Creating ICT Clusters of Innovative Small Businesses

1. Creating ICT Clusters of Innovative Small Businesses August 30, 2004 Keio UniversityShonan - Fujisawa Prof.Daniel Rouach daniel@rouach.net

2. Creating ICT Clusters Success Factors

3. Creating Clusters Regional Strategies to Create Technology Clusters Prof Daniel Rouach, ESCP-EAP Paris European School of Management

4. 1. Forces Behind Cluster Formation 2. Type of Clusters & Key Ingredients 3. Grenoble France Strategies to Create Clusters

5. Creating Regional Wealthin the Innovation Economy Jeff Saperstein and Daniel Rouach sapermktg@earthlink.net and drouach@escp-eap.net

6. Models, Perspectives, andBest Practices Building Regional Centers of Entrepreneurship – and Sustaining them. Financial Times – Prentice Hall Pearson Education - 2002

7. Silicon Valley Munich Cambridge Sophia Antipolis Grenoble Taiwan Ireland, Israel, India Regions Selected « Gold Medalists »

8. 1. Forces Behind Cluster Formation Strategies to Create Clusters

9. Five Forces behind Cluster Formation 1. Universities 5. Competitive Intelligence & Networking 2. Leading Companies Clusters 4. Active Government Support 3. Entrepreneurs Spirit 3. Venture Capital

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

11. Proximity,Special relationships Michael Porter “Proximity in Geographic, Cultural and Institutional Terms allows Special Access, Special Relationships, Better Information, Powerful Incentives, and other Advantages in Productivity andProductivity Growth that are difficult to tap from a distance.” As a result in a Cluster, the Whole is Greater than the Sum of the Parts

12. Elements of Clusters 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.

13. Elements 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

14. Elements 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

15. Elements of Cluster • Geographical Proximity • Critical Mass of firms • Complementary firms • Replacement of Vertical Integration by Specialized Suppliers

16. Clusters are Magnets “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

17. . Where is the RIGHT place to BE ? Intellectual Capital of Regions

18. 2. Type of Clusters & Key Ingredients Strategies to Create Clusters

19. Wired’s 1st Tier Clusters Stockholm Helsinki, Finland Boston, MA Cambridge, England Montreal Dublin, Ireland Seattle San Francisco Israel London New York City Silicon Valley Taipei, Taiwan Albuquerque AustinTX Bangalore, India Source: “Venture Capitals” Wired Magazine July 2000

20. Wired’s 2nd Tier Clusters Malmo, Sweden Virginia Oulu, Finland Chicago Flanders, Belgium Raleigh-Durham, NC Bavaria, Germany Kyoto, Japan Thames Valley, England Tokyo Paris Los Angeles Hsinchu, Taiwan Baden-Württemberg, Germany Hong Kong Queensland Sao Paulo Melbourne Source: “Venture Capitals” Wired Magazine July 2000

21. Wired’s 3rd Tier Clusters Glasgow-Edinburgh, Scotland Trondheim, Norway Saxony, Germany Salt Lake City, UT Sophia Antipolis, France Santa Fe, NM El Gazala, Tunisia Inchon, South Korea Kuala Lumpur, Malaysia Singapore Campinas, Brazil Gauteng, South Africa Source: “Venture Capitals” Wired Magazine July 2000

22. Red = First Tier Orange = Second Tier White = Third Tier Wired’s Clusters Montreal Glasgow-Edinburgh, Scotland Boston, MA Trondheim, Norway Stockholm Virginia Saxony, Germany Chicago Cambridge, England Oulu, Finland Helsinki, Finland Flanders, Belgium Raleigh-Durham, NC Kyoto, Japan Malmo, Sweden Dublin, Ireland Seattle Bavaria, Germany Tokyo Thames Valley, England San Francisco Israel London New York City Sophia Antipolis, France Hsinchu, Taiwan Taipei, Taiwan Silicon Valley Paris Salt Lake City, UT Baden-Württemberg, Germany Bangalore, India Hong Kong Los Angeles Santa Fe, NM Kuala Lumpur, Malaysia Albuquerque El Gazala, Tunisia Queensland AustinTX Singapore Gauteng, South Africa Melbourne Campinas, Brazil Sao Paulo Source: “Venture Capitals” Wired Magazine July 2000

23. Type of Clusters Silicon Valley or Death Valley • Baby Cluster : Atlas valley • Babel Cluster : Sophia Antipolis • Island Cluster : Wadi Valley (Israël) • Magnet Cluster : Silicon Valley • Network Cluster : Bangalore

24. Success FactorsCreating or Destroying Value ? Ingredients For Success • # 1 Cross Fertilisation • # 2 Cooperation /Competition • # 3 A Leader • # 4 Leading Firm + Start-ups • # 5 Incubation Spirit

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

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

27. The Magnet ClusterSilicon 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

28. The Magnet ClusterSilicon 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

29. The 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

30. The Magnet ClusterSilicon 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

31. 3. Grenoble France Strategies to Create Clusters

32. 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

33. Grenoble History of hydroelectric power & atomic energy Isolated environment but market exists A pioneering and self-sufficient spirit. Local Culture 4 renowned universities including the INPG “Communication exchange” between Universities, Research Laboratories & Industry Informal network 20 years history of spin-offs, entrepreneurship Centre d’ Energie Atomique(CEA):key player Local hero: Louis NEEL Spin-off creation Technology Transfer between research and industry “Micro & Nano-Technology House” Aim: no. 1 in Europe for Micro & Nano Technology Future Strategy

34. 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.

35. Role of Government in Grenoble Regional and local governments Intellectual capital National Government 1970s 2000+ 1900+ 1950s Research and atomic energy Microelectronics and high-tech Micro & Nano technology Hydro-electric power Spin-offs Incubators CEA Science parks Decentral-ization 1982

36. Government Local Hero: Louis NEEL Isolation pioneering spirit self-sufficiency Leti INRIA CEA INPG 9 engineering schools State-funded research labs « Informal Network » ZIRST Spin-offs 20 yrs 4Universities 2 business schools Traditional Industry 1950s Hydro & atomic energy Industry: dynamic companies Physical Environment Alps, Italy, Germany, Switzerland Regional organisations AEPI, CCIG

37. Grenoble « spin-off slopes » Pioneering spirit Inspiration Intellectual capital creativity ideas entrepreurship Informal business network Technological know-how

38. c petition oo ooperation pportunity COOPETITION echnology Transfer nnovation ntelligence etworking

39. Competitive Intelligence • Competitive intelligenceis the art of locating, collecting, processing and storing 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.

40. CEA DTA Competitive Intelligence Competitive Intelligence - “Skills and knowledge have become the only source of sustainable long-term competitive advantage”

41. Competitive Intelligence The intelligence pyramid STEP 3: Drive Decisions The Intelligence System : Security Analysis : the Art and the Discipline STEP 2: Analyze the Data Sources : Laying the Foundations... Guidelines and Checklists STEP 1: Build the Foundation

42. The key information sources of Competitive Intelligence The value chain of information Technical intelligence Marketing intelligence Financial intelligence Production intelligence Sales intelligence Active Technical watch Marketing watch Financial watch Production watch Sales watch Passive R&D Marketing Finance Production Sales

43. The key information sources of Competitive Intelligence Classifying according to information types 80 % 80 % 20 % 20 % HOT SECRET COLD INFORMATION White Grey Black Information Information Information Industrial espionage Grey Information Competitive Competitive Black Information Intelligence Intelligence

44. The key information sources of Competitive Intelligence • Partner groups • Subconctractors • Suppliers • Clients • Competitors • Professional Groups • Financial partners • Fortuitous sources • Train, plane, « the street » • Stagiaires... • Institutions • Administrations • International organisations • Associations • Research Centers • Institutes and foundations • Universities • New Networks • Internet • Compuserve Sources • Personal Networks • Clubs • Colleagues • Confrères • Consultants and experts • Ingineering Schools • Universities • Experts • Technical Centers • Consultants • Information providers • Press • Booksellers • Libraries • Internet servers, brokers • Data bases • Information Centers • Events • Colloquium • Fairs • Business trips

45. Conclusion : Why do clusters work? • Network effects! • Direct effects: firm-to-firm learning • Indirect effects: When key inputs are in abundant supply

46. Conclusion : Cluster results • Each firm is more productive • Each firm is more innovative • Formation of new businesses is higher