Hundreds of countries and regions across the world have embraced the industry cluster development model as their framework for economic development, making it the most widely accepted model internationally.
Sadly Australia is not one of them – although a number of regions and practitioners have seen the merits in the model and have customised local approaches to leverage and grow their local clusters. ‘Converts’ (some might call them zealots’) in these regions continue to champion and apply the model, convinced of the value it has to offer.
Adelaide recently played host to an international conference that highlighted the critical role that industry clusters play in driving innovation and competitiveness of regions.
The conference was organised by the TCI – Network Oceania Chapter (a community of these so-called converts and zealots) and featured international, national and local speakers and participants. Not surprisingly a tour of some of South Australia’s high performing clusters and precincts, including the Barossa Valley and SAHMRI, was a popular component.
The Lord Mayor, The Honourable Martin Haese, opened the conference and welcomed guests. He showed he ‘gets it’ – noting that clusters bring together like-minded people to pursue like-minded interests. He also highlighted the opportunities for Adelaide to connect with other internationally recognised clusters including Austin Texas, through our Sister City program.
The keynote speaker for the conference was Dr Christian Ketels, TCI-President and Associate of Professor Michael Porter’s Institute for Strategy and Competitiveness. He set the scene by assessing Australia’s competitive positioning, pre and post 2008 and highlighting structural challenges to our international competitiveness and GDP growth moving forward, prior to exploring how the cluster model can assist us.
Dr. Ketels urged policy-makers to embrace the concept of industry clusters.
He noted that “as globalisation accelerates, clusters strengthen the collaboration required for increased innovation and connectivity, crucial for upgrading the competitiveness of companies, regions and nations.”
Dr. Ketels also stressed that clusters, which represent the specialisations and strengths of the region provide a highly effective focus to tailor and target core economic development policies and initiatives such as education and training, infrastructure, entrepreneur support, export promotion and business attraction to meet the needs of and add value to key clusters.
From a local perspective Chris Burns, CEO of South Australia’s Defence Teaming Centre, one of Australia’s long term cluster initiatives, outlined the vital role played by the DTC in securing contracts for the state and the strong international linkages nurtured over many years through collaboration and cluster strategy.
Further details regarding the conference, including slides from presenters can be found here (courtesy of RDA Brisbane):
For those not familiar with the industry cluster concept or the history of cluster development initiatives in South Australia the following overview may be of interest.
The Industry Cluster Model
Industry clusters are geographic concentrations of related businesses, including suppliers and service providers, together with education and research institutions, relevant government agencies and specialist infrastructure.
For a real world example dear to many we can think of the wine cluster in South Australia which consists not only of growers and winemakers that we naturally associate with the wine industry but also agricultural suppliers, irrigation suppliers, transport providers, bottle and label manufacturers, marketing, legal and finance specialists etc, together with the education and research providers in universities and the Waite campus.
True clusters with a critical mass, a regional concentration greater than that found in the rest of the country and a web of interdependent relationships between members of the cluster constitute sources of specialisation and comparative advantage for the region.
They provide a means for small companies to enjoy some of the benefits of economies of scale and opportunities to leverage specialist workforce and infrastructure.
Of course the word ‘cluster’ has come to mean many things to many people and in addition to the broader regional concept described above, it is now used to encompass smaller networks and alliances, precincts and entities that emerge to support the cluster. This can be confusing but the principles of collaboration and critical mass are common and remain paramount.
To accelerate the growth of industry clusters practitioners can actively engage industry leaders to take ownership of the growth of the cluster, facilitate greater collaboration between participants, develop an effective partnership between industry and government, facilitate new relationships for innovation, develop supporting infrastructure and facilitate joint marketing and trade initiatives.
As Dr Ketels has highlighted we can also maximise effectiveness of other economic development policies by focusing them towards existing clusters.
Clusters In South Australia
The history of cluster development in South Australia has been somewhat chequered although those of us disposed to a glass-part-full perspective can find a lot to like.
Industry clusters have developed naturally over the history of the state, none less important than the agribusiness cluster that still contributes substantially to our economy. The wine cluster has developed ‘organically’ over 150 years and the defence cluster dates back to the rocket trials in Woomera in the 1950s and evolution of the Defence Science and Technology Group/Organisation in Salisbury, formerly known as Weapons Research Establishment.
Nevertheless economic development policy-makers and practitioners have continued to ponder how they can further develop the economy at a greater rate than this natural evolution, recognising that accelerating the growth of existing and emergent sectors/clusters offers significant economic benefits for South Australia
A cluster-based framework for economic development for South Australia was first proposed by the management consulting firm Arthur D. Little in 1992. Sadly a change of government later that year meant that that approach was short-lived and the report was consigned to history.
Nevertheless in 1995 the much criticised Multi-Function Polis (MFP) embarked on a pilot program to facilitate the cluster development model in Adelaide, with an initial focus on Defence and the then emerging sector Multimedia. The success of this initiative led to the application of the model in areas such as Spatial Information, Tourism, the Arts, Water and the Heavy Engineering sector in the Upper Spencer Gulf.
Outcomes have included substantial new business and exports for South Australian industry, and the establishment of a number of industry bodies such as the Defence Teaming Centre, and the Water Industry Alliance and Global Maintenance Upper Spencer Gulf, which have been recognised and supported by the South Australian Government as providing valuable contributions to economic development.
Where Are We Today
If we fast forward to recent years, these organisations are still operating as the pre-eminent bodies in their respective sectors – providing a focus for industry leadership, collaboration, and innovation.
The South Australian Government has invested heavily in infrastructure for the ship-building industry, a key element of the defence cluster, leading to recent announcements.
In 2014 the South Australian Government committed to investing $5 million over four years until June 2017 to support the establishment and development of industry clusters in aerospace, automotive, music technology, clean water technology, medical devices, and the internet of things for mining resources.
These clusters are now established and operational. While arguably they are more appropriately considered to be networks and alliances in light of the discussion above, there is little value in playing with words and they provide a valuable vehicle to foster collaboration, innovation and productivity. The DTC and the Water Industry Alliance are active in facilitating these alliances. Further details can be found at:
The Honourable Kyam Maher MLC, Minister for Manufacturing and Innovation and
The Honourable Leesa Vlahos, Minister for Disabilities and Member for Taylor launch the Australian Aerospace Alliance in 2015.