The Clustering Alliance - Number 16

Rod Brown

April 2001

This newsletter is for members/friends of Clusters Asia Pacific Inc.
– the largest cluster network in the southern hemisphere.

Our Mission -To improve the competitiveness of industries and localities within Australia, New Zealand and elsewhere by enhancing cluster-based development initiatives.

Galway successful

Prof. Roy Green, School of Business & Economics, National University of Ireland, Galway (formerly Newcastle, NSW) reports that their grant application to Enterprise Ireland has been successful. This has been followed with a further application for £3.6 million to the Irish Higher Education Authority to establish a new Centre for Innovation & Structural Change. This will enable continued funding support for international research collaboration on ICT clusters, and also medical devices production.

Given our international links role, we’ll be following things up with Roy.

IT Incubators

The Australian Government is funding $78 million towards ten IT incubators – two in Sydney, one in each of the other States and Territories (except Tasmania which has its own Intelligent Island program), one with dual NSW/Victoria nodes, and a multi-state arrangement.

The Annual Conference of Technology Parks Australia (26-27 March) in Canberra was a very good, high-level gathering of academics, researchers and companies discussing how universities can help make these IT incubators work, and vice-versa.

Michael Sutton, GM within DCITA (the funders) explained that the goal is to assist new and aspiring entrepreneurs to turn their technology/ideas into successful, globally competitive businesses. The style of each incubator varies – the Government hasn’t been prescriptive. The incubators are in their early days – some have not yet been built.

Overall, only 31 incubatees have been accepted from 865 applications - 3.5% success rate (easier to get an audience with the Pope?). As Michael explained ‘they are not holiday homes for young entrepreneurs’. The consensus regarding the features of successful IT incubators:

• Significant IP potential
• Global market potential
• Ability to add value to the business
• The founders are open to being incubated
• Good chemistry between the bid team and the incubator

Other points raised:

• Ballarat Tech Park has dynamic relationship with IBM, who are used as marketing tool.....cluster development centre being established over next 12 months, with State support (Doug Sarah)
• Biggest weakness is in identifying targets for industry development i.e. to take up new technologies.....also difficult to attract sponsors - compared with say Ireland, where companies funded $10 million for an incubator associated with University College Dublin (Ed Hilliard, La Trobe Univ.)
• CSIRO spins off 3 companies/year – need to double or triple this to achieve the approximate international benchmark.....CSIRO committed to this (Ian Elsum)
• The WA Technology Park/Curtin University experience is that formal mechanisms are required to create informal contact....therefore need a focus on governance (Peter Kenyon)

My address explained how cluster concepts might assist IT incubators – but they risk being a cargo cult if the major corporates are not involved somewhere. Earlier speakers lauded the role of IBM, Motorola, Sun Microsystems etc. in their tech parks (each are Partnership for Development companies). I suggested universities and tech parks should think about other PfD companies.

Contact me re PfD issue – and deborah@kuchler.org re the conference papers.

Cairns TCI 2002?

Tracy Scott-Rimington of the Cairns Region Economic Development Corporation is currently working on a bid to hold The Competitiveness Institute's 5th annual conference in Cairns in Sept/Oct 2002 (refer TCI - www.competitiveness.org). If successful, this will provide a wonderful opportunity for cluster members, facilitators, academics and government advisers from the Asia Pacific region to meet with their counterparts around the world. One of the proposed focuses of the conference is to introduce clusters to each other, as part of linking cluster agendas as part of forging stronger mechanisms for R&D commercialisation and investment flows.

We'll keep you posted on developments.

Kiwi engineering agendas

Last month we reported on some of the cluster agendas. Here are two more.

Wellington Launches Natural Hazards Cluster

The Mayor of Wellington, Mark Blumsky, launched the new Natural Hazards business cluster in

November. It is a spin out from the Earthquake Engineering Technology business cluster, a

national cluster facilitated by the Capital Development Agency of Wellington City Council.

Speaking at the launch, Tan Pham of AC Consulting, said that NZ has a unique position resulting from its exposure to a wide range of natural hazards. These include earthquakes, volcanoes, cyclones, floods and landslides. NZ has developed world class expertise to manage, predict and provide engineering and economic solutions to deal with these hazards.

The formation of the cluster came about from feedback by the Earthquake Technologies cluster about the need to incorporate into their programs the amelioration of loss of life and damage, rather than solely be involved in seismic related design and reconstruction work. The Natural Hazards cluster embraces a much wider range of organisations and professionals than are involved with the very active Earthquake Engineering cluster.

Natural Hazards New Zealand www.naturalhazards.co.nz Co-chairs: Tan Pham, AC Consulting Group enquiries@acconsulting.co.nz Peter Wood, Institute of Geol. & Nuclear Sciences; pr.wood@gns.cri.nz Facilitator: Graeme Carroll, CarrollGould@ compuserve.com

Dunedin Engineering Cluster Building Specialist Groups

The Dunedin Engineering cluster is building specialty activity groups to deepen the industry's

Industry base. The cluster employs some 2,000 people, and currently has output of $200m pa.

The cluster is presently pursuing projects to extend its capability and activity in marine

engineering, transport engineering, environmental/waste technologies and tooling. Highlights

from the past year include:

• the development/demonstration in US of a new marine propulsion unit by local firm Contrajet
• local consulting engineer winning a major solid waste into energy project in Sydney
• US Army evaluation of Swing Thru International's container handling system
• major expansion of appliance manufacturer Fisher & Paykel's Taieri plant

Dunedin Engineering Cluster C/- Dunedin City Council, PO Box 5045, Dunedin

Facilitator: Damian O'Neill, Economic Development Unit doneill@dcc.govt.nz

City – Rural divide

Australia’s city-country divide is widening, with the gap between household incomes in Sydney and rural areas doubling in the past 20 years. Mr. Mick Keogh, policy director with the NSW Farmers Association, says the average household income in Sydney is about 120% of the national wage, whereas in regional NSW it is 80% and going backwards. Most of regional Australia is now forced into a ‘beggar bowl’ situation just to retain services.

Other findings:

• 109 GPs per 100,000 population in cities, compared with 70 in rural areas.
• proportion of people in regions who have lost their jobs due to economic deregulation and restructuring was double that in cities.
• In Victoria, the number of male youth suicides has risen 35-fold in small country towns since the mid-60s (compared with four-fold increase in Melbourne)

Manufacturing Prosperity Conference – July, Adelaide

The City of Playford is hosting the third, and now annual, Manufacturing Prosperity Conference on 10-11 July at the Adelaide Festival Theatre.

This national conference is being supported by the University of South Australia, Clusters Asia Pacific Inc., and the Department of Industry and Trade, together with several other sponsors. It will be launched by Hon. Rob Lucas, S.A. Treasurer & Industry Minister and will feature international and national speakers, including an OECD representative.

Day One provides delegates with the opportunity to hear Dr Frank Gelber, arguably Australia’s leading economic forecaster (last year winning the Age newspaper award as Australia’s most accurate forecaster over the last ten years). He will address the issue of future directions in the SA and Australian economies, and will put the spotlight on our productivity growth record – miracle or mirage - and the implications this has for our regional innovation effort.

Major reports on Playford’s regional food cluster and innovation/investment projects will also be launched. On Day Two the University of SA will host hands-on workshops for delegates and industry representatives on issues that affect their future.

So please put these dates in your diaries, especially fellow CAP members, and watch this space.

Contact: Rodin Genoff, Conference Convenor and Co-chair of CAP. rgenoff@playford.sa.gov.au

Software cluster NZ

One of our readers is Trish Brimblecombe, Head of the Computing School at Whitireia Community Polytechnic in NZ (22 km from Wellington CBD).

Trish is working with Innovation & Systems in Wellington (Paul Frater et al). She facilitates a Software Cluster and a Mobile Internet Cluster through a contract I&S has with the Wellington City Council. Clusters are a key component of WCC's economic development strategy.

The IT-related incubator currently established in Wellington has a couple of businesses also involved in the early stages of building the software cluster. She makes the general comment that in this early part, when relationship building and profiling skills/capability is the main focus, these activities also provide similar help and support for start-ups in related incubators. Later on when clusters are involved in setting strategic agendas and identifying projects for possible collaboration, links to incubators can be used to look for additional potential partners or subcontractors, thus stimulating incubator activity and providing useful models for collaborative action.

Trish is interested in contact with other cluster facilitators working in similar areas. We have put her in contact with the Newcastle and Adelaide folk, but are there others out there in cyberspace (Silicon Valley, Cardiff or Algiers?) interested in comparing notes? trish.brimblecombe@xtra.co.nz

Cooperatives – reinvention required

Professor Mike Cook of University of Missouri-Columbia (USA) gave a thought-provoking address to the Australian Agricultural Economics Society meeting in Canberra in late March. He has over a decade of industry experience with Tenneco, Inc. (Houston), Farmland Industries (Kansas City) and the Rice Growers Association (Sacramento).

Some of his point were:

• Most agricultural cooperatives in Australia were set up for defensive reasons, around State legal frameworks, between 1900-1940 – to address market failure of various types. Similar timing and trends in other British-influenced places (US, Canada, South Africa) and Argentina, Brazil, Paraguay etc.
• Co-operatives can ‘tie you up’ because they make producers think horizontally. But the world in now operating very vertically as well – international VI supply chains etc. They have other flaws – free rider problem, short/long-term horizon differences, difficulty of exit.
• Will see the slow death of co-ops unless a ‘new generation’ co-op can be developed. The US has developed sophisticated co-ops in some instances e.g. Ocean Spray – dominates world cranberry industry, Sunsweet in prunes. Dutch have got their act together too.
• Nestle and Cargill will have it all in Argentina – because these two multinationals are very good. In 7-8 years there will be no local agrifood companies left of any significance –– countervailing action is required - unless of course people are satisfied with this.
• Brazil will also be down to two local agrifood majors within a few years.
• New forms of collective action are required.

What do you think? I am thinking about where the Bega Cooperative fits on the scale, having interviewed the Chairman a few months back, and being impressed that they’d cope with global pressures. I believe that the dairy market deregulation underway in Australia will expose weaknesses in organisational and governance systems – for both cooperatives and vertically-integrated corporates. For example, Bonlac is one of the latter, and is on the slippery slide as Professor Cook noted.

Scottish Minister

At TCI Conference in Glasgow, Mr. Nicol Stephen, Deputy Minister for Enterprise, Scotland explained that he was working with Bob Downes of BT in the 1980s with the aim of getting companies to work together. He had persuaded people that the Food Services Agency should be in Aberdeen (and not Edinburgh) - 'without us it would have been in the wrong place'. Partnering wasn't spoke about then.

He said that partnerships are often spoken about, as is the importance of industry/commerce and lifelong learning. However there is still a long way to go to get the correct linkages. Project Alba is an example of a success in facilitating collaboration between a university and companies like Motorola, where 500 research jobs have been created.

We also need to think about India, China, Russia, Brazil and our interaction with them. There is also huge competition out there - for example, Scotland has 13 universities and 47 colleges - India has 116 universities and 500 colleges.

The Scots have a Knowledge Economy Taskforce, and clusters are a key part because they build the critical mass and the commercial environment. His final message - 'get out there and do it'.

Honey, who shrank the world?

Chris Thomson of the ACT Chief Ministers’ Department here in Canberra, sent a note recently:

“Can't recall his name now - been a lot of water under the bridge since then – but I met a bloke while touring the home of the Incas - Cusco, Peru. Now there's a tourism cluster if ever I saw one. He ran a consultancy dealing with issues like clustering and local economic development, and met you at the Glasgow conference last year. In fact, I think he made a presentation there. He said he received the Clusters Asia Pacific newsletter, and made a point of passing his regards to you and John Dean.”

Chris’ remembered the next week – it was the cluster guru, Stu Rosenfeld – he spoke at Glasgow regarding education clusters. His work also encompasses techniques for understanding regional economies, cluster-building strategies etc. The Area Consultative Committees (regionally-based/federally-funded employment councils) in Australia would find his work of major relevance.

R&D funding network

Accessing R&D funding is an art form - scientists and company executives (in both the big corporates and SMEs) often need some external assistance to handle complex grant applications. Many firms also do not know what is available, particularly since the release of the Innovation Statement.

A very professional and effective R&D consultancy network operates in Canberra - the members are former managers of the actual programs - hence their hit rate in winning grants exceeds the industry average. They work mostly on a success fee arrangement - no payment is required until the grant is received by the company. Interested in making contact? Just email or phone me.

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Regards
Rod Brown
Executive Director

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