Video: A practical introduction to industry clusters
The Australian Innovation Precinct Champions interview Ifor Ffowcs-Williams, Chief Executive Officer of Cluster Navigators, to learn more about industry clustering:
- Why would small business want to be part of an industry cluster?
- How can regions support their development
- What practical advice can he offer about running a successful cluster?
What is industry clustering? [00:00]
Rachel Lee, Place Based Policy, Department of Industry, Innovation and Science: I'm here with renowned clustering expert Ifor Ffowcs-Williams, who is going to give us a brief introduction on industry clustering.
Ifor Ffowcs-Williams, CEO, Cluster Navigators: We're not inventing anything new. We're understanding ‘what is the pattern of economic activity in a particular region that is pulling wealth into that region?’ And if I think about a place like little Scone in the Hunter Valley which I think is where 80 per cent of Australia's thoroughbred horse exports go from. It's their local specialisation.
Or if you think about Torquay on the south coast of Victoria. Torquay is the home of Rip Curl, it's the home of Quiksilver. It's the home of maybe 30 other surf hardware, surf apparel companies. It's a naturally occurring cluster. Or even Geraldton, Western Australia. 85 per cent of Australia's winter cucumbers come from little Geraldton.
So clustering is particularly understanding: “What are we good at doing in a region that pulls in wealth?” And then moving on from that to: “OK, what are the holes in that system? What's holding us back and how do we engage around that? How do we work as a team to fill those gaps?”
Why would a small business want to be part of a cluster? [01:20]
Rachel Lee, Place Based Policy, Department of Industry, Innovation and Science: Why is it valuable for businesses, particularly small businesses, to be part of a cluster?
Ifor Ffowcs-Williams, CEO, Cluster Navigators: What a cluster does is enable a business to work with others where there are common agendas. So, it helps a business in part specialise, and a business that are saying: "You know, I don't need to have a machine shop that has got these wide capabilities. What I'm actually good at doing is doing this. That's where I'm productive, that's where I get the best buck. But unfortunately I've got to do all these other things because that's what the customer wants."
So, a cluster - an effective cluster - enables co-specialisation amongst firms where firms over time open up, explore with each other and perhaps understand: “OK, you do that and I'll do this, and somebody else does that, and together it improves our bottom line. And maybe together with our different products, our different services, we can offer a system, an enhanced product to an international company."
So, clustering is to build the environment that helps that small business. Maybe it's developing the training programs that support those businesses. Maybe it's getting the bank managers in the region more switched on to whatever the particular cluster, whatever the sector is. So, it's addressing the infrastructure issues but also creating a culture amongst the firms. That's the payoff for a business.
Why would a region want to support a cluster? [02:54]
Ifor Ffowcs-Williams, CEO, Cluster Navigators: The payoff for a region is this. In today's global world, a region needs to be particularly good at something. The rest of the world can now reach in to our region wherever we are in Australia, wherever we are in the world. That's globalisation. It's made the world a lot flatter, and the question then in part is, what are we good at doing in our region?
And the evidence, from a lot of studies around the world, shows that regions that have strong clusters – where there's a high proportion of jobs within those clusters – regions with the strong clusters tend to develop stronger economies, new things tend to grow out of the old. The strong companies become even stronger.
The evidence from many studies showing that clusters, from an economic development agenda, are key, clusters from the individual business agenda, are a key to the growth of that business.
How do you run an industry cluster? [03:54]
Rachel Lee, Place Based Policy, Department of Industry, Innovation and Science: How would you go about running a cluster in a practical sense?
Ifor Ffowcs-Williams, CEO, Cluster Navigators: So, a cluster is a natural occurrence, and what I see in Europe, what I see in Canada, what I see in South Africa and many parts of the world is a deliberate intervention to build a clustering initiative. So, it's not inventing the cluster, but rather understanding: “Hey, this is what we've got, this is what we're good at doing."
Now, let's bring in some key folk, and it may be one, two people. In some of the larger clusters in Europe might have ten, 20 people with different areas of expertise. People who act as the catalyst, people who act as the connector, people who act as the go-to person within that community where perhaps a company is saying: “Hey, do you know who's good at packaging XYZ?" Or: "Do you know which bank manager is particularly switched on to this sector?" Or: "Do you know which freight forwarders are specialising in servicing the Chinese market?"
So, a go-to person, but also, a cluster manager type person who can pick up common problems, common projects. Maybe it's designing a training program to meet the needs of the businesses. Perhaps it's developing a PR [public relations] program to help the cluster blow its trumpet, to increase its awareness.
And many other clusters across Europe put a lot of effort into finding different ways to reach out to the market, but also to reach out to the immigrants that are coming in. So immigrants know: "Hey, there's something special going on in that little place." Or to reach out to the educational infrastructure to encourage that to become more specialised around the needs of the businesses.
Rachel Lee, Place Based Policy, Department of Industry, Innovation and Science: I've been here with Ifor Ffowcs-Williams, renowned clustering expert. Thank you very much.
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