Cluster Mentality (reflections from 2years as EU Cluster Manger of the Year 2014-16)
By Dr Stan Higgins
EU Cluster Manager of the Year 2014-16
Many have concluded, and I quote, that “Clusters are the key organizational unit for understanding and improving the performance of regional economies. The foundation of a regional economy is a group of clusters, not a collection of unrelated firms.” Yet these well-established messages seem to me to disguise the fact that economic clustering is an activity aimed at stimulating the mind, its really about thinking logically, practically and or creatively about the economic development of industries; not just about counting how many companies or how much R&D capability there is a region.
My term as European Cluster Manager of the Year (2014-16) comes to an end in November 2016. During this period I have had the pleasure of interacting and visiting many locations around the world. Places that suggest to me that they have an active cluster in operation. However on inspection, I have more often than not found a collection of manufacturing plants, companies or researchers who rarely work together on any topic at all. These are locations where industry for historic reasons or due to financial incentives happened to have assembled. These are not clusters they are industrial parks or industrial regions. They do not necessarily represent economic cluster activity.
Successful cluster policy must be devised and implemented in such a way that it stimulates the minds of the leading executives in a particular location’s active industrial sectors. It should encourage them to work together. As cluster guru Porter has said they must learn to work together as a “broad industry sector”, preferably working alongside academics and local economic development officers in order to utilise their collective brain power to develop consultative management processes that stimulate the development, sharing and uptake of new ideas. Encouraging these active minds to work together must then move beyond the talking into the delivery of shared collective & collaborative activities that been developed from within the combined practical nous of industry executives in the region.
The outcome of such rational and hopefully pragmatic cluster activity should inspire new ideas, strategies and projects that can enable businesses to not only support their own creativity and business development. This should also enable creative thinking about the local region, location and infrastructural needs within their geography. Thereby helping those responsible for developing the local economy to understand, not only the needs of a particular company, but also the needs of the wider industrial sector; so that it can be sustained, rejuvenated and grown into the future.
The complication that occurs from encouraging collective thought is that an individual company may, or may not, be the beneficiary of the projects that reach practical implementation. Over a period of time though as more and more projects and activities occur the collective benefit does become clearly apparent and also the majority of participants will also receive direct benefit to them. From the beginning of the Cluster activity these two goals must be in the minds of Cluster participants.
However even the most successful clusters will have those companies that do not participate. In my experience these are companies that hardly ever externalise their management activities. Never benchmarking or understanding where best practicse lay. Interestingly as cluster gurus predict these are usually the companies that fail. In my own Cluster nearly all, and that is 95%, of the companies that have closed down are those that have shied away from cluster participation, never seeking advice from peers or anybody else for that matter, preferring to follow their own track to oblivion.
Within companies we all understand how difficult it is to encourage creativity on a daily, monthly or even an annual basis. If it is not the collective brains of industry & academia stimulating the creative juices within a region then who will it be? In most technical industries local authorities and politicians simply do not have the insight or knowledge to be creative and innovative on behalf of any such sector. Hence the sector must collaborate and become the innovation engine within its locality.
Collective industrial innovation is not only about research and development and taking new products or processes to market. It is also about infrastructure preservation and development, without which individual company failure can potentially fracture an interdependent infrastructure. There is a need for continuous innovation in seeking and implementing best practice, driving efficiency improvement, developing skills, attracting & supporting investment, increasing trade, informing stakeholders or tackling environmental and health and safety issues together. Such shared thinking is so much more powerful in tackling such matters. Furthermore it is these cross cutting cluster concepts and industry supply chain involvement that enables buy-in across all players in an industrial sector; largely because the vast majority of these issues are not anti-competitive.
Once stimulation of the collective industrial minds has occurred it can also rapidly be translated into a stronger collective voice to regional & national Government and many other stakeholders. The reality is it is only by company executives working proactively together on the strategic needs of a sector that an industry can keep moving forward. Collectively they can keep abreast of developments, build collective projects to address its needs and perhaps most importantly offer new perspectives to those outside the sector who do not fully appreciate its needs. Without cluster input a regional or national government cannot possibly understand, diagnose or interpret the signs of economic well-being within it.
Truly effective new ideas, insights, and strategies can only be developed for a sector within the minds of those industrialists involved. This is why it does not matter how big or small your plant or business is in order to participate. Executives from small companies and supply chain companies can have unique perspectives and ideas. We in the North East of England Process Industry Cluster (NEPIC) have always courted the involvement of companies of all sizes and from across the whole sector supply chain. Each NEPIC member company, whether a one man consultant, or multinational like a SABIC, Huntsman or Ineos, each member has one vote. Interestingly in our early formative days it was the larger organisations that challenged the cluster executive team to increase supply chain involvement as well as formulating projects to strengthen the businesses of local SME businesses. This is now deeply embedded in our cluster strategy.
A cluster is ultimately a means for connectivity that cannot be defined by a single model as their strategic focus will vary across industries and can often be shaped by their geographic locations. Firms have traditionally located together in a region because individually each of them has gained some benefit from being located near other similar or related firms, or they have been attracted by an important supply chain. This means that they already have a number of things in common; a good reason to begin sharing experiences and networking to establish best practice in both management and operational matters. However in implementing cluster policies too many regions have been overly focused on their existing assets often hoping that “anchor tenants” or sector leading companies will take up, lead and deliver a cluster initiative. I believe they might have been more productive by ensuring wider cluster engagement activities took place and provided greater intellectual stimulation for the executives of leading sector participants. The effectiveness of a cluster does not come from the holding of assets it comes from active participation of the leading industrialists in the region. Having the key decision makers involved will always stimulate further supply chain participation; but these leading industrialists must be encouraged to accept their role in encouraging and promoting participation.
There has been a tendency for policymakers to fall back on to research information and analysis of clusters using this to build their cluster strategy. From my observations this approach will not engender industrial buy in. My advice to regional policy makers is to of course take cognisance of the learning of academics and others, but to get real effective clustering off the ground it is key to engage in dialogue with potential cluster members. Use these discussions to identify potential enthusiasts from big and small companies from across the supply chain. Use the collective minds of these sector executives to develop effective cluster strategy and early stage engagement activity within the region. It is surprising then how quickly other industrialists wish to be involved. The public sector should never be the driving force behind a regions cluster policy, it has a role to play convening cluster members but must step aside and allow the industry to develop its collective ideas on how to improve the economy for the region.
Thanks to everyone that voted for me to become the EU Cluster Manager of the Year in 2014. Holding this title certainly has enabled me to interact with an even wider network outside of my own sector and learn much more about how many different types of Clusters are developed and operated around the world.