Archive for November, 2005

‘Trust takes time to develop’ says AEEMA

November 17, 2005

The Australian Electrical & Electronics Manufacturers’ Association received a federal grant to identify opportunities for cluster development. The report, released early 2004, provides a very good analysis. Extract follows. 

Cluster development on its own is not a panacea for economic development, but a powerful tool for growth. There is an urgent need in Australia for companies to understand how to collaborate effectively, when to collaborate, and when to compete on a local basis. That is the executive decision to be made, rather than ‘should you collaborate’.

Clusters provide the forum for such collaboration. A workable definition of a cluster is “a system of inter-related companies, institutions and networks with common understandings, a desire for continual growth, and a level of trust which enhances the flow of knowledge.”

This departs from definitions requiring geographical proximity, and is explained by the recent emergence of spatially remote clusters and newer concepts of ‘cluster of clusters’.  A period of 3-5 years is necessary to avoid participants from walking away, rather than the ‘decade or so’ suggested by Porter.

There is a need to focus on picking the ‘low growing fruit’ to achieve early confidence-boosting success, rather than pursuing long-term outcomes that try the patience of industry participants. Short time frames need to be tempered with the fact that trust for the sharing of knowledge and conducting joint projects is a key element in a sustainable cluster. Trust takes time to develop. The development of trust must be “fast tracked” and the process needs to be made explicit in cluster membership.

The report includes draft codes of conduct and ethics for use as aids to develop trust. While commercial self-interest is a driver of behaviour, ‘social capital’ is inherent in clusters. People with a collaborative world-view are the ones best suited to, and drawn to, cluster activity. 

Optimising the mix of structural and behavioural elements is fundamental to the success of clusters. Government-driven clusters have generally not been successful – industry must play a key role in the establishment and operation of clusters in close liaison with government. 

The ‘cluster of clusters’ approach is a new dynamic model – it is aligned conceptually to an atomic structure, rather than a diagrammatic representation on horizontal and vertical planes. This is consistent with the ‘organic growth’ principle and takes account of emerging opportunities and the necessity of establishing new connections in a rapidly changing environment.

This approach redefines the current static model, which although connecting ‘silos’ of activity, is nevertheless prescriptive and limiting.  Australia should consider cluster development in terms of a lifecycle that enables a determination by both government and industry of the stage of development of a network or cluster. This could prescribe the Government’s approach to funding such entities, in the same way as the R&D grants address discrete elements of the commercialisation cycle. 

Australia has far too many small and disconnected industry bodies and networks that are individually weak and ineffective. The ‘cluster of clusters’ approach is essential in gathering small networks together to facilitate real collaboration and a cohesive industry voice through the development of critical mass. 

Contact: John Humphreys at john@globalinnovation.com.au