With over 7,000 innovation clusters around the world, there are numerous ways to start, launch and build an innovation cluster. In this article we describe eight ways clusters commonly get started and what a cluster journey may look like.
What is an Innovation Cluster?
An innovation cluster, or often called industry cluster can be understood in two ways. The traditional view is that it is a collection of companies situated within some level of proximity, allowing for more collaboration, interaction, development of stronger ties and a natural growth of a collaborative strengths within the cluster.
Often called clustering effect or agglomeration economics, in this first perspective the cluster is a naturally emergent phenomenon, without any centralized strategy, structure or management organization. Agglomeration economics has been a widely understood concept since British economist Alfred Marshall first wrote about the concept in the 1920’s, and later popularized by academic like Michael Porter, Paul Krugman and Torger Reve.
The Italian wine cluster, New York’s financial district and Boston’s life science cluster are well-known examples of this first category.
The more modern view is that clusters (or cluster organizations) can be purposefully built and developed. In this view, the role of governments matter, either indirectly through taxation and industrial polices or directly through national cluster programs and direct funding schemes.
In this view pre-existing clustering of member companies matter, but there is also a positive belief that clusters can grow and develop over time, often developing from small, emerging clusters into globally oriented Innovation Superclusters.
Norway’s GCE Ocean Technology Cluster, Netherland’s Health Valley and Canada’s AI Scale Cluster are three such examples, all are actively built out over time and supported by bold government programs.
Ten-item Cluster Checklist
A collection of organizations with a shared intent to collaborate
Built around a specific theme or industry domain
Member-based networks built around future growth industries
Trust-based collaboration platforms
Engines of economic growth, by connecting 100’s of members and partners
Solving Industry level challenges & creating new market opportunities
Private-public Partnerships,developed by design
Magnets that attract talent, venture capital, researchers and companies
Project developer of large-scale, collaborative projects
Key player in the quest for national economic growth
Local or global mindset?
A key defining aspect with clusters is the local vs. global mindset. With a local mindset, the cluster is mostly focused on connecting local companies, hosting local events and building out a series of local development programs with local partners. Often, these clusters will tend to scope their work within a county or state border. For many, this can be a natural starting point, but a local cluster will have natural barriers to growth and will struggle to develop interesting partnerships and market opportunities over time.
Clusters with a global mindset are different. Here, the conversations are naturally focused on global market opportunities, global industry development and global trends and outlook. These clusters will often have pre-existing networks and relationships that allow them to naturally connect and collaborate with relevant markets, project and partners globally.
Questions like “how can we connect and work with global supply chains?”, “In which areas can we compete and win with the best companies and sectors – globally?”, “how can we attract the globally leading firms and investors to our cluster” are naturally discussed during strategy sessions.
With or without a public cluster program?
Crucial to anyone building an innovation cluster is whether a national or regional cluster program exists. Such a cluster policy, financing, development and support program can provide a robust national infrastructure to support the development and scaling of new innovation clusters.
Spain, Norway, Canada, Mexico and China all have strong cluster programs, either at the state or federal levels. Countries like Ireland, Finland, Costa Rica have historically not had such public government programs in place, leading to a structural lack of common cluster practices.
Interestingly, the US has long had a federal cluster initiative, the RIC or Regional Innovation Clusters initiative. Operated by the SBA, or U.S. Small Business Administration, the RIC program has long supported clusters like Defense Alliance, Montana Bioscience Alliances, Montec and UAMMI. While, at the same time, the US is also seeing a number of state-wide cluster programs emerge, like Utah’s Cluster Acceleration Partnership (UCAP).
Today, most national or regional cluster programs run highly competitive application processes; In Canada five out of 50 Supercluster applications were accepted into the five-year program. Beyond the application process and financing, many programs offer strategy development, market development programs, dedicated project financing, cluster leadership training, cluster board development programs and a wide variety of cluster competence development.
Research has often highlighted the need for cluster management expertise and leadership skills in successfully developing new cluster initiatives.
Who starts new innovation clusters?
In our work with clusters around the world, we have identified eight profiles to answer the question, “who starts it”? These personas can be found in diverse location and countries around the world. They all share a passion for economic development and growth, but view the starting point and roadmap quite differently.
The Market Builder
“If we collaborate better, create a joint value chain, and build out the gaps we face; from growth financing, market access, regulatory policies, need for new technologies and better export support; I believe we can develop new markets at home and capture huge markets abroad”.
The Market Builder will be driven by and focused on developing the cluster to go out and capture emerging market opportunities globally. In these clusters, go-to-market programs, market analysis reports and export activities are natural early initiatives.
“Our industry has major structural challenges. We lack young people coming in, we lack good educational programs, we lack advanced R&D projects and we lack a good regulatory framework. These are challenges no one single company can fix. We need to connect and collaborate to solve these problems together!”
The Problem-Solver has deep experience in the industry and recognized the potential that can be unlocked if these problems are solved, and the industry grows.
“I believe Norway can become a global leader in life sciences – but we have to build out the industry at home and win markets abroad. Let’s get organized and capture the future opportunities!”
The visionary sees early opportunities years, or even decades, before others. He then manages to pull together a diverse set of actors to make this vision come to life.
The Government Lead
“In our region, we have great companies, but they are not always organized to capture new economic opportunities. In my role as a government or economic development lead, it is partially my job to get the key people around the table to develop early roadmaps to capture new industrial opportunities”
The Government Lead will often have a network, both locally and internationally, to spot early opportunities. These opportunities can both come from market demands or from new national programs opening up. The key is that he is able to connect the next group of people to move the early initiative forward.
“We have the potential to really build something exciting around Smart City, but we need to get the right companies to lead and the right people to join. Our small industry network can use our access into corporates, public and venture capital sources to pull the first outline of a Smart City Tech Cluster together”
The Industry Network is a loose network, often connected through personal relations more than any formal network. Across the network, there is a common aspiration to build out a more formal innovation cluster, knowing there will be significant challenges around early participantion and funding.
“We are competing on a daily basis; but there are some areas where it makes more sense to collaborate than compete. Let us talk about how we can solve common challenges and grow this industry 5X in the coming two decades. What would that take?”
The Executive Network is often the CEOs of the top four to five companies in an industry. Together, they recognize that industry level challenges like access to common data standards, sharing of industry data, access to venture financing and new MBA programs would be better solved if we worked together. The Executive Network will often see an instant business case and be wiling to fund the cluster’s early operations.
Economic Development Team
“Companies here are not innovating and growing fast enough. We need to develop more aggressive and innovative policies and programs to kick start new growth in the solar energy sector. Let’s develop a state-wide cluster program to drive new economic growth and create more jobs!”
The Economic Development Team has the best of intensions and often access to significant funding sources, but sometimes the team may struggle with getting industry interest and buy-in. Co-developing the cluster with genuine industry leadership is key to a successful outcome.
National Government Team
“Our country needs to accelerate our economic transformation. This requires government and industry to collaborate closely to rapidly build out the industries of the future. We have no time to lose as the global competition is intensifying and we need to compete faster to become the world’s leading semiconductor powerhouse”
In rare cases, the National Government team will lead the development of very focused innovation clusters. These are often linked to the key national industries, where the government is trying to improve the competitive position of its existing firms, while also supporting the transformation into the new technology s-wave. From oil and gas to clean energy and memory chips to system chips are two examples of this.
Two Cluster Journeys
While who starts it may be quite different, the motivation for and the early journey a cluster may take can also vary greatly. Based on our work over the past decade, we have developed the Cluster Journey Map to illustrate how different paths cluster may take, from the starting point to the end outcome. Often, this is a journey that should be measured in decades, not months or years.
Clusters can emerge from anywhere, sometimes coming from industry networks and leadership, sometimes from bold national policies. The following two mini cases illustrate how different clusters emerge and develop over time.
Western Norway, unable to pivot the cluster’s business model
One of Norway’s leading tourism clusters, based on the country’s west coast, got started in 2008, on the shared interest in growing the country’s tourism industry. Fully recognizing the upside in better collaborating and building out the professionalism of the industry, the cluster was shaped by an early industry network. Over time, the cluster developed a formal organization, funding model and strategy. After a decade in operation, the cluster faced the final stages of the national financing program. Unable the find a new business model, the cluster chose to close down its management and cluster operation.
South Korea Commits $450 Billion to Dominate Semiconductor Market
“Governments are deploying ‘wartime-like’ efforts to win the global semiconductor race”, read the May 17th headline on CNBC. With more than 150 companies involved, the government was pushing for a ‘transformational’ strategy to secure Korea’ future position in the industry.
Already a leading memory chip manufacturer, South Korea unveiled a bold national plan to build the world’s biggest semiconductor cluster by 2030. With a goal of attracting $450 billion investment from the private semiconductor chip sector including Samsung Electronics and SK Hynix, mainly driven by generous tax incentives and relaxed regulations, the government is pushing for global dominance with Taiwan, US and China, in the future chip market.
“Major global competitors are pressing ahead with massive investment to be the first to take the future market,” President Moon said in a speech. “Our companies have been taking risks and innovating as well and have completed preparations for tumultuous times.”
Known as the K-Semiconductor Belt strategy, the cluster will cover areas like advanced manufacturing facilities, new chip foundries, up to 50% R&D tax discounts, new support for ‘strategic technologies’, a new industry investment fund, new funding into university research and the training of 36.000 new high-tech workers in the chip industry. Ultimately, the initiative is expected to secure Korea’s global position in the chip race, double exports and create more than 100.000 new jobs by 2030.
A bold initiative like the K-Belt cluster would not have been possible with the leadership of a national government team. Aligning industry, academia, government around this strategy is required to be able to develop a response to the intensifying rivalry for dominance in the industry.
How are you building your innovation cluster?
From Sydney to Saudi Arabia, Lapland to Spokane leaders are finding new and better ways to develop future-oriented clusters of innovation. Some clusters may emerge over a decade, others are able to come together in a few months due to external pressures or specific funding opportunities.
Whether your cluster is being launched by a Market Builder, Industry Network or a National Government Team, all clusters are embarking on a lengthy journey, potentially a multi-decade journey of innovation, transformation and economic growth.
Research documents the economic impact of successful clusters. From early-stage entrepreneurship to late-stage scale ups, clusters can play pivotal roles in funding and scaling new high-growth companies. Modern government policies are showing more and more countries are leaning into national cluster programs.
The time to build better innovation clusters are upon us, to better compete and collaborate in the global innovation race.
How can countries accelerate national transformation and compete in new, high-growth, high-value industries? Increasingly, countries are turning to Innovation Superclusters to innovate, compete and win on the global stage. For governments, Innovation Superclusters can be a key tool in the post-pandemic recovery toolbox.
An emerging global phenomenon
Globally there are some 7000 innovation clusters. The EU alone has just below 3000 clusters. A country like Norway has 40. Denmark counts 14. Business clusters, according to traditional literature, are naturally emerging phenomenon, developing in places with high density of naturally collaborating firms and along traditional value chains of cooperating companies.
But in the last two decades, a new phenomenon har emerged, The Innovation Supercluster. Over the past six years, the author has been involved in shaping, developing as well as researching and studying these new Innovation Superclusters.
Today, countries like Canada, Denmark and Thailand have official national supercluster programs. While diverse countries like India, Australia, Oman, Serbia, Costa Rica, Mexico and Norway are in various stages of their understanding of and development of Innovation Superclusters. Increasingly, governments are starting to realize Innovation Superclusters can be a new and potent tool in the national innovation policy toolbox.
In this article, we will explore this new development and discuss how Innovation Superclusters can help countries and regions in their post-COVID economic recovery and growth.
What is an Innovation Supercluster?
Business clusters, or agglomeration economies, are natural phenomenon in many regions and to many economic activities. Clusters have been recognized in management literature since the 1890’s, but tracing back to the earliest days of human organized economic activities, as suppliers, customers and partners naturally would group together.
In most parts of the world, clusters are understood as geographical clusters, often around a specific industry or field. Media, high tech, life sciences, medical technologies, space, maritime, finance, seafood, energy; these all have strong geographical clusters that have evolved and matured naturally over time.
Today, we are learning to build, shape and design far more impactful clusters. We see these new clusters rapidly developing, often built around the industries of the future, helping regions, nations and national leaders navigate economic shifts and prepare for new economic growth in future growth industries. We call these Innovation Superclusters. Since the early 2000’s, the term Innovation Supercluster has been evolving, shaping ambitious political and industrial thinking in Asia, the Americas and Europe.
Defining Innovation Superclusters
Today, we define an Innovation Supercluster with six key factors.
Innovative engines of economic growth, by connecting 100’s of members and partners
A Supercluster will connect members, partners, stakeholders, startups, corporates and financing bodies to accelerate economic growth. Most Superclusters are membership-based organizations, some with zero membership fees, while others receive a significant portion of their financing from their 500+ member organizations.
Once established and connected, the Supercluster will develop shared go-to-market and business development opportunities for its members. The best Superclusters are experts at spotting and developing global business opportunities for its diverse member base.
Understanding that the Norwegian home-market would never be large enough to support a growing solar industry, the Solar Energy Cluster quickly established international business development teams and global growth programs. Taking its growing member base to East Africa and Singapore, the Solar Energy Cluster was able to develop several commercial market opportunities, in turn leading to large scale floating solar energy projects in Singapore.
Collaboration networks built around the industries of the future
Most Superclusters build out dense and tightly interconnected collaboration networks. These networks in turn become highways of new projects, new collaborations, mergers, acquisitions, and new industry-developing projects. The best Superclusters are actively developed around the high growth, high value industries of the future, like solar energy, digital, autonomous mobility and clean maritime solutions.
In Canada, the Digital Supercluster counts over 900 organizations from across Canada in sectors ranging from health care, forestry, education, heavy industries and software development. Under the leadership and guidance of CEO Sue Paish and the Digital Supercluster the member organizations aim to accelerate Canada’s digital transformation and make Canada one of the world’s leading digital nations.
Solving industry-level challenges & opportunities
Successful Superclusters work actively to identify, map and solve industry level challenges.
Consider the case of Norwegian NCE Seafood Innovation Cluster. The Bergen-based cluster has worked extensively to identify the barriers to industry growth, including sea lice, fish health and startup financing, then established large-scale collaboration projects to attack and solve said challenges. These strategic initiatives have led to the establishment of Aquacloud, an industry wide collaboration on sharing and analyzing data among industry players and competitors and the establishment of several finance for startup programs aimed at connecting national and international venture capital companies to the growing scale up ecosystem in the cluster.
Private-public partnerships, developed by design
Superclusters, identified in our research and work, are always private-public partnerships. These organizations are all part of the larger national economic transformation and development policy frameworks of their respective countries. Yet, to be successful, they need to be deeply anchored in industry leadership and genuine industry needs. This translates into an industry-led board and a strong business development focus.
In Canada, the Supercluster Initiative is owned and funded by ISED, Innovation, Science and Economic Development Canada. The national government will invest up to $950M over a five- to ten-year period into the five national Superclusters. This funding is expected to be matched 1:1 by industry. Early data indicates that industry will invest 1.4 – 1.5X the government’s funding amount. This mechanism allows government to provide catalytic capital, in turn activating significant capital commitment from industry.
Trust-based collaboration platforms
Over time Innovation Superclusters become trust-based collaboration platforms. New connections and relationships are built and nurtured in a cluster context.
Increasingly, Superclusters are building out startup-, scale up- and fast-track to IPO programs where they focus on introducing and connecting the entrepreneurs with professional investors and venture capital companies. This facilitates better connections and speeds up pace of the investment cycle.
This trust-based foundation is critical in connecting diverse actors across academia, policy, industry and capital around industry shifts and emerging economic opportunities.
Magnets that attract talent, capital, researchers and companies
Truly successful innovation Superclusters become strong magnets for their countries and regions. Accelerators, startups, investors, corporates, researchers all want to relocate to the leading Superclusters to better their chances of professional and personal success.
Consider the case of Cap Digital. French Supercluster Cap Digital is the country’s hub for digital transformation. With roots going back to 2006, the cluster has grown into well over 1200 members, completed more than 1600 R&D projects and secured well over $1,7BN R&D funding. Today, the cluster offers a highly attractive soft-landing program for startups and scale ups looking to get established in France. Increasingly, Cap Digital is a magnet pulling startups into the booming French tech ecosystem.
Canada’s Ocean Opportunity
Around the world, the ocean economy is gaining speed. From sustainable maritime shipping, solving the problems of ocean plastics, to sustainable aquaculture and clean energy, the ocean economy is becoming increasingly important. In fact, many countries are starting to realize they hold vast, untapped potential for innovation, growth and economic development in the ocean space.
Globally, around 2,5% of GDP comes from the ocean economy. For Norway, the ocean economy is over 25% of GDP. For the UK, the number is 2,7% of GDP. Yet for Canada, the ocean economy sits at just around 1% of the national economy. This is despite Canada having the world’s longest coastline and one of the largest ocean territories in the world.
With almost 350.000 Canadians employed in the ocean sector, contributing $36BN to GDP, Canada’s ocean economy is sizable, but with massive potential for growth. Developed right, it has the potential to become one of the key industries of the future for Canada.
Canada’s Ocean Supercluster
This was the background that led to the formation of Canada’s Ocean Supercluster, one of five national Superclusters in Canada. The Ocean Supercluster is eligible for up to $153M in national funding, to be matched 1:1 with industry funding, to accelerate Canada’s ocean economy.
Today, Canada’s Ocean Supercluster is an industry-led transformative cluster driving cross-sectoral collaboration, accelerating industry innovation, and growing Canada’s ocean economy in entirely new ways. Counting over 400 members from across Canada, the Supercluster has rapidly grown into a national powerhouse for the ocean economy.
It is widely recognized that the global ocean economy is expected to double by 2030, reaching $ 3trillion. For Canada, the Ocean Supercluster is one of the key vehicles to capture a larger share of these market opportunities. The Ocean Supercluster is expected to create more than 3000 new jobs and contribute well over $14BN in GDP impact over ten years.
Three Types of Clusters
While much of the literature has focused on clusters as one-size-fits-all, we have identified three distinct types of clusters. Certain national cluster programs have a similar cluster segmentation methodology in place, fully recognizing that clusters have different maturity levels and expectations of economic impact.
The first type is what we call Emerging clusters. Emerging clusters are typically young clusters. They are just starting out. Emerging clusters have a low number of members, frequently in the range of 35 – 75 members. They have a very limited resource base, with limited funding and often only one full-time cluster manager, supported by one to three part-time resources.
They naturally remain very local or regional in their focus. They tend to have very incomplete cluster structures, frequently lacking access to and involvement of key groups like private venture capital, startups, scale ups and accelerators.
By our estimates, between 3000 and 5000 of the global clusters could be counted as Emerging clusters.
Take the example of the Norwegian Ocean Autonomy Cluster. Located along the Trondheim Fjord, closely connected to the research division at NTNU, a university, the Ocean Autonomy cluster counts 45 members, currently not paying any membership fee (due to COVID-19).
The cluster was founded in 2019 and accepted into the national cluster program the same year. The Ocean Autonomy Cluster is Norway’s number one hub on ocean autonomy. Attracting members from industry, startups, scale ups, research and government, the cluster is quickly establishing itself as a leading global player in ocean autonomy.
Today, the cluster is developing the world’s first test site for autonomous ships. Here, in the Trondheim fjord, the cluster will develop and operate testing facilities and required infrastructure for autonomous vessels and operations.
Now, with a few years of proven results, the cluster is growing, attracting members and new financing. The Ocean Autonomy Cluster is likely to transition into the next category, Growth cluster, within one to three years.
A Growth cluster is a very different type of cluster. At this stage, the cluster management team has grown, often counting five to eight full-time employees. Membership has grown, frequently counting from a hundred to several hundred members, usually but not always paying members.
More importantly, by now the cluster is able to establish a significant number of industry collaboration projects. The cluster’s wider ecosystem is growing. The cluster is often able to identify and address structural challenges lacking in the wider ecosystem, like access to venture funding, market access into new, international growth markets or education of young talent for the industry.
At this stage, the Growth cluster will often start tracking its value impact, measured in contribution to GDP, new jobs created, or capital raised by its members. Interestingly, these clusters tend to be naturally expanding out of their local regions, often establishing first international partnerships and projects.
We estimate between 2000 to 3500 of all global clusters would qualify as Growth clusters.
Consider the case of Maritime Blue. Located in Washington State in the Pacific Northwest region of the US, Maritime Blue, or just Blue, has rapidly grown into an innovation powerhouse for the state’s ocean economy. Founded in 2018, with a mission to implement Washington State’s Strategy for the Blue Economy, Blue has grown rapidly to more than 120 members from across the ocean sector. Led by CEO Joshua Berger, with five full-time staff, three part time staff and a diverse board with members ranging from Amazon, Wärtsila, SSA Marine, Port of Seattle, Pacific Northwest National Lab and University of WA; Blue has established a more robust organization and capabilities.
Quickly identifying a significant capital gap in the industry, Blue launched a Maritime Blue Capital Landscape Study. This in-depth study of early-stage and venture capital going into the Pacific Northwest’s ocean economy revealed a structural funding challenge with comparatively little financing going into the state’s ocean economy.
The report led to the formation of Maritime Blue Innovation Accelerator, led by Accelerator Program Director Josh Carter. Now running its second cohort, Blue’s accelerator is just one of several strategic projects to help develop the blue economy in the Pacific Northwest.
Looking ahead, the cluster is likely to expand its project portfolio, establish more international partnerships and increase the focus on value creation and economic impact in the blue economy.
Finally, Innovation Superclusters are a very different category of clusters. Globally, we estimate less than 100 clusters would really qualify as an Innovation Supercluster.
In our work, we find Superclusters having several traits that are significantly different from the other two types. First and foremost, a Supercluster is recognized by the size and membership base, but even more importantly by the value impact or value creation in the Supercluster. We find that successful Supercluster have far higher value creation then their peers. They also tend to have a much larger export share and just naturally work and compete globally.
Frequently, Superclusters tend to have far more resources, both in terms of government funding, member financing, project financing and staff. Canada’s Ocean Supercluster counts 22 employees, while French Cap Digital has nearly 40 employees. The best Superclusters, over time, become strong magnets, widely recognized as global innovation hotspots in their field, drawing international capital, researchers and startups into the cluster.
Importantly, a country can only carry and support so many Superclusters. Our work indicates between three to ten Superclusters, beyond that it is unlikely to find sufficient industrial foundation or member support to truly drive a global Supercluster.
In October 2020, Denmark, with a long history of high-quality cluster policy and cluster program support, announced a new cluster policy. Titled, Innovation Power, (INNOVATIONSKRAFT 2021-2024), the new policy would support 14 clusters across Denmark. These 14 would effectively consolidate 42 previous Emerging and Growth clusters into a more ambitious Supercluster program.
Starting January 1st, 2021, the danish cluster landscape initiated a massive merger and consolidation process. The purpose behind the new program was to strengthen the innovation power in Denmark’s strongest and most promising industries and technology fields.
One of these new Superclusters is Odense Robotics. Now, under the new policy, Odense Robotics Cluster is Denmark’s national robot, automation, and drone cluster, with a goal to bring the entire robotics ecosystem together to speed up innovation and growth in the industry. With 20 employees, 300 companies in the robotics space and now five regional hubs, Odense Robotics is still just coming into its new role as a national Supercluster.
But, with significant experience behind it, the Odense Robotics Supercluster has established a clear valuation proposition; we strengthen your market position. This is backed up with five strategic focus areas; Develop new startups, speed up innovation, global growth, build new networks and increase member visibility.
It is still early, but everything indicates the revitalized Danish national cluster program will be able to deliver on its ambition to scale and support this new breed of Innovation Superclusters.
Superclusters vs. Ecosystems
Innovation Superclusters vs. ecosystems, how are they different?
The ideas around Innovation Superclusters challenge many of the traditional perspectives on clusters and clustering. Traditionally, in much of the literature, clusters were seen as the effect of a natural clustering or clustering effect of have many complementary and competing companies co-located in the same geography, with a high density of talent and closely link supplier-customer relationships; all factors driving the pace of innovation and, as a result, the competitiveness and economic outperformance of these regions.
Silicon Valley, Norway’s west coast oil & gas industry and Boston’s life sciences corridor are traditional examples of this this. These three examples all have a high degree of innovation capacity. They enjoy a very high clustering of complementary companies, education providers, talent and capital, and they are widely recognized as innovative regions on the global stage. They may have a strong clustering density. Yet, we suggest these are not Innovation Superclusters.
Innovation Superclusters, in our definition, are more actively shaped, built and led. They have formal operating organizations. They have active members, often paying a nominal membership fee. They have full-time employees, newsletters, web sites, annual reports and strategy documents. They develop and run large project portfolios. Innovation Superclusters are purpose-built national innovation engines.
Granted, Innovation Superclusters need to be anchored in a pre-existing industrial foundation. There has to be a certain, albeit limited, industrial foundation in place. This foundation needs to have a combination of talent, industrial leadership, entrepreneurs, research, anchor companies, technology base, market focus, innovation density and shared purpose; yet, and contrary to some academic research, we suggest that Innovation Clusters and Superclusters can be actively nurtured and developed out of a relatively thin foundation. Yet, with the right leadership, these clusters can quickly develop into thriving growth clusters or even Superclusters in less than a decade.
A Shifting Cluster Paradigm
Most clusters and cluster programs around the world are based on the Triple Helix framework. Originating in the late 1980’s, the underlying theoretical framework of the cluster was getting industry, academia and government to better collaborate. The Triple Helix was a key construct as societies emerged into the knowledge-economy.
That paradigm is rapidly getting outdated. Since the early 2010’s, a growing number of clusters and cluster programs have been upgrading and expanding their theoretical frameworks to including capital and entrepreneurs. Through work by Professors Torger Reve (BI Norwegian Business School and Scott Stern (MIT), we are seeing a shift from the Triple Helix to the Pentagram. This shift is both a theoretical shift in the underlying ‘idea of the cluster’ as well as a practical shift.
Today, any cluster needs to update its foundation to better include, involve, activate and serve startups, scale ups, accelerators, incubators, business angels, venture firms, PE funds and large investment companies. Welcome to a new cluster paradigm.
The Five Stakeholder Groups in an Innovation Supercluster
Innovation Supercluster are often said to be serving their members. Today, that membership base is rapidly expanding from three to five key membership categories.
Traditional industry players are often the largest and most active member group in a cluster. Most clusters try to be industry-led, translating into having active industry engagements, industry executive as Chairman of the Board and a large number of programs and projects serving corporate and SME members.
In most Superclusters corporate members are the backbone of the Supercluster’s direction, leadership and early financing.
Ever since the introduction of the Triple Helix, clusters were supporting an increasing number of knowledge-driven economies around the world. Here, access to and close collaboration with academics, universities, researchers and research program were seen as vital to the cluster’s success.
This still is the case as the role of academia is critically important to most Superclusters. In Canada, the Scale IQ Supercluster is funding a number of professorships to improve long-term research and education in the field of artificial intelligence.
Government, both on the national, regional and local levels are vital parties in a cluster. Connecting government agencies, national policymakers and local councils into the cluster can have a strong impact on the speed on innovation to establish testing sites, build out local accelerators and more.
Looking at cases like Thailand, Malaysia and Canada, visionary governments are often required to initiate, lead and support early national Supercluster initiatives.
Entrepreneurs are often considered the ‘new addition’ the clusters. Despite being recognized in earlier cluster literature, most clusters around the world have ‘forgotten’ entrepreneurs over the past decades. This is changing. Now, startups, scale ups, accelerators and incubators are actively signing up as new cluster members. In turn, the cluster is developing new projects, like Canada’s Ocean Startup Project or Spain’s Avaesen clean energy cluster with its numerous startup and scale up programs. Recognizing the unique needs of its early-stage members, a growing number of Superclusters are building out in-house accelerator programs, fast-track to IPO programs or investor readiness programs for their members.
For most clusters and Superclusters, ‘Capital’ is the most recent group of members and also the hardest to identify, engage with and serve. Most clusters we have worked with have truly struggled to identify member prospects, develop value propositions and activate this group of members. In one cluster we worked with, we identified more than 125 potential capital members, but the cluster was only able to engage with a small handful of them.
Fortunately, this is changing. In countries like Australia, Switzerland, Costa Rica, Norway, Denmark, Canada, US and France, private capital members, like business angels, business angel networks, venture capital firms, corporate venture capital firms and family offices are starting to get recruited into the clusters as active members. We have helped numerous clusters develop their cluster capital strategy and the global awareness of this fifth stakeholder group is rapidly rising.
Reinventing Norway’s national cluster program
Consider the case of Norway. Norway is widely recognized as having one of the world’s leading national cluster programs, with roots going back more than 20 years. With more than 60 clusters and smaller business networks across a national population of 5 million people, these clusters make up a large part of the national innovation infrastructure.
Despite the historical strengths in cluster policy, coming out of the 2014-2016 oil crisis, it became apparent that the cluster program was not sufficiently set up to help accelerate national transformation and take Norway into a post oil & gas economy.
The author was brought in in 2018 to help rethink and reinvent Norway’s national cluster program. Working with a very capable internal team, the new cluster paradigm was introduced.
Over the following three years the cluster program implemented:
From Triple Helix to Pentagram as the guiding cluster framework
Strong capabilities around scale ups and scale up ecosystem development
A series of initiatives around private risk capital, venture capital and fast track to IPO
A growing shift from traditional industries, often based on natural resource extraction to a growing number of industries of the future, often based on digital, renewable energy, health care and high-tech growth areas
Training and upgrading the internal national cluster team
A national cluster strategy platform
Advanced cluster leadership development programs
Cluster board development program
Much of this built around a new theoretical foundation and a vast series of visual strategy tools and canvases, all designed to help communicate, align and implement the new cluster paradigm in action.
Today, Norway enjoys a significantly upgraded cluster program and a growing number of clusters aspiring to becoming global Innovation Superclusters.
Why Clusters Exist; Grow, Transform, Build
In working with more than 120 clusters and cluster programs over the past years, a pattern has started to emerge. We call this pattern Grow, Transform or Build.
This pattern refers to the focus of the cluster and its members. Are we growing an existing industry? Are we transforming an existing industry? Or are we Building an entirely new industry? This may not always be apparent but is critical to the cluster’s strategic choices, long-term success and economic impact.
In Grow, the cluster is focused on expanding and growing the existing industry.
Here, the problem we are trying to solve is how we can continue to develop and improve an industry. Most likely, we are trying to grow the industry into new markets, apply new technologies faster, increase the collaboration and innovation, but underlying it all, is a shared ambition to reduce cost, increase margins and continue to grow the industry as-is.
In strategy, we would call this linear strategy or path-dependency.
This ‘grow’ reason is perfectly reasonable and may in fact be fueling most innovation clusters around the world. Here, there is little interest in and need for disruptive innovation or transformational business models.
A well-known example is the NCE Seafood Innovation Cluster. When it got started in 2017, the strategy was to 3X the industry’s value creation from NOK97BN to nearly 300BN by 2030. Following a strategy review, the cluster raised its aims and set out to 5X the value creation by 2050. This goal will be achieved, not by big bang disruption, but by steady growth, using new technologies into existing operations and removing the industry’s barriers to growth.
The ‘Grow’ model
Expand in new markets, often exports
Increase basic trust and collaboration among members
Next we have Transform. In this model, we are seeing an industry – or a cluster – go through significant, industry-level changes. We call these industry shifts. The raison d’etre is to help members, partners and the larger economy navigate and accelerate through these shifts – often happening at a rapid pace.
Today, most energy-related clusters are realizing they no longer operate under a ‘Grow’ model. Rather, they are all – willingly or unwillingly – going through a ‘Transform’ moment.
In these clusters, the problem that is being addressed is how we can find new markets, new business models, apply new technologies, develop new partnerships and invest in entirely new business areas – often outside the current core business.
The ‘Transform’ model
Navigate significant industry shifts
Accelerate transformation within member companies
Bring startups and corporates together to speed up innovation
A great example of the transform model in practice is the Norwegian Energy Solutions Cluster. Based in the Norwegian oil & gas capital of Stavanger, the cluster is actively helping its members and the industry-at-large navigate the industry’s energy transition to low carbon oil and gas and renewable energy. Under the leadership of former Shell executive Tor Arnesen as Chairman of the Board and former Halliburton Director Egil Aanestad, the cluster has been growing into a transformative force for the energy industry. Working actively to connect and collaborate large companies and emerging startups, the Energy Solutions Cluster sees itself as a bridge builder, connecter and accelerant to help its members and partners better understand, navigate and strategize through the energy transition.
Build is an entirely different category. In Build, the cluster is trying to build out industries that do not yet fully exist. This can be ocean autonomy solutions, deep sea mining, offshore floating wind energy, clean maritime solutions or any number of industries still considered to be on the horizon.
Several years ago, working with the Norwegian Solar Energy Cluster, few people took the cluster seriously in its first year. Surely, there was hardly space for a solar energy industry in Norway, not to talk about the acute lack of sunshine six months a year. Under the strong leadership of founder Trine Kopstad Berentsen, the cluster aimed for global growth, brought its early members into new market opportunities overseas and quickly built out the early pieces of a new growth industry for Norway. Today, Norway enjoys a booming solar startup scene, an active solar M&A landscape and a thriving solar energy IPO market. Much of this can be accredited to the early work of the Solar Energy Cluster.
The ‘’Build’ model
Develop a new industry from scratch
Very limited number of members early on
May struggle with funding and support in the early phases
Consider the Queensland Robotics Cluster. With an intent to accelerate robotics in Australia, the cluster has been actively shaping and building a vast innovation cluster to build out Australia’s robotics industry. Founded in 2019, by Australian Andrew Scott, the cluster has been able to attract a significant number of startups and scale ups, as well as heavyweight venture capital investors like Softbank and Hax. Yet, the industry is still very early in its development. Looking ahead the cluster and its members see a significant potential to build out a strong robotics industry, generating tens of billions of dollar in domestic and export revenue, while creating new high-value jobs across Queensland and Australia.
The ‘Grow’ model
The ‘Transform’ model
The ‘Build’ model
– Expand in new markets, often exports¨ – Efficiency-driven innovation – Increase basic trust and collaboration among members
– Navigate significant industry shifts – Accelerate transformation within member companies’ – Bring startups and corporates together to speed up innovation
– Develop a new industry from scratch – Very limited number of members early on – May struggle with funding and support in the early phases
We believe it is critical for both cluster leaders, industry leaders and policymakers to understand the lens they bring to the cluster. Are we aiming to grow and support an existing industry? Well, then the cluster program will need to align with much of the existing industrial policies. Are we hoping to transform legacy industries and introduce a significant level of innovation and reinvention? In that case, we will need bolder and more daring policies and programs. Projects, programs and initiatives will need to match the transformational need in the cluster’s membership base. Or are we trying to build out entirely new industries, industries we may not have much foundation for or pre-existing capabilities in? in that case, more startups, scale ups, more international partnerships and vast amounts of venture funding may be required.
How Innovation Superclusters Get Started
A question we frequently get asked is ‘who starts it?’ and ‘how does Superclusters get started?’ Looking globally, we have been able to identify four unique ways Superclusters may get started.
Research project shines a light on what already exists. Research helps drive attention and boost investments into the area. Research alone is insufficient to drive the development of a Supercluster program, but it can be a key factor in drawing attention and kick-starting the process. In Norway, going back since 1991, the publication of three decades of research on economic development, led by Professor Torger Reve has greatly helped develop a national appreciation of the value of Innovation Clusters.
In Eastern Europe, the author is supporting multiple early-stage research projects to identify potential Supercluster themes.
Lone Hero, Evangelist
Early Supercluster initiatives are most often driven by a small band of enthusiasts with funding from sponsors, corporates, and grants. We find this to be a very common starting point, with enthusiasts like Bill Tam in British Columbia, Trine Kopstad Berntsen in Norway being highly influential in getting Supercluster initiatives of the ground.
Often, these lone heroes start small, then they connect with industry and later engage governments to support and lead with policy and national programs.
Bottom-Up, Industry led
The third option is initiated and funded by the industry and key industry partners. To truly get the ball rolling and secure industry interest, a bottom-up, industry led working group is a powerful way to get an early Supercluster initiative of the ground.
The NCE Seafood Cluster got started as four industry CEOs got together, realizing it made perfect sense for them to collaborate on certain industry-level challenges. Over time, the cluster grew, hired its first CEO and joined the official national cluster program. Since 2019 the Seafood Innovation Cluster has been aspiring to become a global seafood Supercluster, but the first few steps were four industry CEO’s aiming to improve industry-level collaboration.
The fourth category is initiated and funded by the Government; usually by the Ministry of Finance, Ministry of Science, Innovation and Trade, economic development organizations or national innovation agencies.
In September 2015 BOI, Thailand’s Board of Investment, developed and launched a national Supercluster program. The program supported six national Superclusters and two Industrial Clusters. Amongst the six, were Superclusters for Digital, Food, Electronics and automotive.
Today, we see many governments and government agencies in the Middle East looking into Supercluster Programs to accelerate national transformation, notably in the areas of post-oil & gas industrial development.
While the government-led way of starting a Supercluster Program can be successful, it is vitally important to include and engage with industry and the wider ecosystem early and frequently. Genuine ecosystem engagement is a key part to any Supercluster strategy process.
The early beginnings of Malaysia’s Supercluster Initiative
Working in Malaysia in 2017, we got the chance to follow the rapid development of the early design of Malaysia’s Supercluster program. The lone hero was then-MaGIC CEO, Ashran Ghazi. He quickly saw the potential in developing a national Supercluster program to accelerate the development of Malaysia’s startup and innovation ecosystem.
Over a period of months in the fall of 2017 he and his team engaged with key industry leaders, national venture funds, senior leadership in sovereign wealth funds and innovation leaders across a number of industries, in the process building up support for the idea of a national Supercluster program.
Next, engaging with key ministries and decision makers at the ministry level, the team was able to connect the Supercluster program to a series of national economic policies and policy goals.
In December 2017, at the Global Entreprenurship Summit in Kuala Lumpur, Malaysia’s national Supercluster program was launched by the then-Prime Minister Najib Razak.
The program was designed to be built around five key industries of the future for Malaysia; clean energy, digital health, agriculture technologies, mobility and smart city. Following the 2017 launch and the subsequent election, the new government decided to review the project in line with their new economic development policies.
The Role of Government
In some of our earlier writing on the topic we have stated ‘visionary government required’. This statement still holds true. Around the world, we see no Innovation Supercluster Initiative that is not actively supported or even led by the government.
Yet, at the same time, the role of government is often misunderstood. In many places the role of government is often viewed as a financing source, as a bank. That would be a mistake. In our experience, government can take on a much bigger role or rather a much smarter role.
Checklist for the role of government in Innovation Supercluster initiatives
Framework Create the national Supercluster policy and framework.
Policies Align national economic development policies with the Supercluster program.
Selection Create the mechanisms for selecting, evaluating, and pushing the individual Innovation Superclusters. The competition between Supercluster candidates is a key success trait.
Financial Provide financing, up to 50% of total budget. The remaining amount to be matched by industry.
Training Provide strategic support, training, networking opportunities and leadership development for cluster staff and boards.
Champion Be a champion for the Superclusters and the new economic growth opportunities they create.
Canada’s Innovation Supercluster Initiative
Consider again the case of Canada. Starting in 2016, visionary industry leaders like technology entrepreneur Bill Tam in Vancouver and government leaders like Minister Navdeep Bains increasingly recognized the need to rethink Canada’s global competitiveness. There was a growing awareness of the need to shift policy to help accelerate Canada’s national transformation. With an extensive part of the economy based on traditional resource extraction industries, like oil sands, forestry and fishing, Canada was falling behind in the larger knowledge- and technology-driven industries.
Some of the challenges that were recognized included:
How can Canada shift the economy from natural resources (forestry, oil, oil sands) into more high-tech?
How could Canada develop more jobs in high-growth, high-value industries?
How can Canada accelerate the growth of new digital companies?
How can the Canadian ecosystem nurture more unicorns (early stage companies valued at more than $1BN)
How can Canada better compete – and win – in the global innovation race?
This led to the early formation of the ISI – Innovation Supercluster Initiative, initiated by industry leaders, it grew into a massive, national program, led and championed by Navdeep Bains, Minister of Innovation, Science and Industry (2015 to 2021).
When the program first launched, 50 consortium applications were received from across the country. Out of these 50 nine were shortlisted for final consideration. These included early consortium proposals like the Mobility Systems and Technologies for the 21st Century Supercluster(candidate), based in Quebec and Clean, Low-Energy, Engaged, & Remediated (Mining) Supercluster (candidate), based in Ontario.
Through an intense application process, these nine were reduced to five winning candidates. The five winners were announced in February 2018 and kick-started one of the largest economic policy programs in modern Canadian history.
Aiming to unlock Canada’s digital economy, the Digital Supercluster focus on technologies like virtual reality, data collection, advanced analytics, digital health and quantum computing. The Supercluster was quick to launch large-scale collaboration projects on digital twins, precision health and data commons. Today, the Supercluster counts more than 900 members from all over Canada.
Based in the Prairie Provinces, the Protein Superclusters mission is to transform Canada’s agriculture and food processing sectors. Key initiatives include increasing the value of traditional crops, while also developing plant-based meat alternatives. The Supercluster is actively developing new go-to-market programs, covering markets like North America, Asia and Europe, through its Farm-to-Fork Programs.
Advanced Manufacturing Supercluster
Advanced robotics, 3D-printing and industrial digitalization are key focus areas for the Advanced Manufacturing Supercluster. Based in Ontario, the Supercluster quickly set up projects to bring more advanced technologies into existing industries, while also developing the startup ecosystem. Long term, the Supercluster’s mission is help develop Canada into a world-leader in advanced manufacturing. To date, the Advanced Manufacturing Supercluster has attracted more than 3100 members from across Canada.
Scale AI Supercluster
The Scale AI Supercluster is pulling diverse stakeholders and sectors together to apply technology and build intelligent, AI-driven supply chains. The Supercluster has developed vast collaboration projects on AI-adaption, AI commercialization and scale up ecosystem to accelerate Canadian AI startups and scale ups. Scale AI Supercluster has partnered with 24 incubators and accelerators with the goal of scaling more startups in the space.
Based in Halifax, the Ocean Supercluster aims to supercharge Canada’s ocean economy. Under the leadership of CEO Kendra MacDonald, the Supercluster has launched a series of projects like Technology leadership, Accelerated Ocean Solutions Program, Innovation Ecosystem and Ocean Startup Project, in the process establishing itself as one of the leading ocean Superclusters globally.
Today, counting more than 4.600 members across Canada and 285 projects launched in just four years, the Canadian Innovation Supercluster Initiative has quickly established itself as a bold innovator and role model for other countries aspiring to reinvent economic policies. Over the coming decade, the initiative is expected to create a total of 50.000 new, high-growth, high-value job and contribute $50BN to GDP
Critical voices have suggested that the bold effort is falling behind the plan to create value, but the jury is very much out on the long-term value impact of the Innovation Supercluster Initiative.
Economic Recovery Through Innovation Supercluster Programs
Today, as governments and industry leaders around the world grapple with economic recovery post-COVID a well-designed Innovation Supercluster Initiative can be a key policy tool to unlock new economic growth and accelerate national transformation.
The pandemic has boosted many digital industries, while devastated industries like aviation and tourism. At the same time, it has also sped up the development of newer industries like clean energy, life sciences, digital health and micro mobility. Coming out of the pandemic and into recovery mode, it is up to leaders to select the right policies and programs to best compete for the future.
Three questions industry and government leaders should be asking themselves:
What are our high-value, high-growth industries of the future?
How well are we competing and winning in these key industries today?
What policies and programs do we have in place in to accelerate our economic development in a post-COVID recovery?
Competing on system-level innovation
Nations compete. Regions compete. While many leaders tend to focus on innovation and new growth at the company-level, we suggest thinking more at the system-level. This is where Innovation Superclusters come in. Innovation Superclusters allow you to pull in all stakeholders, create a trust-based collaboration platform, identify shared industry-level challenges and go after shared market opportunities in a global innovation race.
Whether you need to grow existing industries, transform legacy industries, or build entirely new high-growth, high-value industries; Innovation Superclusters may very well be the right tool for the job and help unlock new growth and accelerate national transformation.
Christian Rangen is a strategy advisor, faculty and serial entrepreneur. He works with governments, clusters and companies to accelerate transformation and find new economic growth. He is currently developing a global strategy platform with Strategy Tools. Connect with him on Twitter @Chrisrangen.
Much of the traditional cluster theory has been developed by Michael Porter, Paul Krugman, Henry Etzkowitz and Loet Leydesdorff, starting in the late 1980’s. In more recent times, academics like Torger Reve and Scott Stern have helped update and shape a more entreprenurial approach to cluster thinking and cluster theories. The pentagram framework is based on research at MIT and BI, then expanded upon in the context of Innovation Clusters.
Innovation clusters can be both naturally emergent or built. EU alone has 3,000 clusters, most aligned with an academic institution. Often very local by design and focus. Most are built around supply chains and/or the Triple Helix framework. Small in size, limited funding. Often relying on project funding.
Innovation Superclusters are massive innovation systems, built around a single theme (i.e. solar energy or digital health). Designed around industries of the future, they are expected to generate significant value as they develop. Built around the five stakeholder groups, often clustered closely together. Has a formal organization, board, CEO, staff, budget and annual reporting.
Innovation ecosystems are thriving hot spots, often focused on entrepreneurship, capital & corporate innovation. Mostly emergent but supported by government policies. Universities play a critical role. Will encompass multiple themes, i.e. tech, hardware, AI, mobility, health tech, & software. Does not have any single formal organization. Does not have a CEO.
National (or Regional) Cluster Program
A cluster program provides the national context, policy and program to support and develop clusters. Serves as the bridge between government’s industrial policies and single clusters. May include program design, capacity building, co-financing, selection and oversight of the various national clusters.
Accelerator Scale Up Program
Dedicated programs to help early-stage companies grow. Often 3-month format. Will usually invest $150K, get 7-10% equity. Can be held on-site or online. Often funded 100% by private investors. Y-combinator, Katapult Ocean and Hatch are great examples.
Program to help big companies innovate. Build a new business unit in just five days. Helps established companies identify and capture new market opportunities. Typically costs $30.000 – per program. May be funded 50% – 50% between private and public.
Creative Innovation Hubs
Office spaces, innovation parks, co-working space, incubators or creative lofts. These physical spaces will very often be members of one or multiple innovation clusters. These hubs are single buildings or large parks with labs, offices, test facilities and more. Mostly a real estate investment case.
Large scale innovation areas in cities and regions. Often developed by long-term public planning and intervention. Frequently located in amenity-rich residential and commercial environments, often near universities. Clusters might be located within Innovation Districts.
Found at or near to universities, research parks tend to practice a more closed approach to innovation. Most Parks will also have a Tech Transfer Office (TTO) to help commercialize the research. In China, Zhongguancun Science Park hosts 19 clusters and 65 Unicorns.
Venture Builder Program
Dedicated program to start and build new companies in selected industries. X2 Labs Blue Revolution started 10 new ocean startups in 4 weeks. Anyone can apply. Rigorous selection. High-intensity program. Build and launch new companies in weeks and months. Funded 100% by private investors.
https://i0.wp.com/www.engage-innovate.com/wp-content/uploads/2020/12/2020-YEAR-IN-REVIEW.png?fit=750%2C500&ssl=1500750Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2020-12-31 13:37:492021-01-01 12:20:53Engage // Innovate: A Look Back at 2020
Over the past months, Engage // Innovate has been working with the South Island Prosperity Partnership, the City of Victoria, the Association of BC Marine Industries and Urban Systems to lay the groundwork for the development of an ocean economic ecosystem on Southern Vancouver Island and Pacific Canada.
Building the Ocean Futures Hub & Cluster in Pacific Canada
With the longest coastline in the world, Canada has access to an array of marine resources. With the world rapidly shifting to a more sustainable model known as the blue economy, the Ocean Futures Hub & Cluster (OFH&C) will be a vehicle for industry leaders, entrepreneurs, researchers, governments, and investors to accelerate Canada’s position in the global ocean technology sector with a blue economy focus.
By 2030, the Ocean Futures Hub & Cluster (OFH&C) aims to become a global ocean technology hub, create new high-value jobs in British Columbia and transform ocean industries for the 22nd century.
Over the past months, Engage // Innovate, together global accelerator Hatch and Canadian firm Urban Systems, has been supporting the development of the business case, cluster framework and feasibility study of the OFH&C through research, facilitation and custom designed tools.
Working virtually with over 120 stakeholders towards a common goal
Together with Urban Systems and HATCH, Engage // Innovate engaged and worked with over 120 stakeholders to co-design the OFH&C concept – completely digital, across borders.
Split into 10 smaller breakout groups, the ocean and marine leaders worked through strategic questions and tools to discuss the strategy, structure, governance, financing and key strategic initiatives for the OFH&C, as well as the current challenges and future of the blue economy in Pacific Canada.
The stakeholder engagement process identified several key factors, which has been worked into a report released in December by Urban Systems.
Helping government leaders accelerate national transformation
Over the past ten years, Engage // Innovate’s team has helped government leaders accelerate national transformation, develop new high-growth industries, build Innovation Supercluster Programs and transform economic growth.
Recognized as a global authority on Building Innovation Superclusters, the Shifting Energy Arena and how to drive corporate transformation, Engage // Innovate currently has active projects running in the Americas, Asia, Africa, Middle East and Europe. Despite the challenges of international business travels, all programs are delivered on schedule using a highly innovative blended approach to secure a successful project delivery.
https://i2.wp.com/www.engage-innovate.com/wp-content/uploads/2020/12/ofih.png?fit=3801%2C1798&ssl=117983801Jolene Foo-Hodnehttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngJolene Foo-Hodne2020-12-31 08:09:002021-02-09 08:15:13Building the next generation ocean cluster in Western Canada
In our work with corporate transformation, we have identified five distinct leadership scenarios. In this blog post, inspired by the 2020 Drucker Forum’s ideas on leadership everywhere, we explore these five scenarios and what “leadership everywhere’’ might mean for large scale strategic transformations.
She was not the obvious leader in the room. As a female CFO, she was not the obvious go-to-leader, but it was very clear once you got to know her and the work she did, that for all practical purposes, she was the one that was driving the transformation at this oil and gas service company.
When the transformation program had first started a couple of months ago, everyone looked to the CEO, a long-term industry executive, to own and lead the transformation. Neither the staff nor the board was particularly engaged in, nor did they see the need for transformation. When my team and I was first invited in, we quickly got the impression that the CEO was leading the strategic transformation process, with the rest of the organization following many steps behind him.
But working with the management team up close, following the interactions with the board and, notably, seeing the interaction with financial markets, it became clear to us that the CEO was not the one in charge. It was, if you will, a strategic CFO that was leading the transformation journey. Together with the internal strategy team, she was clearly out in front, taking the lead to reinvent the firm.
It was a powerful reminder that transformational leadership does not always sit at the top of the hierarchy. Transformational leadership can be found everywhere.
Over the last 10 years, we have worked extensively with large-scale corporate transformation in industries and geographies around the world.
While the traditional literature may imply the big man CEO theory with a CEO firmly leading the transformation, our experience has been that there are, in fact, five distinct and quite different way of leadership or organizational power dynamics that create and shape successful transformations.
In this blogpost, we will explain these five and share our insights on them. In doing so, we will follow the Transformation Starters Map, a visual tool that was developed during the research on Building the Transformation Company.
The Transformation Starters Map helps visually identify where transformation starts, who leads it and who is actually in charge of leading the transformation successfully. It allows the CEO, strategy leader or a consultant to map out and identify who is driving – and who is blocking – the transformation.
The map is built on nine groups, that all can have critical roles to play in leading a transformation.
In our work we have often come across various scenarios. They may not be clearly visible at first, but they always emerge over a period of time. Five of these scenarios on transformational leadership is mapped out below.
Scenario One: The Existing CEO
‘’It should be illegal to focus (only) on the core business’’, a favorite slogan of CEO of Lyse, a Norwegian utility-turned-technology company.
Under the two-decade leadership era of Mr. Eimund Nygaard, Lyse has transformed from a traditional local utility to a rapidly growing energy- and technology company. Nygaard has been leading the transformation by following a structured approach to innovation, new market opportunities and making strategic industrial deals. One of the secrets to his success has been the collaboration and engagement with the board during these two decades.
This is a common scenario, with the CEO clearly leading the transformation. He is working well with the management team, and collectively they involve the board in the transformation process. Based on frequent interaction between the management and board, the management team engages the wider organization throughout the transformation journey.
This scenario follows the traditional CEO-led, top-down approach to transformation, possibly with the board waking up late to the need for transformation.
In our experience, external orientation and an early recognition of industry shifts is a core capability in CEOs who are able to reinvent the firms they lead.
Scenario Two: CFO Leadership
As suggested in the opening story, in some companies we see the CFO leading the transformation, even to the extent of leading the entire ‘future-oriented’ part of the management team’s agenda. The CFO also takes the point in activating and collaborating with the strategy team.
This is a rare kind of strategic CFO, being the connecting part between the management team and internal strategy team. Over the past decade we have had the pleasure of working with this strategic CFO across several industries, over time growing to really appreciate this transformational leadership.
One benefit; it is much easier for the CFO to understand the full financial implications of introducing the Core-Growth-Explore framework. Niel, one of the CFOs we worked with in Denmark, was instantly able to assess both cap.ex (capital expenditure), op.ex (operational expenditure), impact on revenue, impact on margins and finally impact on market cap when we worked through various business model portfolios for his firm.
One challenge; in this scenario the CEO if often more in the background, sometimes causing a potential conflict on who is actually in charge.
Scenario Three: Bottom-Up Leadership from Employees
When Norwegian energy giant Equinor announced a range of open positions in their new New Energy Solutions unit, the small team was flooded with internal applications. Across the company, the new positions in the fields of solar, battery and offshore wind generated a massive buzz. But the high interest did not come as a total surprise.
For years, the conversation had been bubbling up. ‘What should we do with renewables?, ‘what is our position in the energy transition?’, ‘how do we position ourselves for an accelerating energy transformation?’, these questions had been surfacing in small pockets across the firm for years, both forcing and inspiring a larger conversation across the firm.
We call this phenomenon bubbling up organizational conversations. In this scenario, the transformation journey really begins with a 1000’s of questions being asked, and small conversations being had. Over time, this conversation spreads from the frontlines, to managers and eventually finding its way to the management team and up to decisionmakers.
To quote Professor Rita McGrath, ‘’snow melts at the edges’’ , and the people at the edges are also the leaders that are driving the bubbling up scenario.
Granted, this scenario can take years to emerge and may not be suitable in more formal high-power cultures. But in highly innovative, decentralized organizations, the bubbling up transformational leadership relies on leaders to emerge from anywhere.
Scenario Four: The Board Selecting a New CEO (Internal)
When Equinor was recruiting for a new CEO recently, the board was left with four candidates, all internal. When one of the candidates, Mr. Anders Opedal was announced as the upcoming CEO, the media reported ‘’It was Opedal’s presentation to the board of directors about a clear reinvention of the company in the direction of greater renewable investment that made an impression on the board. The leading candidate at the time, Mr. Lars-Kristian Bacher, placed a greater emphasis on a gradual transition in line with the company’s current strategy.’’
In this scenario, the board takes a leading role in driving the transformation journey. Transformational leadership starts with the board. In hiring a new transformational CEO, the board puts a new leader in place to drive a top-down transformation.
In the case of Mr. Opedal, he is currently working with a large transition team. The team is a larger-than-usual number of company leaders, supporting the new CEO’s transition phase into the official CEO role later this year.
Scenario Five: Activist Investors Changing the Board, Recruiting an Outside CEO
“The most feared investor in America” has Twitter’s CEO in his sights, read the headline on the Verge. Activist investor Elliott Management Corporation had just taken a 4% stake in the social media platform and was pushing for a new CEO.
Step one, assemble a new board. ‘’Elliott Management quickly put forth four new nominees for the company’s board, with the goal of replacing Jack Dorsey as CEO’’, leading to the headline ‘’Jack Dorsey is in for the fight of his life’’.
With Twitter stock wildly underperforming other social media platforms, investors had had enough. It was time for a CEO change. It was time for an activist investor.
In a December 2019 letter, investor and marketing guru Scott Galloway penned a letter to the board of Twitter. “To be clear, my primary objective is the replacement of CEO Jack Dorsey,” Galloway said in an open letter to the company’s executive chairman, Omid Kordestani. “However, your firm’s weapons of mass entrenchment include a staggered board that may force shareholders to seek to replace other directors, including yourself, first.”
Welcome to activist investors. When leaders – and boards – do not perform and transform, the stage is set for the activist investor. The transformational leadership is violently different in a scenario of activist investors forcing through an early transformation.
Often, we see the activist investor replacing the entire board before swiftly recruiting a new, outside CEO. This CEO will come in, expecting to change most if not all of the management team, needs to engage with the wider organization, the frontline staff and the lower ranks of the company. She may engage with operational issues on the frontlines, not strategizing in the headquarters, all a part of engaging the wider organization in the accelerated, investor-initiated transformation journey.
The activist fights over Darden Restaurants and Red Robin are great illustrations of the transformational powers of an activist investor, all the way down to how the new management spends weeks on the frontlines, transforming customer experience, employee engagement and removing internal blockers by actively leading through the transformation.
While this scenario is not frequently recognized in the leadership literature, there is little doubt of the power and impact of the right activist investors. But, as in the case of Blockbuster’s demise, an activist investor is not guaranteed to lead to a successful transformation.
Despite popular ideas of a visionary, strong-willed CEO, we find there are multiple kinds of leadership to drive a successful transformation. In this blogpost we have identified five such scenarios.
In our work with transformation in organizations around the world, we frequently find that transformational leaders can emerge from anywhere. From strategy leaders in Brazilian unicorns, to young managers in oil & gas to middle managers in Asian utilities, transformational leadership does not have to start at the top, in fact, it frequently does not.
As we strive to gain a better understanding of successful transformational leadership, we hope that the ideas and visual tools shared can help companies create more successful transformational leaders for the future. Looking ahead, we are firm believers that truly transformational leadership can and will be found everywhere.
About the Author
Christian Rangen, founder and CEO of Engage // Innovate and Strategy Tools – the Modern Strategist’s Platform, is a strategy and transformation advisor to companies and leaders around the world.
He has developed more than 120 visual strategy canvases helping leaders everywhere solve their top strategy and transformation challenges. His upcoming book on Building the Transformational Company is out in 2021.
Globally there are some 7000 innovation clusters. In many countries, these clusters fuel a critical part of the national competitiveness, future growth industries and a large percentage of GDP. Yet, leadership in these critical innovation networks is poorly understood and little researched. Leading up to the 2020 Global Drucker Forum, we explore the topic and challenges of leading in an innovation cluster networked organization.
Clusters can play a significant role in shaping national growth industries and accelerate national transformation. Countries like Denmark, Norway, Germany and Spain has invested significantly over the past few decades in building out high-performing national cluster programs. More recently, countries like Canada, Thailand, Malaysia, Saudi Arabia and Costa Rica has started exploring future-oriented cluster and Supercluster programs.
Today, as many countries face an urgent need to transform their fossil energy-based economies, clusters can play a crucial role in developing the new high-growth, high-value industries of the future. In successful clusters and cluster programs, clusters become the central point where government aspirations, public policies, industry leadership, corporate transformation and innovative ecosystems meet and interact.
Leading and Organizing Clusters
While clustering, the natural evolution of co-locating naturally interacting companies, often is a naturally emergent process, Innovation Clusters are purposefully built, designed and led over time. They are legal organizations, with boards, annual budgets, reporting and operating staff. Yet, these Innovation Clusters follow an interesting mix of organizing principles. It is fascinating today, to look at how clusters are led in light of Peter Drucker’s teachings on leadership.
In clusters, we genuinely need to see ‘leadership everywhere’, ranging from the informal powers of a board member, to the influence of a working innovation group manager. Contrary to most traditional organizations, with top-down power structures and hierarchies, clusters function much more like informal ecosystems with distributed leadership and relationship-based, networked leadership principles. One of us frequently call successful cluster leadership a ‘superhuman task’, due to the distributed power principles found in most cluster systems.
Case: Offshore and Energy Wind Cluster
Consider the example of the Norwegian Offshore Wind Energy Cluster. This cluster is now taking a central leadership role in shaping the Norwegian industry for floating offshore wind energy on the global stage. With the aspiration to become ‘the strongest supply chain for floating offshore wind worldwide’ the cluster could help unlock billions in value over the coming decades.
While the ‘market opportunities’ of offshore wind energy has been on the horizon for years, the cluster has now taken a critical role in pulling government interest, government policies, industry interest and market development together into a single, coherent cluster strategy. Founded of the idea of knowledge-transfer from oil & gas to new, high-growth industries, the cluster is designated a critical part of building out Norway’s economy post-oil & gas.
Today, the Offshore Wind Energy Cluster is critical to building out global market opportunities, establishing a better collaboration culture amongst private-public stakeholders, establishing stronger value chains and accelerating industry-level innovation for decades of growth in the global market for offshore wind energy.
Yet, clusters come with some unique organizing principles, balancing collaboration and competition, full-time employees (few) with active members (many) and formal roles (few) with informal power influence (many). The cluster has a general assembly (annual), Board of Directors (ten), CEO (one), Employees (four), Innovation Working Groups (nine, seven depicted below) and a total membership base of 173 members, and counting.
With that kind of collaborative, member-led organizing model, a number of new questions of leadership and leadership principles emerge.
What is an Innovation Cluster?
An Innovation Cluster is a public-private, non-profit, membership organization. These clusters are built and developed over time, typically with a mix of public and private financing. Most clusters are organized around a specific domain like, Smart Mobility, AI, Fintech, Clean Energy or Aquaculture. The best clusters are built around the key, national growth industries, what we often refer to as Industries of the future.
From Five to Eight Levels of Leadership
In our work with Innovation Clusters and Superclusters around the world we have studied leadership practices, interviewed dozens of cluster CEOs and board members and observed numerous cluster CEOs in action. This work has led us to conclude that leading in clusters, networks and ecosystems is a fundamentally different practice of leadership that our traditional management models. Grappling with a theoretical framework, we landed upon leadership expert and business school faculty, Mr. Morten Emil Berg’s Five Levels of Leadership (note, one of us have taught this framework extensively in Executive Leadership programs).
Building on Mr. Berg’s Five Levels of Leadership, we realized there were three critical components missing for successful cluster leadership. This led us to build upon and expand from five to eight levels of leadership, adding Networked leadership, Influencing Leadership and Member-focused leadership.
Describing the Eight Levels of Leadership
The leader must build a large coalition of industry leaders, government leaders, politicians, ecosystem builders and unite them around a strong vision for the cluster. A cluster CEO has little formal power over these stakeholders and must use new and innovate approaches to achieve the herculean task of co-creating a shared vision and a shared ambition across the entire cluster landscape.
In our research, we find all successful cluster leaders to emphasize the importance of the network and having access to the right networks. Either directly, or through their key stakeholders (often, the Board of Directors at the cluster level), the leader fully recognized the critical importance of working in and across personal networks to build and scale the cluster.
Just like Drucker is quoted, “Strategic planning is the first priority of the leader”, a successful cluster leader needs to work strategically. This is often echoed in our findings. “A good cluster leader has to be strategic – always”. The statement came from the CEO of one of Norway’s largest innovation clusters. The cluster had a roadmap to 2050, with a target to 5X the industry’s value impact. To achieve this mission, the CEO knew that strategic thinking, sensing the landscape across the entire industry, from CEOs, policymakers, educators, researchers, startups, investors, corporate innovators, and regulators was of the outmost importance. A great cluster will develop a bottom-up long-term strategy, define strategic areas and targets, future business models (critical), KPIs, roadmaps and a culture of execution at all levels.
How strong influence does the cluster leader have in her network? With hundreds of members, many of them industry CEOs, Professor and policymakers, the leadership role changes fundamentally from “boss” to “influencer”. Soft power, diplomacy, nudging and invisible influence can be far more important than any formal decision making. In our research, we found that few cluster leaders were fully aware of this area, acting rather like they were operating within formal, hierarchical leadership structures. Our findings are very clear; they don’t.
Most leaders we found struggle through this, experiencing an overload of reporting, systems and reviews, often caused by the financing and requirements by the national cluster programs.Fully in line with Drucker’s ideas on leadership, we find that the administrative tasks simply “must get done” within the innovation clusters. Good leaders will ask ‘what must get done?’ and keep administrative work to a minimum. Surprisingly, a number of cluster leaders do not use the administrative supporting tools and reporting platforms, designed to ease their job.
“We work to serve our members”, is a common statement found in our interviews. While this is obviously true, it is also a dangerous trap to fall into. If the cluster leader overly spends his time and resources on serving the existing cluster members, he is unlikely to achieve the larger, strategic goals of the cluster. The right cluster leader will focus on the architecture and structure, building an organization that can serve the members, not trying to do everything himself.
In traditional companies, business units, departments and teams, people are organized in a hierarchical and largely formal manner. This is not the case in most innovation clusters. On average, an innovation cluster will often have a CEO and 3-4 employees. While the number of formal employees tend to be small, the number of people and staff that fall under the operational management is large, and in some cases very large. This creates highly complex leadership structures and challenges. In our interviews, we find a clear and repeatable pattern that management has clearly shifted from hierarchies to managing ecosystems.
The importance of self-leadership has been on the rise since the 1980’s. The ability to set goals, focus on personal performance, strengths-based development, self-imposed positive psychology in practice and a positive developmental belief system are all key pillars of self-leadership. They also echo many of the criteria cluster leaders mention in their own talks about leadership and leadership challenges in clusters.
Designing a Cluster Leadership Map
Based on early feedback on our work from national government leaders, we developed an early map for cluster leaders. The Cluster Leadership Map was first put to the test in the early summer of 2019.
Working with a group of Norwegian Innovation Cluster CEOs we started putting the eight principles of leadership to work, with self-assessment, individual reflections, and short action-items for personal developments. This quickly led to shared insights in three areas.
Cluster CEOs have widely different leaderships styles
Most Cluster CEOs apply industrial management ideas to their cluster leadership
The topic of cluster leadership was poorly understood and rarely reflection upon
What everyone could agree on was that the challenges of leading in an Innovation Cluster was critical to its success and urgently needed more work and better understanding. Many commented on the challenges of leading without formal authority, leading across widely different stakeholders (from different sectors and backgrounds) and leading without having the traditional leadership levelers and tools available.
Reflections of a Cluster CEO
by TANJA HOEL, FORMER CEO OF NCE SEAFOOD INNOVATION CLUSTER
For nearly four years, from May 2015 to February 2019, I had the privilege of serving as founding Managing Director (CEO) of the leading Norwegian seafood cluster.
During this time, we founded, designed and scaled the innovation cluster with a strategy to 3X the value creation of the Norwegian Seafood and Aquaculture industry by 2030. Our strategy was to increase the industry collaboration through knowledge, innovation and entrepreneurship. In my experience, cluster leadership is creating a community engagement to achieve a common vision. Making all members understand the value of co-opetition and co-creation. Utilizing resources and knowledge from the cluster community to accelerate cluster members innovation capabilities.
For many industry CEOs, working together with competitors goes against all they have learnt in business school. Board of Directors reward them on their competitive skills and ability to perform better than their competitors. So how can a cluster CEO succeed to change the behavior of an industry CEO? Two key words; leadership and trust.
A cluster CEO needs to have a a visionary leadership skill with an ability to demonstrate how co-operation can make them reach their business targets faster, smarter and better. The cluster CEO is central to build trust across competitive CEOs and cluster members. Setting up clear lines on what are competitive and what are non-competitive collaboration areas for the cluster to address.
In my personal experience, this starts with four critical steps:
First, it requires investment of time to build your relationship with key industry CEOs and cluster members. Getting a clear understanding of the cluster members business goals, challenges and need of support, capabilities and resources to succeed.
Second step is analyzing this information and setting up a business plan how a cluster model will support cluster members to achieve their business targets.
Third step is to quickly get some success stories. Identify some cluster community building projects that quickly can provide results and value to cluster members. This will encourage the CEOs to see the business value of the cluster and lead to further investment of resources in the cluster community.
The fourth step is requires strategic leadership, co-creating a visionary project, that fully utilizes the knowledge, expertise and resources from the cluster community to enable a more transformative change; i.e new business models, solving key sustainability challenges that lead to the creation of new revenue growth.
And last; key success criteria for the cluster CEO is to have focus on the member’s needs. It is not the cluster CEOs vision, but the vision on behalf of the cluster members.
A cluster CEO plays the role of an underdog, making the members of the cluster succeed and encouraging other key CEO from the cluster members to take ownership and supporters of the cluster community.
The Cluster Leadership Map in Action
Having worked closely with Tanja as a strategy advisor and consultant, I was intrigued by how Tanja would assess herself using the Cluster Leadership Map. One of the strengths of Tanja’s leadership, as witnessed during our many months of collaboration, was her ability to drive the vision, build strong relationships and deeply understand her members and key stakeholders. While she held little formal power and few traditional leadership tools, she was able to achieve a profound shift in industry collaboration working with her small team of innovation manager and project managers.
Tanja’s leadership style in action was one of ‘leadership everywhere’, by creating energy around the cluster’s 3X value creation target and enabling a culture of openness, collaboration, and bottom-up engagement. Leadership happened in a very distributed way throughout the entire cluster ecosystem. This leadership style is clearly apparent in Tanja’s self-assessment of her leadership role as the CEO of the NCE Seafood Innovation Cluster below.
Key Lessons for Leaders of Ecosystems, Clusters and Networks
A key challenge for many leaders today are ‘how do I lead without formal authority?’, ‘How do I lead without a formal hierarchy in place?’ and ‘how do I lead in a largely networked organization?’. We believe these questions are being asked worldwide and will become even more mainstream in the coming years.
We offer three key lessons for leaders leading under these circumstances:
VISION Develop a strong shared vision – but expect this to be far more challenging than in a traditional organization. The breath of stakeholders you have to deal with is many times larger than in a regular company-based organizational structure.
RELATIONSHIPS Your power lies in your relationships – invest a disproportional amount of your time and energy into building deep, personal and professional relationships with all key stakeholders.
TRUST Build trust between your cluster members. This is fundamental to ensure engagement and openness of cluster members. Be sure to clearly communicate competitive and non-competitive areas for the cluster to focus on. Expect participants to be sensitive to having competitors in the room tackling industry level challenges. But, get this right, and the impact can be significant for everyone.
What Would Peter Drucker Say?
Looking at the state of leadership in Innovation Clusters, it begs the questions, ‘What would Peter Drucker say?’, and more importantly, ‘How can Drucker’s teachings help us develop even better leadership in clusters?’
Drucker’s ideas have helped shape modern leadership practices for decades. Working with global cluster leaders and their top challenges, we find that a great deal of Peter Drucker’s ideas on leadership fully resonates with the challenges of today’s cluster leaders. We hope and think that a new generation of cluster leaders will equally find both inspiration and guidance in the ideas of leadership first developed by the leading management thinker Peter Drucker.
Global innovation clusters, we believe, mirror many of the challenges modern organizations will face in their challenges to develop ‘leadership everywhere’. In this quest, we again suggest look to Drucker to guide leaders in their quest for great leadership in modern, networked organizations.
About the authors:
Christian Rangen, founder and CEO of Engage // Innovate and Strategy Tools – the Modern Strategist’s Platform, is a strategy and transformation advisor to companies, innovation clusters and governments around the world. His next book on Superclusters explore leadership, strategy and business models for innovation clusters around the world.
https://i1.wp.com/www.engage-innovate.com/wp-content/uploads/2020/10/Cluster-Leadership.png?fit=660%2C386&ssl=1386660controlhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngcontrol2020-10-27 17:56:552020-10-27 17:57:00Leadership in Clusters and Networks
In the wake of COVID-19, Engage // Innovate has seen a sharp shift in client needs around the world. Over the past few weeks, the company has secured multiple new economic development contracts in North America, Latin America and the Nordics.
Economic revival in a post-COVID environment
The majority of contracts secured this month are large-scale government initiatives to revive and kick-start economic growth in a post-COVID era. These contracts are all entered into with ‘entreprenurial government leaders’, leaning in to come up with large-scale economic recovery initiatives.
“We see key government leaders really start thinking about what are our next growth are industries? What are our industries of the future? Then, laying down rapid-action plans to accelerate the development of these key future industries”, says Partner Christian Rangen of Engage // Innovate.
Building next generation ocean cluster in Western Canada
On the island of Victoria, in Canada’s British Columbia, visionary Mayor Lisa Helps is already leading the work on Victoria 3.0, a long-term strategic economic development initiative. Under the pillars of Recovery Reinvention Resilience, Victoria 3.0 lays out the economic growth model for 2020 – 2041.
Central to the economic recovery plan is creating an ocean futures cluster, accelerating western Canada’s value creation in the ocean space. While Canada has the world’s longest coastline, the economic activity and value from its ocean industries lag behind other major ocean economy nations. Combining the ocean cluster with the larger city-development of a brand-new innovation district is expected to provide an influx of high-value jobs for the region.
The project is the full development of a feasibility study, cluster framework and operating structure for a successful innovation cluster in Canada’s emerging ocean space.
“I see a massive potential for new economic activity in the ocean space, combining new technologies, venture capital and scale ups with the existing infrastructure and economic leaders in British Columbia”, says Rangen.
“This investment in the Ocean Futures Innovation Hub is an investment in the future of B.C.’s economy,” says Melanie Joly, Minister of Economic Development and Official Languages and Minister responsible for Western Economic Diversification Canada.
Engage // Innovate is partnering with global accelerator Hatch and Canadian firm Urban Systems to deliver the end-to-end project on a significantly accelerated timeline.
Developing new medical technology growth industries in Latin America
Under the leadership of the Latin American team, Engage // Innovate has recently secured a key contract with CINDE – Costa Rica’s Investment Opportunity Agency. Tasked with developing Costa Rica into a high-knowledge, high-value country in the medical technologies, manufacturing and devices industries, CINDE plays a key leadership role in accelerating the development of a new Life Sciences Hub in the region.
“This is a superb Innovation Supercluster Initiative, and I am very excited for the potential I see in Costa Rica. In line with the global transformation of the medical technologies industry, Costa Rica can really take a leading role”, says Rangen.
The project is designed to pull all the key stakeholders together to co-design and co-develop a new strategy for the country’s significant medical devices and medical technology industries. Ever since the launch of a national medical technology program 20 years ago, Costa Rica has been able to attract talent, foreign direct investments, multinationals and manufacturing companies to the country.
Today, Costa Rica is looking to grow in the areas of high tech, software, innovative business models, scale ups and further talent development.
“I look forward to following Costa Rica’s ambitious journey in the medical technology space”, says Rangen.
Helping government leaders accelerate national transformation
Over the past ten years, Engage // Innovate’s team has helped government leaders accelerate national transformation, develop new high-growth industries, build Innovation Supercluster Programs and transform economic growth.
Recognized as a global authority on Building Innovation Superclusters, the Shifting Energy Arena and how to drive corporate transformation, Engage // Innovate currently has active projects running in the Americas, Asia, Africa, Middle East and Europe. Despite the challenges of international business travels, all programs are delivered on schedule using a highly innovative blended approach to secure a successful project delivery.
https://i0.wp.com/www.engage-innovate.com/wp-content/uploads/2020/09/victoria-3.0.jpg?fit=605%2C467&ssl=1467605Engage//Innovate Teamhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngEngage//Innovate Team2020-09-21 10:57:112020-09-21 10:57:20Engage // Innovate secures new international economic development contracts
“Why is there a need to transform?” was one of the questions that has been coming up quite frequently after we published the report Building the Transformational Company. While this wasn’t part of the original report, we went back to our work, our notes and our case studies, and looked into why there was a need to transform.
What we found was that there were six fundamental reasons why companies need to transform. You may have other perspectives and have probably seen other reasons why, and we would really encourage you to share your thoughts and opinions with us, and have a discussion around how that fits in.
Six Fundamental Reasons Why Companies Need to Transform
1. Declining Profits
With profits steadily on the decline, and limited opportunities to turn that around, being locked in a declining core business model is a recipe for disaster. You may be locked in the newspaper business, or oil and gas, or maybe an outdated software business. If your declining profits can’t be solved, the need for transformation is imminent. If it’s not already too late, and you end up in a “shock” type of scenario.
2. Structural Industry Change
Deep, structural changes to how an industry operates and how value is created and captured. These structural changes may take decades to play out, but you can’t fight against them. It is like the surf and the tide, you can try to compete it, swim against it, but deep structural changes will play out, no matter how you position your business. An example of this would be the gradual shift from oil & gas to renewables. Most executives today would say that, “over a timeline long enough, we will transition. It is just a question of when,”.
3. Rapid Technology Shifts
Swift and rapid technology shifts are similar to structural industry change, but happens at a much faster pace. They’re much more dynamic and much quicker. Expect to see a significant number of startups, scale ups and investors operate in this space.
You can already see examples of this playing out in the mobility space with ride-sharing, micro-mobility, scooters, and in tourism with the sharing economy like Airbnb.
4. Financially Under performing
Companies financially under performing on the stock market will often be pushed to transform – even against their own will. Activist investors, PE fund and other investors may acquire enough leverage to force through a radically new direction.
Example of this abound, but are often less known from the outside. Starboard’s transformation of Darden Restaurants is a great example how an active investor came in, sacked the board, changed management and led a transformation. While Blockbuster is another example where an activist investor actually blocked a transformation into streaming (you can learn more about this in the online program).
5. Strategic Preemptive
Often led by an internal strategy review or a new CEO, the strategic preemptive route is often driven by foresight, some level of anxiety about a shifting landscape and a desire to transform before it is required.
Often, a new CEO will have the momentum and opportunity to lead this reinvention easier than an established, internal CEO will.
6. Markets Fallen Off a Cliff
In times of economic shocks and crisis, markets may vanish virtually overnight. The oil and gas crisis back in 2014, the financial crisis back in 2008, 2009, and today in 2020, the economy fallout thanks to COVID-19. These economic shocks happen, and when they do, companies go through three phases – they start with “shock”, they cut, and for those that make it, they transform. From hospitality to oil & gas crisis, these moments will push many firms into bankruptcy, while others are able to use the crisis to generate a compelling case for swift transformation. Very challenging.
So those are the top six reasons that we find. Again, these are just based on our own findings. I would love your insights and would be very happy to discuss this further with you.
One of the many conversations we had in our early findings was this question:
“is it only just the one reason, or can it be multiple?”
So we did a little bit of research, and what we found was that very often, there are several reasons that come together at the same time. For example, a company could be seeing declining profits over time, experiencing structural industry change, and also on top of that, going through some more rapid technology shifts. Of course, if you are going through all of these, it is a very challenging environment to manage a transformation in.
Another example, one that is more crisis-driven, would be a company (like many today in the wake of COVID-19) facing markets that have fallen off a cliff, and rapidly declining profits.
Finally you could have a company which is transforming due to a strategic preemptive, maybe through a new CEO or a strategy review, rapid technology shifts, and also a deeper underlying structural industry change.
So what are the implications for you? You may be a consultant, an executive, a strategy leader or a HR, L&D executive?
We have developed a tool that can guide you on this journey – and here we are sharing a beta version of it.
The Why Transform Canvas is specifically designed to assess whether you are in need of transformation.
Assess Your Organization’s Need to Transform
It’s a simple and straightforward tool – which you can use to assess your company on a scale of 6 – 30. The higher your total, the lower your need is to transform. Check your score here.
You can access the PDF and high quality JPEG format of the Why Transform Canvas – as well as the entire toolkit and know-how you will need to guide your company’s transformation within the online certification program – Building the Transformational Company.
https://i0.wp.com/www.engage-innovate.com/wp-content/uploads/2020/07/why-transform-01.jpg?fit=2134%2C1600&ssl=116002134Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2020-07-10 11:21:432020-07-10 11:25:34Why Organizations Need to Transform
Innovation Superclusters and innovative ecosystems are both crucial engines of growth. In our research, we have looked into future trends and how governments can actively build Innovation Superclusters around the industries of the future.
SUPERCLUSTERS VS. ECOSYSTEMS
Globally, there are around 7000 formal Innovation Superclusters. Of these, around 15 – 25 may be recognized as genuine Innovation Superclusters. On the other hand, most startup ecosystem ranking will often rank the top 150 – 200, with Silicon Valley, Beijing, Boston, Shanghai, New York, and Tel Aviv topping the list. One ecosystem, let’s say Beijing, may count 30 – 100 clusters. While one cluster, possibly the Norwegian seafood cluster in Finmark, could be a single cluster, it does not have much of an ecosystem to lean on. While both these systems of innovation are important, they are also fundamentally different.
SUPERCLUSTERS ARE ACTIVELY BUILT
Innovation Superclusters are the result of both active government programs, long-term industry leadership, and hands-on organizational development.
A cluster will always have an operating organization, a (small) management team, a board or steering commit, an operating budget, members and reporting. No matter what size, from early “baby clusters”, to Growth Clusters and Superclusters, these traits are always in place.
Two examples are the two ocean-centric clusters, NCE Seafood Innovation Cluster, located in Bergen, Norway and Canada’s Ocean Supercluster, based in St. John, Newfoundland. Both are led by a CEO, co-funded by Government and industry alike and working to solve industry-level challenges to unlock sustainable economic growth in the ocean space.
ECOSYSTEMS ARE PASSIVELY NURTURED
Ecosystems, on the other hand, are far more passively nurtured. Granted, governments will invest heavily in various elements of ecosystem development, including Singapore’s recent announcement of a $500M investment into building Singapore into one of the world’s leading AI ecosystems.
This will likely propel Singapore forward and put it even more firmly on the world map of most innovative tech hubs. But you are unlikely to find a CEO, a single member-based operating unit, a cluster-based strategy document and the close collaboration found in the best clusters around the world.
CB Insights, an analysis firm, recently published an overview of the world’s leading tech hubs, or ecosystems. Much along the methodology lines of Startup Genome, CB Insights maps out the best tech hubs, based on a number of key variables.
Looking ahead, our research shows Innovation Superclusters are on the rise. At the same time, regions and nations are competing more than ever to attract, build and scale the best tech firms. Whether in life sciences, AI, smart mobility, clean energy or platform-based business models; expect to see both Superclusters and ecosystems become an even higher focus for governments, policymakers and nation builders in decades to come.
Around the world, Innovation Superclusters are on the rise. But what, exactly, are Innovation Superclusters and why do they matter?
INNOVATION SUPERCLUSTERS IN SIX POINTS
While often misunderstood due to various policies, structures, funding models, strategies and capabilities, we find that Clusters and increasingly Innovation Superclusters can be identified and understood through six key points. A Cluster initiative on Taiwan, in Korea or the Thai Supercluster program, will be different in context, industry need, and government program, but the six principles are equally valid across geographies and culture.
1. Engines of Growth
Successful Innovation Supercluster is first and foremost Engines of economic growth, by connecting 100’s of members and partners. From a policy- and GDP-development point of view, Clusters are expected to produce value that far exceeds the national averages across all industries.
2. Collaboration Networks
Second, Superclusters are immense collaboration networks built around the industries of the future. These clusters exist to build out larger, more connected networks around future key industries. By pulling together industry executives, academics, investors, startups and government leaders, the Superclusters aims to build close and personal ties across domains, roles, hierarchies, and traditional silos.
3. Private-Public Partnerships
Third, Superclusters ae large-scale private-public partnerships, developed by design. While they do require certain foundational capabilities in terms of local industry, local talent and local investors, it is really the co-development of private and public partners that make the cluster initiative a success.
Forth, Superclusters are trust-based collaboration platforms. While the level of trust and preferred route to develop trust may vary, the essence is that industry leaders, researchers, startups and other members in the cluster should work to create trust across the entire cluster base. This translates into collaborating on projects, sharing research data, pool company data into cluster collaboration projects (Seafood industry sharing fish health data for machine learning development).
5. Solution Creators
Fifth, great clusters are solving industry-level challenges & opportunities. Think, open innovation across a close community of stakeholders. Using our open innovation software platform, clusters can identify industry-wide challenges, challenges that then can be addressed by the cluster through joint innovation projects or innovation working groups. Over time, Superclusters should be able to take on and solve “challenges that are too big for anyone of us”, in the words of an industry CEO.
Finally, strong Superclusters become magnets. Think of magnets that attract talent, capital, researchers, and companies into the region and cluster membership base. In Canada, the Digital Supercluster is already seeing a growing number of corporates and startups relocating into the greater Vancouver region to be a part of the rapidly developing Digital Supercluster.
PULLING IT ALL TOGETHER
We are seeing a rising interest in and understanding of building a new breed of Innovation Clusters. Governments from Canada to Thailand already have Supercluster programs in place. The EU, the Nordics, South-East Asia, Latin America, and the Middle East are all in various stages of exploring their own Supercluster Initiatives.