The Clustering Alliance - Number 11

Rod Brown

November 2000

This newsletter is for 180 + members/friends of the Australia New Zealand Alliance on Clustering (ANZAC).
This newsletter previously went under the Silverhawk label.

IT clusters

DCITA and Victoria University (CSES - Centre for Strategic Economic Studies, Melbourne) convened a workshop on cluster developments on 16 October. Phil Flaherty of DITA said the aim was to determine whether or not clusters might be important in the information and communications technology industries, and hoe cluster studies might facilitate key industry development issues.

About 40 people attended. Peter Sheehan and John Houghton were the convenors. Some of points raised were:

  • Graham Larcombe (NIEIR) - key issues are the split between competition/collaboration, geographical proximity and tacit knowledge, networking capabilities, economies of scale/scope.
  • Hugh Forde (BV 2010, SA) - it's about critical mass, and finding leaders, enthusing them, identifying opportunities and ways of collaborating, getting resources. 3 basis steps - what are we? How do we organise ourselves? How do we commercialise?
  • Peter Morris (Telesis, WA) - the danger of slipping into homilies (nice point, I think)
  • Ainsley Jolley (CSES) - distinguishing between national (eg. Scotland) and regional systems, clusters can capture externalities eg. technology and information spillovers
  • Peter Davenport (CSES), Richard Howe (Deloitts, Brisbane) et al - role of GIS, IO analysis and other statistical tools.
  • Jane Marceau - identifying the points of leverage, and the importance of IT as an enabling technology, and understanding the linkages between 4 groups within the IT industry ie. the producers/suppliers, the users, the research and training community, and the regulators
  • Graeme Sheather (UTS, Sydney) - further interesting insights into network structures and supply chains

My 20 cents worth was providing brief report on Glasgow conference, tabling of 'Clusters in Australia, by industry' document, plus the suggestion that the key for the IT industry seems to be to strengthen supply chains. I floated the possibility of some best practice IT clusters being nurtured e.g. Ballarat, Adelaide, North Sydney.

DCITA was thankful for the many ideas and perspectives offered. One might assume that a report would be assembled, and then Minister Alston, his staff, DOCITA senior people would be briefed via this report and other means, and that things might emerge in due course. As some participants mentioned, there is an important awareness-raising job to be done.

Contact: John.Houghton@pobox.com or phone 02 - 6282 1981 (ie. he is based in Canberra)

From Bells Beach to Paris = globalisation

At the TCI conference in Glasgow in October, a regularly-raised topic was globalisation and converging market power - whether in the form of multinationals, supermarket chains or whatever. One of the responses put forward was for small business to organise itself to improve its market clout, purchasing leverage and general commercial dealings with larger organisations.

After Glasgow, I flew to Paris to wait for a Monday meeting with OECD officials. With a brain still spinning with concerns of where Australia sits in the global world, I nevertheless strolled up the Champs Elysees to see what my pathetic Aussie dollar might buy me.

And there it was - Quiksilver - on the right as you head up the best-known street in the world. Either side is Virgin Records, Charles Jordan, Club Med, Planet Hollywood.

So what? Well, in 1970 Quiksilver involved two surfers making surfboards in a garage in Torquay (Bells Beach), 20 minutes drive south of Geelong. Rip Curl and Oakley sunglasses and numerous parts suppliers are there too.

I walked into the Quiksilver store to check out the labels. On two floors were Quiksilver sweaters and shirts made in France and Macau, priced at around 389ff - 400ff (about $100), joggers made in Macau at 689ff ($170), wet suits made in Cap Breton at 1289ff ($320) and hundreds of other products with the Quiksilver brand. The goods seemed not overly expensive - similar in price to what our kids would pay in Australia.

However, neither the clothing labels nor the advertising posters, made any reference to Australia - no big deal, but I was interested from the regional/national branding perspective.

Although the store was reasonably full, one of the managers was keeping a quiet eye on me. He wandered over and I explained my interest. Although his parents are Brazilian and French, he explained to me in perfect English that Quiksilver 'sells a dream' instead of using a strong Australian image.

He provided me with a glossy brochure that indicated that the original owners - Alan Green and John Law still live in Torquay and pull the corporate strings from there. Today, The Quiksilver brochure 9kept under the counter) explains that Alan is a happy man, the 'brainchild of the biggest and most successful international surfwear label on the planet' and John is proud that his 'passion for quality has paid off in a big way'.

Harry Hodge, formerly a surf photographer in Australia, set up the European operation in 1984. Harry is President of Quiksilver Europe, with headquarters in Saint Jean de Luz, near Biarritz on the French-Spanish border. The fourth Australian is Bruce Raymond, formerly a top surfer. He began as a sponsored athlete. He is now MD of Quiksilver International and has been a key factor in the evolution and continued success of the brand.

They sponsor scores of surfers such as Kelly Slater and Lisa Andersen, who have won ten world titles between them, as well as snow boarders around the world - all part of the image and mystique. The bottom line is annual sales of $US600 million - in other words a billion dollar company in Australia.

Their success arguably lies with having gathered expertise around them, taking a few risks, being that little bit different, and building supply chains into key world markets. Quiksilver's repatriated profits to the Australian owners are somehow feeding into Mr. Costello's National Accounts. Quiksilver is an outstanding example of how to cope with globalisation.

Latrobe Valley

If you think Newcastle, Upper Spencer Gulf, Eden etc. had problems, spare a thought for the Latrobe Valley! For the uninitiated, it mostly comprises Moe, Morwell and Traralgon (each about 18-20,000 population) and is 140 - 180 km east of Melbourne.

The Valley produces 85% of Victoria's electricity, by virtue of massive brown coal deposits - open-cut mines deliver the cheapest coal in the world, skilled labour on tap, the road/rail/air infrastructure is first-class, two hour drive from Melbourne, green pastures all around, mountains 30 minutes north, and the sea and the Gippsland Lakes about an hour.

Well, things went terribly wrong in 1992-93 when the Victorian Government privatised the generation, transmission and distribution assets - direct job losses of 7,000 ensued. Now the State Regulator-General (ex half-back flanker for ANU) has capped the revenue earnings, and the institutional investors and overseas utilities who now own these assets are doing their proverbials - thus the SMEs who supply the maintenance crews, tooling etc. are working at 30% capacity. One company's staff has fallen from 220 to 24. Unemployment is almost 3 times the national average, and houses can be bought for a song. It sounds like British Steel in the early 1980s…..this is an economy is reverse gear.

I had the opportunity to attend the discussions between the locals and Senator Minchin, Federal Minister for Industry, Science & Resources -I think he was surprised, but he was genuinely impressed by the R&D efforts of the generators in addressing Greenhouse gas emissions. He asked intelligent questions……….I trust that the Victorian Government is doing likewise. He also gave some frank advice regarding the state of industrial relations in Victoria, specifically that it was arguably an impediment to investment attraction when compared to the situation in South Australia. (The following week Email announces the shift of production form Victoria to SA - 500 plus jobs…..very interesting).

Mike Enright's view on North Sydney

Prof. Michael Enright is on TCI Board that organised the recent Glasgow conference. He was the research director for Michael Porter's Competitive Advantage of Nations Project. He also did his Ph.D. on clustering with Porter, and is now based in Hong Kong, although he does some consulting work in Australia.

In Glasgow he stated as follows:

"Both public and private entities are caught between globalisation and the localisation of competitive advantage. Modern information technology is accelerating the trend. This is resulting in an increasing velocity of forces that locations are having to understand and deal with.

These forces are having a variety of impacts within Australia. One the one hand, they have aided the development of clusters like the IT cluster of North Sydney that has over 100 firms. In addition, some small and medium sized Australian firms are using new technologies to reach wider markets. On the other hand, Australia is losing some management functions of major multinationals as strong country managers are replaced with figureheads because of centralisation back to Singapore and Hong Kong. Similarly, we see the death of rural towns in Australia and the US, where distribution companies are being displaced by e commerce.

Further extracts of his address, plus those of others, are included in the 'Scotland the Brave" report that I am currently finalising - due for release in 3 weeks or so.

AFFA program for farmers

New program - AAA - has a Farm Innovation component which has $18.2m available over two years - in the first round, they have received 80 applications totalling $20m!! Since there are still 3 rounds to go, I assume that 75% of first round applications will get the flick or go back for re-working.

The assessment involves liaison with State agencies, Boards etc. A council of 7-8 people to be formed very soon. Minister will make final approval. Projects need to be innovative.

Good Luck

As foreshadowed, the guidelines for the Regional Solutions Program (RSP) were released on 27 October - has taken a while - old trick of announcing the program in the May Budget, then waiting 5 months to provide the details - two lots of good news! Then announce the projects some months hence, another lot of good news.

The guidelines/criteria are very flexible - wide as the Sydney Heads in fact. However, the following passage should be carefully noted:

"Regional Solutions targets communities in:

  • regional, rural and remote areas experiencing economic stagnation and/or population decline due to industry restructuring, and/or a lack of diversity of economic activities in the region; and
  • regional or rural areas with high population density experiencing above average unemployment levels due to structural change."

Since there is pent-up demand, and expectations, the $90 million (spread over 4 years) will cause some headaches for the Department. One ameliorating fact is that the States are now increasing funding eg. Victoria and NSW.

Summary of the guidelines

RSP offers communities flexibility in obtaining the resources they need to identify barriers to their sustainability and growth, and then develop and implement local solutions that build on their strengths. As a guide, financial support is available for community planning, local project implementation, community adjustment initiatives, local industry development, or to resource people to work for a local community or region. RSP can also provide funding for regionally-based and community-oriented enterprise or infrastructure projects. Grants of between $1000 and $500 000 are available.

Planning

Between $1000 and $5000 over one year to stage workshops or public meetings, print and circulate newsletters, pay for professional facilitators and so on. RSP also supports larger-scale strategic planning by communities that are able to implement the outcomes. Strategic plans might identify, for example, opportunities for economic growth and community capacity building, or for enhancing tourism based on a community’s location or industry. Grants of up to $200 000 over two years are available for strategic planning.

Undertaking large or small projects

Grants of up to $50 000 in total over two years are available to support small scale community development projects. Larger grants - up to $200 000 in total over three years - are available for more strategic community projects that aim to diversify the economic base of a community or region, expand capacity to respond to local issues and challenges, or implement development opportunities.

RSP also supports development of infrastructure in local communities or regions that will deliver social or economic benefits eg. establishing a multi-function development centre that provides access to a range of community services. Grants of between $200 000 and $500 000 in total over three years are available for infrastructure.

Resourcing people to work for your community

Assistance is available to help meet the cost of resourcing local community or regionally-based people to improve the flow of information between the Federal Government and the community (for example, by employing a community information officer), or to coordinate implementation of strategic plans or projects. RSP can provide up to $100 000 in total per application over two years. Funding assistance for these positions will not be ongoing.

Assessment criteria

  1. Circumstances and degree of disadvantage/need in the local community or region
  2. Significance and benefit of the proposal to the local community or region
  3. Sustainable outcomes
  4. Support for the project
  5. Organisational, financial and project management abilities of the applicant

First round closes in three weeks.See www.dotrs.gov.au

Fancy the Paris Option?

The 'World Congress on Local Clusters' is to be held in Paris from 23-24 January. The French Government and the OECD have indicated 'that the time is right to hold a major international conference on local clusters. During the two days policymakers, managers of enterprises and local actors from regions throughout the world will debate the strengths, challenges and prospects for these local groups of SMEs, and will exchange knowledge and ideas on how to run projects."

All ANZAC members are urged to seriously consider attending this Conference - non-ANZAC members are obviously welcome too. Contact me know, and I will mail out the flyer.

Important Note

I met with OECD officials when in Paris last month, and they have kindly agreed to offer ANZAC membership of the LEED group which is convening the above conference - LEED meets twice a year. I indicated to the OECD that we would make every effort to attend both the January conference plus the LEED meetings.

Biotech Bonanza

Met an old work colleague and friend, Dr. David Fayle, at Australian Busines Ltd AGM/farewell to Kate Carnell exercise last week. He tells me that Victorian Minister Brumby recently released his report 'Victorian Biotechnology & Bioscience Based Industry (October 2000). It is a very useful who's who. It analyses/describes 63 biotech enterprises in Victoria (market cap. of $7 billion) plus another 70 enterprises where biotech is a significant part of their business.
There have been 18 start-ups in the last 21 months. Victoria has 43% of Australia's action - NSW 28%, and Qld/SA/WA combined has32%.
'Networking within Australia forms a vital basis on which to develop a global industry, and Australia will gain the greatest benefit if the States and Territories work together, and support and applaud each other's growth and success.'
Having recently had my own insight into Scotland's biotech industry, I believe there is considerable potential for joint ventures between companies within this cluster (it is being called a precinct) and those oveseas.For our Scottish and other overseas readers to get a handle on it, visit www.innovation.vic.gov.au. David's company is BioAccent Pty Ltd - ph 02 - 6254 3871. www.bioaccent.com.au

Apology

Mr. Colin Shepherd, a senior Commonwealth Department of Finance official, has expressed concern at not being appropriately quoted as the source of last month's joke re the bloke, his wife, the mistress. He has threatened to sue….I think he was joking, but you can never tell with Treasury/Finance types.

Mr. Rodin Genoff, our Playford CC correspondent, has offered this tasty little number:

"An Aussie is having his breakfast (coffee, croissants, bread, butter and jam) when an American man, chewing gum, sits down next to him. The Aussie ignores the American who, nevertheless, starts a conversation.

American: "You Aussie folk eat the whole bread?"
Aussie (in a bad mood): "Of course."
American:(after blowing a huge bubble) "We don't. In the US, we only eat what's inside. The crusts we collect in a container, recycle it, transform 'em into croissants and sell 'em to Australia."
The American has a smirk on his face. The Aussie listens in silence. The American persists: "D'ya eat jam with the bread?
Aussie: "Of course."
American (cracking his gum between his teeth and chuckling):
"We don't. In the States we eat fresh fruit for breakfast, then we put all the peels, seeds, and left-overs in containers, recycle them, transform them into jam and sell the jam to Australia."
The Aussie then asks: "Do you have sex in America?"
American: "Why of course we do", the American says with a big smirk.
Aussie: "And what do you do with the condoms once you've used them?"
American: "We throw them away, of course."
Aussie: "We don't. In Australia, we put them in a container, recycle them, melt them down into chewing gum and sell them to America."

Ms Irene Hepburn of ANGLE Technology Limited, Aberdeen S&T Park (Scotland) has forwarded some male-bashing material that I reluctantly publish in the interests of free speech.


"A man's family gathers round his bed to hear the bad news from the doctor.
'I'm afraid the only recourse is a brain transplant..' says the doctor.
'How much will that be? asks the son.
' £20,000 for a man's brain, and £5000 for a woman's brain' replies the doctor.

After some thought and obvious careful consideration, the son asks
' Why is a man's brain more expensive?'
The doctor replies ' Because it hasn't been used'.

Copy to a friend

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Drive safely.
Silverhawk.

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