now focus on optimizing for innovation. The report contains numerous insights and important recommendations. Among its proposals are:
§ Build 10 regional Innovation Hot Spots in the next five years.
§ Designate a lead Federal agency and an inter-agency council to coordinate economic development programs around innovation-led growth.
§ Increase the availability of early-state risk capital with tax incentives, expanded angel networks and new seed capital funds.
The report is available at http://www.compete.org
Deloitte’s Fast 500
Deloitte, the global consultancy, has been busy passing out awards to the world’s fastest growing technology companies through its Fast 500 program. In December, it honoured the Europe, Middle East, and Africa (EMEA) Fast 500. The No. 1 firm is Lastminute.com, a British on-line travel service firm. In Europe, the software business is booming reflected in the fact that 42% of the EMEA Fast 500 operate in that sector. Great Britain hosts the largest number of EMEA Fast 500 firms, with 174 located there.
Regarding the Fast 500 Asia Pacific, software is also the hot sector. The No.1 firm is Australia’s Bill Express Ltd, an online payment system. China hosts 90 of the Fast 500 Asia Pacific firms.
Visit http://www.deloitte.com/dtt/section_node/0,1042,sid%253D39959,00.html
Select conferences
23-24 February 05, Perth – Off-shore Oil & Gas. Major world conference, includes attendees from UK, Norway, USA etc.
21-23 March 05, Napier, NZ – conference hosted by Enterprise NZ and EDANZ. http://www.regdev.govt.nz
17-20 April, Melbourne & Bendigo – Planning Institute of Australia 2005 National Congress. See http://www.piacongress2005.com.au
July 05, Adelaide – Manufacturing Prosperity Conference. Annual event. PM Howard was keynote speaker in 2004.
30 August – 1 September, Sydney – 5th Annual Forbes Global CEO Conference. First time in Oz.
19-21 September 05, Beijing – IASP World Conference on Science and Technology Parks. Deadline for abstracts is 10 January 2004 to [email protected]
21 October 05, Cairns – Global Eco Source Design conference. First-ever conference of its kind. Will also involve the Design Research Institute (Seattle).
7-11 November 2005, Hong Kong – TCI’s Annual Conference yes a year away, but start saving! (Why not visit Vietnam en route? It really has taken off as a tourist destination).
Membership matters
Clusters Asia Pacific Inc. is a network of development practitioners – a member of the LEED Group (OECD, Paris) with links to The Competitiveness Institute, the IEDC and UN agencies. Primary circulation of our newsletter is 690, and then onto thousands.
Mission: To improve the competitiveness of industries and localities in the Asia Pacific region – by enhancing cluster-based development initiatives. We connect the dots!
§ Visit our website at http://www.capinc.com.au It provides an overview of industry clusters, recent publications, CAP newsletters since January 2002, key events etc.
§ CAP members share substantial information and ideas. We tender for projects, give each other leads, assist with tour itineraries, make submissions to Government, liaise with other associations, speak at conferences, help people find jobs – and generally try to make the world a better place. We look for collaborative partners. We are apolitical, and have a ‘no dud’ rule to help us.
§ There is no copyright on this newsletter – so if you know others with an interest, please email it to them or copy it into your Board papers! Ideas or suggestions for our newsletter are welcomed.
Go safely.
Rod Brown, Executive Director
This newsletter is a product of Clusters Asia Pacific Inc.
Australian Project Developments Pty. Ltd. (Canberra) provides the editorial/distribution service.
Phone/fax 02 – 6231 7261 [email protected]
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