Canadian rebuts cluster critics

Topical paper by Indira Singh, Office of the Ministry of Northern Development & Mines, Ontario indira.singh@ndm.gov.on.ca). Addresses common concerns about clusters.

1. Cluster definitions are broad and ambiguous - clusters vary due to size, structure of industries, origins, performance, etc. Boundaries of clusters evolve. As new firms and industries emerge and pursue a global strategy, the stage of the cluster evolves. Part of the reason why different types of governments can adopt cluster strategies is precisely because the approach is so flexible.

2. May not be applicable to rural areas (lack the necessary scale) – there are successful small clusters in regions e.g. Renfrew, Ont. (pop. 10,000); Montebelluna, Italy (pop. 25,000); Timmins, Ont. (pop. 75,000) and Dalton, Georgia (pop. 25,000). Cluster theory and principles are not exclusive to urban areas. Empirical evidence from developing countries shows that clusters exist in rural areas.

3. Communication technology is replacing the need for spatial or geographic clustering – while ITC has made e-education, e-business and telecommuting possible and profitable, but face-to-face interactions that support an information rich environment are still needed. Both research and empirical evidence support the view that tacit knowledge is critical to innovation. Tacit knowledge is not easily transferable through technology. Clusters gain power through personal collaboration.   

4. Scarcity of research on effectiveness of the cluster approach  - clusters require a decade or more to develop depth and gain competitive advantage. There is a lack of available information. Intangible assets (trust, social capital and inter-firm linkages) are difficult to measure. The cluster model is effective for several reasons.
-          sector-specific strategies usually compartmentalized – but clusters are integrative.
-          clusters drive innovation, and innovation drives productivity.
-          Clusters break down silos, promote social capital, facilitate tacit knowledge. 

From a public official’s point of view, clusters promote horizontal collaboration and strategic partnerships…focus on strengthening economic foundations (infrastructure, workforce development) and brings coherence and coordination to programs and funding at various levels of government that usually exist in isolation and lack cumulative impact.

Utah goes cluster route

Within days of taking office in January 2005, Utah Gov. Jon Huntsman Jr. dismantled the Department of Community and Economic Development and promised to make significant changes to how Utah approaches wealth generation and economic growth.

He kept that promise by unveiling a new cluster-based strategy around seven industry sectors – life sciences; software development & IT; aerospace; defense & homeland security; financial services; energy & natural resources; competitive accelerators (e.g. nanotechnology, advanced manufacturing.)  

Go to http://rss.dced.utah.gov/ee/index.php/ed_clusters/C147/ 

 Source: TA 3 Connections 

Tech transfer at the Indian coal face

Dr. Victor Pantano, TT Leader, at the International Automotive Research Centre in Warwick (UK) has written an interesting paper entitled: “India’s Manufacturing ‘Coalface’ – A Deep Seam of Potential?”   

The following article comes from Dr. Bob (no relation) Brown, who has run the MuNet newsletter from his home in Avenel, Victoria. Bob has been a long-time spokesman for manufacturing in Australia, having headed up the CSIRO Division of Manufacturing in the 1990s.

I first met Bob when we were members of the Metals Industry Council (in Keating Government days), when we pushed the need for greater processing of our minerals. Someone in my organisation had a brochure printed, with a nice yellow excavator digging away in the Pilbara.

Well, the then head of the mining industry lobby screamed blue murder, and demanded that the AMC secretariat identify who was responsible for this slight on his industry – unfortunately everyone ducked, and I had to apologise for my staff (Funny how value adding doesn’t get a mention these days. Have we been seduced by a desire for healthy super fund returns?)

Anyway, here is Bob’s article. 

There are numerous stories of suppliers sourcing from low wage economies such as India and China.

One commonly cited antidote for traditional manufacturers in developed nations is to innovate and increase the rate of technology transfer, through the creation of a ‘knowledge economy’.

The ‘knowledge economy’ relies on two vital components – the generation of knowledge/technologies followed by application or implementation. In a manufacturing context, the implementation usually takes place on the shop floor or at the ‘coalface’. It is here that innovation and technology transfer often breaks down, particularly within economies suffering cultural, behavioural and attitudinal inertia.

Unfortunately this is not often recognised.  Dr. Pantano gained first-hand experience of the difference in implementation within the Australian and Indian manufacturing subsidiaries of a global automotive OEM.  The organisation wanted to capture downstream manufacturing knowledge (in tooling, stamping, assembly areas) and feed this back to engineering, product development/design to establish a Knowledge Management System (KMS). A web based system ensured knowledge capture at source – shop floor operators, supervisors and manufacturing middle management.

After management approval, the entry is sent back to the originator with associated feedback. At all times the user is kept informed of progress (via electronic ‘Noticeboard’) indicating that their input and knowledge is a valued organisational asset.  

The KMS was launched in Australia, but  modified when introduced on the Indian shop floor. The differences were significant and in terms of transfer ease and adoption, clearly in favour of the Indians. Australian manufacturing can be likened to the UK – traditional and suffering from troubled industrial relations – thus making new technology introduction highly political, bureaucratic and overly complex.  

The Indians are not burdened with the same baggage. Indian shop floor operators thrive in this type of organisation – understandable given the previous primitive conditions where workers were not allowed to talk with superiors and hierarchy was entrenched. In the KMS implementation, the Indian workers appreciated the communication and openness between management and the shop floor and the ability to be able to discuss and participate regardless of title and rank.  

The average age of the manufacturing workforce in the Indian subsidiary is 30 years – all highly educated, at least a degree and most with masters. A high proportion spend 12 hours a day at work/travel, and a further 3 – 4 hours at night studying. This underscores the desire for personal achievement and improvement. Many of the male shop floor operators are motivated by the need to provide for not only their own family but that of their siblings and parents.

But there is an overwhelming sense of hunger – a hunger to do better, to learn, to develop, to succeed. They are extremely enthusiastic to learn new things and apply them in their work.  

What’s this mean for the ‘knowledge economy’? Current attention is focused on the generation side – but without associated swift appreciation of implementation cultures, these policies will most likely fail. The results for manufacturing in developed nations will be dire.

(This work was part of Victor Pantano’s Ph D studies, supported by his supervisor, Professor Cardew-Hall, Head of Engineering at the ANU). 

UK study on Hidden Innovation

A new study from the UK National Endowment for Science, Technology and the Arts (NESTA) examines the role of “hidden innovation” in six so-called “low innovation” sectors.

The research makes a bold and important claim – “the innovation that matters most differs between sectors.”

In other words, innovation in the legal services field looks a lot different from innovation in the oil production industry. Innovation in the services sectors depends very little on R&D spending. Instead, it’s often more about absorbing ideas.  

The study also finds that service sector innovations are rarely affected by traditional tools of “innovation policy.”

Framework conditions – tax policy, local regulatory climate etc. – are more important factors. Because each sector has unique approaches to innovation, the public sector will never be able to fine-tune innovation policies to support all industries. Only industry leadership can provide the type of specialized sectoral knowledge and skills that are required.  

Go to Hidden Innovation, by Michael Harris and Richard Halkett.    

Source: NDE – News