We learn from extreme situations. I visited Rwanda in trepidation. My first surprise came before arrival: the rapid response, super efficient on-line visa process. My second was having my suitcase searched at Kilgali airport…for plastic bags. They are banned. My third was walking down a street in Butare, the second city, at midnight and not being hassled.

Rwanda is indeed a remarkable country. It has come a long way from the unimaginable horrors of almost twenty years ago.

I have been reminded of my visit by reading ‘Rwanda Inc., How a Devastated Nation Became an Economic Model for the Developing World’ (Crisafulli & Redmond, Palgrave Macmillan, 2012). The book is light on what will deliver Rwanda as ‘Africa’s ICT hub’, but there are many nuggets with clear learning that can be applied at a national level … and at a cluster level.

Two words stand out in Kinyarwanda, the local language:

Umudugudu: Getting people to sit down together and to identify their needs, sharing information; a self-help team.

The importance of a decentralised and inclusive approach.

Imihigo: A kind of performance contract where people publically state their goals before elders …  ‘I WILL ACHIEVE THIS’ … and others in the community are then expected to support them. Failure to deliver is seen as a dishonor.

Establishing a (voluntary) coalition of the willing.

Two further insights from Rwanda that equally apply to cluster development:

1. The importance of a do-it-yourself, self-sufficiency culture. Firstly, setting priorities internally, self-determining. And then forging external partnerships with those who support, and can help resource, the vision.

2. Establishing a high level strategising forum that also opens up external support. Rwanda has a Presidential Advisory Council in place, a by-invitation business-government-academic forum that meets twice a year.

Go 4 it!  E4

Cluster Development: The Go-To Handbook

Author: Ifor Ffowcs-Williams, Cluster Navigators Ltd, New Zealand

Available from:  www.clusternavigators.com

What readers around the world are saying

From Stockholm: “Ifor’s book provides a personal and up-front perspective on what he has seen in the practice of cluster mobilization and management. Ifor has over two decades been following the evolution of cluster practice as an active participant. A truly global traveller, he has worked with cluster groups around the world, gaining insights on what works, and what doesn’t.

The book opens the door into his uniquely broad treasure chest of experiences. It is hugely valuable to cluster initiative managers all over the globe in their fascinating journey of organizing joint action to raise the competitiveness of their clusters.”

Dr. Christian Ketels, Harvard Business School and President, The Competitiveness Institute

From Barcelona: “It is different from most of the texts on clusters and economics in general. Very practical and the title could not be more appropriate: a real go-to handbook. The dozens of quotes are very valuable. A must-have book for all cluster practitioners.”

Alberto Pezzi, Director of Competitive Strategy Division, ACC1Ó, Directorate General for Industry, Government of Catalonia.

From North Carolina: “A wonderful job of capturing the essence of clusters and—more importantly–what to do with/for them.  Easy to read, follow, and useful. “

Dr. Stuart Rosenfeld, Founder, Regional Technology Strategies Inc.

From Chihuahua: “It is the reference guide for our current cluster work in Chihuahua. It is so detailed and well structured that it actually works as a manual, in contrast to other works that never get into the real ‘How’. It is full of ‘pearls of wisdom’ on practical matters. An outstanding and uncommon feature is the use of crowdsourcing by bringing along so many contributors with comments and valuable pieces of advice. On top of it, the amount of research material and sources makes the work truly monumental.  

I’m sure that on every new visit I’ll find more valuable ideas and concepts.”

Alonso Ramos Vaca, VP, Chihuahua Economic Development, Mexico and RedLAC Founder

From Cape Town: “Ifor is, without doubt, the world’s leading cluster ‘artist’, combining decades of research and hands-on management with an oversight of hundreds of initiatives on every continent.

Ifor can be viewed as the ‘Godfather’ to our programme, guiding the 1998 launch of the first cluster, the Cape IT Initiative, and subsequently helping to shape the agenda of our programme at critical points.  Without his wisdom and guidance, and the practical approach as contained in the 12 Steps, it would almost certainly not have gained the traction that it has.

This book fills an important gap in the cluster literature. It is invaluable to any practitioner interested in the ‘art’ of clustering.”

Nigel Gwynne-Evans, Director, Department of Economic Development, Western Cape Government

From Newfoundland: “The book is a welcome addition to the sources available on cluster building. It has been used extensively as a ‘virtual benchmark’ to assess our strategies and activities against best practices set out in the handbook. It provides a crisp update on global developments. It is very timely and reflects a proactive world view on clusters.”

Les O’Reilly, Executive Director, Oceans Advance cluster

From the Netherlands: “The book has a lot of practical tips and tricks within the structure of the 12 Steps. But what I like most … the examples from all over the world, avoiding a European or American focus. Not many people can do this.”

Frank Eetgerink, Senior Project Manager, East Netherlands Development Agency, Oost NV

A ‘Who’s Who’ of competitiveness practitioners from around the world gathered for The Competitiveness Institute’s conference in Spain’s Basque Country last October.

The organising team from Orkestra, the Basque Institute of Competitiveness, presented to each participant an excellent workbook with abstracts of the 200+ papers. What follows is a personal selection of gems and insights from this workbook. Some are abbreviated.

On clusters as a principal framework for economic development

• ‘With its cluster policy, Baden-Wurttemberg’s Ministry of Finance & Economy intends to shape the economic and innovative environment in a way that promotes future enterprise competitiveness in world markets.’ Ulrich Winchenbach, MFG Innovation Agency, Stuttgart, Germany

• ‘Industrial clusters are the key contributors to the country’s socio-economic development’ Rupa Naik, All India Association of Industries

• ‘Cluster development … one of the priorities of modernizing the Russian economy.’ Marina Sheresheva et al, Moscow State University

• ‘Clusters … an important tool in achieving sustainable economic development in transition economies as well as developed countries.’ Danka Milojković, LEDIB Cluster House, Serbia

• ‘Portugal has a strong challenge in terms of growing its global competitiveness capacity. Clusters are a central instrument for this objective.’ Jaime Quesado, Oporto University, Portugal

On smart specialisation

• ‘Smart specialisation strategies and cluster-based policies are gaining popularity at the European level as a way of better aligning regional competitiveness strengths with resources and cost effective policies.’ Alberto Pezzi, Department of Innovation, Catalonia, Spain

• ‘The concept of smart specialisation has been taken up by the European Commission and increasingly by national and regional governments as an approach to strengthen competitiveness, based on existing strengths in a selected number of sectors, domains or clusters.’ Patries Boekholt, Technopolis Group, Netherlands

• ‘Smart specialisation means … highlighting each region’s competitive advantages and rallying regional stakeholders and resources around an excellence-driven vision of their future.’ Anke Merki-Rachbauer et al, TMG Upper Austria

• ‘All major regional business schemes target … the region’s three smart specialisations … creating synergies and ensuring optimal use of available funding.’ Dorothe Kusk, Region Southern Denmark

On the importance of dialogue in strategy development

• ‘When creating an innovation strategy  … do it in dialogue since the actors are more like splendid fragments than parts of a whole.’ Lars Eklund, Scandinavian Competitiveness Group, Sweden

• ‘Importance of the dialogue process that requires both industrial leadership and good public governance.’ Tamás Gyulai, Living Lab, Hungary

• ‘Participative strategic thinking in clusters mobilises key stakeholders and allows consensus building and joint decision-making.’ Günter Clar et al, Steinbeis, Germany

On identifying (and then empowering) leaders

• ‘A critical first step is identifying the “curious” people with the drive and commitment to take forward innovative ideas.’ Joe Lockwood & Madeline Smith, EKOS, Scotland

• ‘Cluster managers need to identify local key business players who can act as ‘innovative business locomotives’ within the cluster initiatives.’ Lars Albæk, Bornholm Bright Green Island, Denmark

On the importance of linking clusters

• ‘Many clusters … share the experience that new technological fields emerge at the interface between existing industries.’ Simone Hagenauer, Ecoplus, Lower Austria

• ‘International inter-cluster collaboration offers access to new, complementary knowledge, new collaboration partners and new markets.’ Erik Bunis et al, VINNOVA, Sweden

• ‘Related variety exploitation through intercluster cooperation.’ Jokin Garatea et al, Electronic & IT cluster, Basque Country, Spain

• ‘Innovative multinational companies have developed complex organisational structures to integrate the distinctive knowledge from regions around the world.’ Jacques Bersier, Scientific & Technical Centre, Fribourg, Switzerland

• ‘The crucial problem of cluster building is regional and national non-coordination.’ Mirjana Dragičević, Zagreb University, Croatia

On the role of a cluster organisation, summarised concisely and insightfully

• ‘Triple Steelix acts as a junction box and a port for projects.’ Maria Engholm, Triple Steelix cluster, Sweden

On cluster management

• ‘Active cluster management organisations tend to provide higher impact on the competitiveness of cluster firms.’ Gerd Meier zu Köcker, Institute for Innovation and Technology, Berlin

• ‘Passion and teamwork – the twins for successful cluster management.’ Christoph Beer, ICT Cluster Bern, Switzerland

• ‘Unity in leadership, common vision and wide ownership in projects.’ Rauli Sorvari, EduCluster, Finland

• ‘Innovation through cooperation.’ Werner Parminger, Clusterland Upper Austria

• ‘Cluster Managers as Knowledge Boundary Spanners.’
• ‘Focus on the quality of relations (e.g. innovation related joint activities) rather than the quantity.’ Judith Terstriep, Geisenkirchen University, Germany

On designing cluster interventions

• ‘Cluster programmes need to be designed to support different types of clusters: emergent, national champions, world-class clusters and clusters in transition. And long-term support is required.’ Morten Thomsen et al, Danish Science, Technology & Innovation Agency

• ‘Good and sound evaluation is important to both legitimize a new policy or programme, and to facilitate learning from the process in order to improve it.’ Örjan Sölvell, Stockholm School of Economics, Sweden

• ‘Clusters that cross political boundaries can create benefits for the companies they serve, but regional rivalry must be recognised and managed if clusters are to reach their full potential.’ Neil McLean, South Carolina Council for Competitiveness, USA

• ‘Private sector-led cluster development, especially when supported by private funding, can significantly speed needed action within local governments and academic institutions.’ Ted Lyman, HIS Global Insights, San Francisco

On new business thinking, new acting

• ‘Creating a sustainable business requires new thinking, but more importantly new acting. It requires both addressing systemic issues and new forms of cooperation and collaboration.’ Manuel Escudero, Deusto Business School, Spain

• ‘A new knowledge economy in which companies have radically modified their strategic position.’ Iker Atxa, Innobasque, Spain

On new combinations

• ‘Opportunities to increase competitiveness come not from a single asset or an investment, but from the combination of people, place, investment and attitude.’ Gerard Quinn, Grow Wellington, New Zealand

On close, personal relationships

• ‘Geographic proximity is not enough; Relational proximity is not so easy to develop.’ Diane-Gabrielle Tremblay, Quebec University, Canada

• ‘A study trip is key for building social capital amongst participants.’ Lotte Langkilde, The Danish Cluster Academy

On garnering fresh perspectives

• ‘Gender perspective in a male industry opens new business opportunities.’ Kerstin Hindrum, Swedish Marine Technology Forum

On the value of TCI membership

• ’TCI members are at the forefront of world’s best practice in competitiveness. To be up with the play, every country needs to have people who are members of the network.’ Tony Caughey, TCI 2011 Organising Committee, Auckland, New Zealand

The next TCI global conference is in Kolding, Denmark, 3-6 September 2013. www.tci2013.com See you there?

Go well, E4

A TCI Founder and Past President.

Author  ‘Cluster Development: The Go-To Handbook’

Last week I was in the Hunter Valley, Australia,  speaking at the HunterNet Conference as they focus their attention on boosting productivity and linking with other local and international clusters.  To read the ABC article click below:  http://www.abc.net.au/news/2012-10-05/clusters-to-protect-and-boost-hunter-businesses/4297184

E4’s forthcoming book, ‘Cluster Development: The Go-To Handbook’, to be launched in mid October, includes a chapter on the roles and characteristics of ‘The Cluster Manager’. Advice is offered to cluster managers.  An extract from the book:

Act as a venture capitalist

Build a portfolio of projects

Spread both the benefits and the risks through developing a portfolio of projects. Not every project will benefit every firm.

Accept that there will be failures; if there are not failures then you are taking it too easy.

Learn by doing.

Shift the focus from addressing problems to addressing opportunities. Explore new opportunities at the fringes, look for patterns in the outlier data, focus on what is different.

Generate multiple options. New agendas that are backed by passion are not debated…just tested. Validation will come over time.

Engage only when there is momentum.

Be comfortable with knowing without reasoning, your intuitive understanding.

I am often asked ‘How do clusters start?’ Clusters primarily originate and develop through natural market forces. Very few public agencies anywhere in the world have been successful in creating from a zero base a sustainable cluster. Unfortunately, many have tried at the taxpayer’s expense. The role of public agencies is to stimulate, not invent clusters.

This story from Calgary, Canada is one explanation on the origins of a cluster [1]. It compares the development of a shopping mall to that of a cluster.

Shopping Mall

Economic Clusters

A shopping mall normally has one or a few ‘anchor’ stores, such as a large department store or supermarket. These stores drive the traffic to the mall. This traffic then supports other stores and services.

A cluster often has one/a few lead or anchor businesses. These businesses bring in customers, supply contracts and expertise that support other businesses and service sectors in the region.

A shopping mall may have a couple of hair salons and several women’s apparel stores. The mall has enough traffic to support these competing businesses and, in fact, is often a destination because there are competing businesses (if I need an outfit for a wedding, I want to go where I can see lots of options in one place).

The volume of business coming into a cluster can support many direct competitors in the marketplace. Some competitors may gain market exposure simply by virtue of being located in the cluster.

Tailors and seamstresses move into the mall to provide alteration services to the clients of the many clothing stores. A food court and a cinema may open to cater to the other interests and needs of shoppers while shopping.

Related and supporting industries move in to take advantage of market opportunities up and down the value chain relative to the larger cluster businesses.

The start of a New Year provides an opportunity to reflect on the most effective approaches in upgrading competitiveness through cluster development.

Sweden’s national innovation agency, VINNOVA, has now accumulated a decade of knowledge on the practicalities of cluster based economic development, more than most similar agencies globally.

Starting in 2003, VINNOVA made a 10-year financial commitment to the winning clusters that came through from their very successful national competitions, with ongoing funding being subject to international reviews every third year.

Last year E4 was a member of international teams that reviewed two groups of clusters supported through VINNOVA’s VINNVÄXT programme. Five of the clustering initiatives had been supported since 2004, including ‘Triple Steelix’ and ‘GöteborgBIO’. The second group of four clusters was chosen in 2008 as early stage, more embryonic initiatives and included ‘Smart Textiles’ and ‘BioRefinery’. Following the review, support to one of the initiatives has been terminated.

The framework developed for these reviews had two dimensions:

1. The innovation stretch of the initiative:

• Knowledge base: academia
• Knowledge base: firms, absorptive capacity
• Commercialisation & Entrepreneurship
• Equity finance: venture capital, angel funding
• Cluster scale: potential regional impact

2. The quality of the clustering intervention:

• Governance
• Strategic focus, including internationalisation
• Process leadership
• Connecting & catalysing; Leveraging the regional innovation actors
• Raising the cluster’s profile

The full reports are now available through VINNOVA’s website:

Report VR 2011:16 http://www.vinnova.se/en/Publications/Products/Innovative-Growth-through-Systems-Integration-and-Glocalisation/

Report VR 2011:17 http://www.vinnova.se/en/Publications/Products/Ready-for-an-early-Take-Off/

Happy reading, go well into 2012, Best,  E4

I am often asked where to go for information on cluster development, and for identifying clusters.    These are some of my starting points:

The Competitiveness Institute   www.tci-network.org <http://www.tci-network.org>
European Cluster Observatory   www.clusterobservatory.eu <http://www.clusterobservatory.eu>
Reg X, The Danish Cluster Academy www.regx.dk <http://www.regx.dk>
ProInno Europe   www.proinno-europe.eu <http://www.proinno-europe.eu>
European Cluster Alliance www.proinno-europe.eu/eca <http://www.proinno-europe.eu/eca>
European Cluster Excellence www.cluster-excellence.eu <http://www.cluster-excellence.eu>
Cluster Collaboration   www.clustercollaboration.eu <http://www.clustercollaboration.eu>

Harvard University, Institute for Strategy & Competitiveness   www.isc.hbs.edu <http://www.isc.hbs.edu>
UNIDO www.unido.org/index.php?id=o4297 <http://www.unido.org/index.php?id=o4297>
India’s Foundation for MSME Clusters  www.msmefoundation.org <http://www.msmefoundation.org>

Are there other key sites that you use?

A cluster’s soft infrastructure includes a wide range of organisations: national agencies with a role in economic development; R&D providers and technology transfer agencies; secondary and tertiary educational institutions; private sector organisations including industry associations; trade unions; and regional/local economic development agencies. Each can play a key role in upgrading a cluster’s competitiveness.

This fourth installment contrasts the quality of the soft infrastructure in weak and in strong clusters.

Weak, dysfunctional, static clusters

• A clutter of public agencies each with their own short-term development agendas…economic development, rural development, education, R&D/technology, export development, FDI attraction, etc…
• Little coordination, alignment.
• Cumbersome red tape, an inefficient public services (such as slow customs clearance), gridlock and inertia.
• Development priorities, especially from national agencies, continually under review.
• Universities & schools disinterested & remote.
• Technical training remote from firm needs, slow to respond.
• Politicians chasing expensive white elephants, little effective dialogue with the private sector.
• Politicians seeking to establish clusters from a weak base. The most popular ‘wantobe’ clusters globally: ICT, nanotech, biotech and creative clusters.
• Development focus on financial support to individual firms, and to sectors, not clusters.
• Business support to firms mainly coming from broadly based and reactive Chambers of Commerce, business associations.
• Industry associations, when present, with an external lobby focus.

In contrast:

Strong, innovative, high performance clusters

• Well-coordinated and aligned public support, centered on the needs of firms.
• Private sector able to clearly articulate priority needs and drive public agency agendas.
• Close interaction between academic institutions and businesses; porous boundaries with ideas and people circulating.
• Universities undertaking pre-competitive, needs driven, basic research; designing courses in collaboration with firms; able to support the commercialisation of promising innovations; seed funding for new ventures.
• High schools offering specialised courses.
• Technical training agendas developed through partnerships with firms.
• A self-help cluster association in place with a focus on upgrading competitiveness, ‘strategic doing’.
• A proactive, professional, cluster facilitation team in place underpinned with long-term funding.s

Moving from weak towards strong clusters

E4’s four initial strategies for the soft infrastructure:

1. Involving all soft infrastructure organisations in the cluster’s strategy workshops; ensure transparency and active participation.
2. Firms clearly articulating to support organisations their priorities, enabling more targeted support…quality is the key, not quantity.
3. Identifying individuals within tertiary and secondary educational institutions with a passion to engage with local firms.
4. Facilitating technology diffusion through seminars, workshops.

Should a region’s economic development strategy be centered on specialisation or diversification? The arguments continue between economic development practitioners and amongst academics, on the merits of focussing on existing industry concentrations, or alternatively developing a broader base of economic activities within a region.

Certainly over-dominance on a single economic activity can be increasingly risky in today’s global environment. Over-specialisation presents the danger of a new competitor suddenly emerging, or a lock-in with isolation from changing markets and technologies. It can also limit the opportunities for the absorption of new knowledge from other activities within a community. On the other hand, an economy that is still a ‘little bit of everything’ is most unlikely to be internationally competitive with many of its offerings.

Political leaders may well be seeking an economy composed of a series of specialised (and linked) high growth clusters. Succeeding with such a broad   ambition is in part dependent on the size of the local economy.

In reality, a region has few opportunities to change its economic structure and the limited public resources that are available to support economic development need to be focussed. One practical option in applying these resources is to build on the region’s strengths, its clusters.

A second option is broader: fostering an entrepreneurial environment that supports new business start-ups and growth. Entrepreneurs will be seeking high growth opportunities and these are more likely to come from servicing a wider market than the region itself. Such opportunities will tend to be found within the region’s clusters. Innovative clusters, with an array of supporting firms and a specialised soft infrastructure, provide a fertile environment for business growth.

Successful entrepreneurs will be pushing out the boundaries of those clusters, developing new products and services and exploring new markets. By developing these opportunities at the periphery of their clusters, they will be broadening out and diversifying their region’s wealth creating base.

Sustainable diversification particularly comes from building and extending a region’s strengths, the clusters. It is unlikely to come from a random scattering of activities.

Specialisation comes first; then comes diversification. And this diversification may well lead to the emergence of a new cluster.