Creating ICT Clusters of Innovative Small Businesses

August 30, 2004 Keio UniversityShonan - Fujisawa

Prof.Daniel Rouach

daniel@rouach.net

Creating ICT Clusters

Success Factors

Creating ClustersCreating Clusters

Regional Strategies to Create Technology Clusters

Prof Daniel Rouach,

ESCP-EAP Paris

European School of Management

Strategies to Create ClustersCreate Clusters

3. Grenoble France

2. Type of Clusters &Key Ingredients

1. Forces Behind Cluster

Formation

Creating Regional Wealth in the Innovation Economy

Jeff Saperstein and Daniel Rouachsapermktg@earthlink.net and drouach@escp-eap.net

Models, Perspectives, and Best Practices

Building Regional Centers of Entrepreneurship – and Sustaining

them.

Financial Times – Prentice Hall

Pearson Education - 2002

Regions Selected « Gold Medalists »

Sophia AntipolisGrenobleTaiwan

Ireland,Israel,India

Silicon Valley

Munich

Cambridge

Strategies to Create ClustersCreate Clusters

1. Forces Behind Cluster

Formation

Five Forces behind Five Forces behind Cluster FormationCluster Formation

Clusters

2. Leading Companies

5. CompetitiveIntelligence &Networking

1. Universities

3. Venture Capital

3. EntrepreneursSpirit

4. Active GovernmentSupport

CCluster Formation luster Formation Definition Michael PorterDefinition Michael Porter

“Clusters are Concentrations of Highly Specialized Skills and Knowledge, Institutions, Rivals, Related Businesses, and Sophisticated Customers in a Particular Nation or Region.”

Proximity,Special Proximity,Special relationships Michael relationships Michael

PorterPorter “Proximity in Geographic, Cultural and

Institutional Terms allows Special Access, Special Relationships, Better Information, Powerful Incentives, and other Advantages in Productivity and Productivity Growth that are difficult to tap from a distance.”

As a result in a Cluster, the Whole As a result in a Cluster, the Whole is Greater than the Sum of the Partsis Greater than the Sum of the Parts

Elements of CElements of Clusterslusters Why do clusters work?

• Better access to employees.

• Better access to suppliers.

• Better access to specialized information.

• Access to public goods (universities).

• Location is self-reinforcing – increasing returns.

Elements of ClustersElements of Clusters Distance matters!

• Collaboration over distance is hard… particularly for innovative activities

• Distance slows work

• Distance leads to breakdowns

• Distance keeps you far from the customer

Elements of ClustersElements of ClustersWhy do clusters work?

• Workers cultivate social & professional affiliations within the cluster– friends and acquaintances – human linkages.

• Clusters have most sophisticated buyers, so firms have best view on the market.

• Site location – outside firms set up next to like firms. “The buzz.”

• Peer pressure

Elements of ClusterElements of Cluster

• Geographical Proximity

• Critical Mass of firms

• Complementary firms

• Replacement of Vertical Integration by Specialized Suppliers

“Clusters are a Driving Force in increasing exports

and are Magnets for attracting Foreign Investment”

Michael Porter . Feb 2000 Economic development Quartely Vol 14 p.15

“Clusters are a Driving Force in increasing exports

and are Magnets for attracting Foreign Investment”

Michael Porter . Feb 2000 Economic development Quartely Vol 14 p.15

CClusters are Magnetslusters are Magnets

Where is the RIGHT place

to BE ?

Intellectual Capital of Regions

.

Strategies to Create ClustersCreate Clusters

2. Type of Clusters &Key Ingredients

“”

Wired’s 1st Tier Clusters

Cambridge, England

Seattle

Stockholm Helsinki, Finland

London

Dublin, Ireland

Israel

Bangalore, India

Taipei, Taiwan

Boston, MA

New York City

Montreal

AustinTX

Albuquerque

San Francisco

Silicon Valley

Wired’s 2nd Tier Clusters

“”

Los Angeles

Sao Paulo

Raleigh-Durham, NC

Virginia

Chicago

Tokyo

Hsinchu, Taiwan

Hong Kong

Queensland

Melbourne

Oulu, Finland

Thames Valley, England

Kyoto, Japan

Baden-Württemberg,

Germany

Malmo, Sweden

Paris

Flanders, Belgium

Bavaria, Germany

Wired’s 3rd Tier Clusters

“”

Salt Lake City, UT

Glasgow-Edinburgh, Scotland

Gauteng, South Africa

Campinas, Brazil

Santa Fe, NM

Kuala Lumpur, Malaysia

Singapore

Inchon, South Korea

Saxony, Germany

Sophia Antipolis,

France

El Gazala, Tunisia

Trondheim, Norway

Wired’s Clusters

“”

Cambridge, England

Seattle

Stockholm

Helsinki, Finland

London

Dublin, Ireland

Israel

Bangalore, India

Taipei, Taiwan

Boston, MA

New York City

Montreal

AustinTX

Albuquerque

San Francisco

Silicon Valley

Los Angeles

Sao Paulo

Raleigh-Durham, NC

Virginia

Chicago

Tokyo

Hsinchu, Taiwan

Hong Kong

Queensland

Oulu, Finland

Thames Valley, England

Kyoto, Japan

Baden-Württemberg,

Germany

Malmo, Sweden

Paris

Flanders, Belgium

Bavaria, Germany

Melbourne

Glasgow-Edinburgh, Scotland

Gauteng, South Africa

Campinas, Brazil

Santa Fe, NM Kuala Lumpur,

Malaysia

Singapore

Saxony, Germany

Sophia Antipolis,

France

El Gazala, Tunisia

Trondheim, Norway

Salt Lake City, UT

Red = First Tier

Orange = Second Tier

White = Third Tier

Type of Clusters Type of Clusters Silicon Valley or Death Silicon Valley or Death

ValleyValley• Baby Cluster : Atlas valley

• Babel Cluster : Sophia Antipolis• Island Cluster : Wadi Valley (Israël)

• Magnet Cluster : Silicon Valley

• Network Cluster : Bangalore

Success FactorsSuccess Factors Creating or Destroying Value ?

Ingredients For Success

• # 1 Cross Fertilisation

• # 2 Cooperation /Competition

• # 3 A Leader

• # 4 Leading Firm + Start-ups

• # 5 Incubation Spirit

Success factorsSuccess factors Ingredients for Success

# 6 . Networking Culture# 7 . Magic Atmosphere# 8 . No Not Invented Here Syndrome# 9 . Knowledge Transfer# 10. Diasporas Culture

Success factorsSuccess factors Ingredients for Success

# 11 . Education Investment# 12. Risk & Chutzpah !# 13. Branding# 14. Competitive Intelligence# 15. Venture Capital

The Magnet ClusterThe Magnet Cluster Silicon Valley Ethos

• "Can do" Attitude with Contagious Enthusiasm for Collaborative Projects

• Emphasis on Teamwork, Openness and Egalitarianism• Encouragement for Risk-Taking, Innovation, and

Tolerance for Failure that is based on Learning so Best Practices can be Discovered and Applied in Future Projects

• A focus on Productivity and Practical Goal Setting • The ability to be Intellectually Agile, while working on

projects that have tight, ambitious timetables for completion

The Magnet ClusterThe Magnet Cluster Silicon Valley Ecocluster

• Regional Network-Based Industrial System : Proximity of All Professions and Skills needed for technology based businesses.

• Social Networks and Open Labor Markets that encourage Experimentation and Entrepreneurs

• Informal Communication and Collaborative Practices

• Abundant Venture Capital

The Magnet ClusterThe Magnet ClusterSilicon Valley Ecocluster

• Educational Institutions and Technology Parks as Incubator Hubs and a Skilled Workforce Generator

• Government at Federal, State and Local Level facilitating the Speed for Investment and Quick Problem-Solving

The Magnet ClusterThe Magnet Cluster Silicon Valley Ethos

• Individual Freedom and Self-Discipline are Integrated • People are Respected for their Knowledge and

Contribution to the Team, not their Job Title • Knowledge must be translated into Action with a

potentially positive outcome

Strategies to Create ClustersCreate Clusters

3. Grenoble France

Example Grenoble - France

•A high-tech hub: Digital, IT, micro & nanotechnologies

•Mission: No 1 in Europe for micro & nanotechnologies

•Influence by local environment and tradition

•Entrepreneurial spirit: spin-offs, self-sufficiency

Grenoble

History of hydroelectric power & atomic energy Isolated environment but market exists A pioneering and self-sufficient spirit.

4 renowned universities including the INPG“Communication exchange” between Universities, Research Laboratories &

Industry

20 years history of spin-offs, entrepreneurship

Centre d’ Energie Atomique (CEA): key playerLocal hero: Louis NEEL

Technology Transfer between research and industry

“Micro & Nano-Technology House” Aim: no. 1 in Europe for Micro & Nano

Technology

Informal network

Local Culture

Spin-off creation

Future Strategy

Challenges and problems for Grenoble“to stay competitive and to attract multinationals”

•Regional Infrastructure factors: no TGV from Lyon, isolation.Competition: Lyon & Sophia-Antipolis are in the same region.

•National Brittany, Lorraine, Paris and Sophia-Antipolis are national competitors for high-tech development.

•International Grenoble is not a major European city. In competition with Munich, Dublin, Barcelona and Stockholm.

Role of Government in Grenoble

Regional and local governments

Intellectual capital

1900+ 1950s 1970s 2000+

Research and atomic energy

Microelectronics and high-tech

Micro & Nano technology

Hydro-electric power

National Government

Scienceparks

CEA Decentral-ization 1982

Spin-offs

Incubators

Government

Isolation

pioneering spirit

self-sufficiency

Physical E

nvironment

Alps, Ita

ly, Germ

any,

Switzerla

nd

Regional organisations

AEPI, CCIG

Traditional

Industry 1950s

Hydro & atomic energy

Local Hero:Louis NEEL

INPG9 engineering

schools

4 Universities2 business schools

ZIRSTSpin-offs

20 yrs

State-funded research labs

CEALeti INRIA

« Informal Network »

Industry:dynamic companies

Grenoble« spin-off slopes »

Intellectual capital

ideas

Technological know-how

entrepreurship

Inspiration

Informal business network

creativity

Pioneering spirit

ooperation

pportunity

echnology Transfernnovation

ntelligence

etworking

• Competitive intelligenceCompetitive intelligence is the art of locatinglocating, collectingcollecting, processingprocessing and storingstoring information to be made available to people at all levels of the firm with a view to shaping its future, but also protecting its present against competitive threat.

• It is legal and it respects a code of ethics.

• In other words, business intelligence is the transfer of knowledge from the environment to the organisation with respect to established rules.

Competitive Intelligence

““Skills and knowledge have Skills and knowledge have become the only source of become the only source of sustainable long-term sustainable long-term competitive advantage”competitive advantage”

Competitive Intelligence -Competitive Intelligence -

CEA DTA Competitive Intelligence

STEP 1: Build the Foundation

STEP 2: Analyze the Data

STEP 3: Drive DecisionsTheIntelligence

System :Security

Analysis : theArt and the Discipline

Sources :Laying the Foundations...Guidelines and Checklists

The intelligence pyramidThe intelligence pyramid

Competitive Intelligence

Active

Passive

Technicalintelligence

Technicalwatch

Marketingintelligence

Marketingwatch

Financialintelligence

Financialwatch

Productionintelligence

Productionwatch

Salesintelligence

Saleswatch

R&D Marketing Finance Production Sales

The value chain of informationThe value chain of information

The key information sources ofCompetitive Intelligence

Classifying according to information typesClassifying according to information types

The key information sources ofCompetitive Intelligence

COLD INFORMATION

20 %20 %HOT SECRET

80 %80 %

WhiteInformation

GreyInformation

BlackInformation

Industrialespionage

Grey Information Black InformationCompetitiveCompetitiveIntelligenceIntelligence

The key information sources ofCompetitive Intelligence

Sources

Fortuitous sourcesFortuitous sources• Train, plane, « the street »• Stagiaires...

Partner groupsPartner groups• Subconctractors• Suppliers• Clients• Competitors• Professional Groups• Financial partners

New NetworksNew Networks• Internet• Compuserve

Personal NetworksPersonal Networks• Clubs• Colleagues• Confrères

Information Information providersproviders• Press• Booksellers• Libraries• Internet servers, brokers• Data bases• Information Centers

EventsEvents• Colloquium• Fairs• Business trips

Consultants and expertsConsultants and experts• Ingineering Schools• Universities• Experts• Technical Centers• Consultants

InstitutionsInstitutions• Administrations• International organisations • Associations• Research Centers• Institutes and foundations• Universities

Conclusion : Why do clusters work?

• Network effects!– Direct effects: firm-to-firm learning– Indirect effects: When key inputs are in

abundant supply

Conclusion : Cluster results

• Each firm is more productive

• Each firm is more innovative

• Formation of new businesses is higher