The Federal EDA, Harvard, MIT, and UMN had teamed up around big data analysis on US industry clusters. This was a two day event (09/29/14 – 09/30/14) showcasing a broad range of speakers and case studies of cluster development. For a number of years they have been collecting data on the current state of industry across cities in the USA. The high level data starts to identify strong concentration of cluster assets by geography and creates a basis for measuring the effectiveness and growth ( or decline ) of regions. The Federal EDA and Small Business Association have created grant programs to help regions develop their clusters. Already many cities have capitalized on these government investments and begun programs and have created innovation centers / parks to bring clusters together in new ways and around joint collaboration and co-opition.
Harvard Professor, Micheal Porter, gave a presentation with practices for reshaping clusters and highlighted the work he has been involved with developing the Life Sciences cluster in Massachusetts. Some of the best practices he highlighted included:
- Focus on competitiveness, not job creation
- Cluster-based, reflecting the core drivers of jobs and wages
- Build on existing and potential strengths, versus rely on reducing
- Develop an overall strategy rather than a list of actions
- Prioritized and sequenced, not treating all weaknesses equally
- Data driven, not political or based on wishful thinking
The case study examples where interesting and great to hear them presented directly the teams leading the initiatives. Ecolab CEO Doug Baker presented a very interesting cluster collaboration that spanned multiple states and adjacent clusters that included water, energy, and agriculture. This highlighted that the potential of clusters is just not within the scope of a single city, but in the interconnection of key partners that may span state boundaries. This concept was reinforced later in the year seeing states applying for the federal grants together in unified proposals. The example also highlighted the power supporting adjacent clusters. This allowed corporations from adjacent vertical sectors to partner in new ways and create business opportunities through combining assets, technology, and processes.
Regional economic development practices where discussed and it highlighted the wide variety of approaches adopted by groups and some of the trade off to the approaches. For example:
- Some regions don’t have strong leadership and lack any regional development plan, much less a shared vision. This is worst case scenario, but can be common
- Regions that have long standing clusters, but struggle to maintain their lead. They focus on keeping parity though this tends to ultimate lose the lead and invest enough in creating competitive advantage
- A region could focus on a new and emerging cluster, but that is a very competitive space. Success would really hinge upon the actual strength of regional assets to support that industry. This can be a very costly investment only to not sustain the lead in the long run against another region with inherit more advantages
- Regional investment in generic infrastructure can also be an expensive but unsuccessful strategy. Building generic industry parks, start-up spaces, and industry support systems can turn into a bust without a clear and focused plan.
- The opposite of generic infrastructure though would be an approach to build cluster specific infrastructure that creates a unique and differentiated assets for the region resulting in a clear competitive advantage. Example of these can be innovation center campuses that integrate industry, start-ups, universities, research parks, that have common infrastructure around shared labs, manufacturing, supply chain, education and commercialization.
One aspect of cluster development that paves the way is the development of supportive government policy in the region to create business opportunities, align government investment, and create incentives. This can be a huge factor in terms of attractiveness to the region for internal and external investment and the attraction of talent and ideas. While government plays a key role, it doesn’t mean a region can only be lead by government agencies. In most case the agencies are not staffed or funded for extensive economic development programs and these programs have to last past any given administration. Some of the most success case studies of cluster development are lead by private organizations that are built and dedicated to the mission. It still takes government, industry, education, start-ups, venture capitalists, etc to be all contributing, but much of the facilitation can come from private firms. Two red flags I’ll immediately raise in this conversation are as follows:
- There can be more than one private firm involved. Regional transformation is an enormous, and though a shared vision is required, the work and easily and probably be better severed by a number of focused organizations that can sustain long term.
- There is a difference between leadership and control. A leading organization can lead through delegation. A clear flag of a failing economic development organization is one that seems to take control of everything. Its a stewardship model vs. dictator model that is needed for scalability and sustainability.
CHEVAL insight looking into regional cluster selection also brings a variety of approaches:
- One can begin by looking at what the region is already known for and has in abundance. Next one would have to compare the regions current success and competitive differentiators against any other regions that are in that space. In too many cases a region that pioneers a field becomes comfortable at the lead and fails to see others gaining on them until it is too late. Keep in mind that the individuals who probably created the industry tend to retire and turn it over to the politicians in their companies, so its not surprising that the decline of industries sectors in a given region over time.
- Studying your areas of strength, then exploring the strength you have in adjacent industries could also be a opportunity in waiting. In many cases these have grown up independently and could be at a maturation point where stronger cross sector integration can create dynamic opportunities in the marketplace.
- Investing in a growing regional competency might make sense. Really mature clusters don’t need much additional support. They have already built their systems and partnership. So a growing sector could be the place where the investments make a big difference.
- Even though emerging markets might be risky, if you region already has strong momentum in that entrepreneurial area and that mark may have the support of mature adjacent sectors, then it could be a strategic play. You really have to look at the competition before jumping in though.
- Looking at cluster intersects can be a game changing strategy, even for your mature sectors. Combining a horizontal with a vertical sector could be a multiplier. For example: Add a IOT focus to a manufacturing or agriculture cluster strengthens both sectors in your region and could create dynamic opportunities. Combining mobile into healthcare or supply chain could amplify all your mature businesses and share the cost of the innovation and R&D.
I was able to have several follow-up meetings with the Federal EDA and some of the analytics partners. We where exploring some partnerships around the next level of economic big data that could be generated around innovation centers. This could provide much greater insights into regional activities and innovation plus expand the language of cluster development and metrics. This effort will continue as regional cluster planning comes into focus across a number of cities we are currently engaged with. I should also mention that these innovation centers with clear focus clusters are key landing pads for the international corridors programs we are developing to connect global clusters and innovation.