A tale of two clusters
Why we need clusters, and why they aren't getting the support they need.
Tuesday, September 20 2011 || Talking the Walk || BY Fiona Rotherham
Kistler heads biotechnology incubator the Institute for Innovation in Biotechnology (IIB) at the University of Auckland’s School of Biological Sciences.
Fairweather runs the agritech-focused Waikato Innovation Park and the AgBio cluster, located on 17 hectares at Ruakura, next to other agricultural research organisations.
Two key differences are the Auckland cluster is housed in a university and comprises only New Zealand firms while the Waikato one stands alone and includes international companies as well.
Nine companies are co-located at the IIB and share its hi-tech equipment, expertise and networks. A startup with, say, three staff, is limited to the technology knowledge of the trio. But put the startup with 400 other scientists and that knowledge base expands dramatically, Kistler says. “You can learn new techniques within the hour — try that in a warehouse location in the suburbs.”
Androgenix, a startup researching gender identification of livestock sperm, is co-located at the IIB. Seed investor Brent Oglivie says while not a cheap option, the IIB provides physical and intellectual assets Androgenix couldn’t otherwise access. Not just startups benefit. Natural health company Comvita, one of New Zealand’s larger companies, co-located its research division at the IIB in 2009. Chief technical officer Dr Ralf Schlothauer says the decision has paid off with one scientific paper already published, two in submission, and data for two more. They’ve also successfully run a science symposium and annual student challenges with institute support.
Because the core of the cluster is a university, the biggest advantage is what Kistler calls the watercooler effect — industry and academic scientists rubbing shoulders daily sparks fresh thinking.
In the Waikato, Fairweather’s innovation park houses over 50 companies and the AgBio cluster, started in 2002, has 90 members. He reckons a bunch of startups alone is not a good look as you need a mix of those and multinationals to get international attention. “No one company can cover everything a client requires and, if they try to, they end up in non-core business. If you associate with others and stick to your core offering, you can meet all your customer’s needs.”
The park has been slow to get backing from local research institutions, partly because they’re more incentivised to compete than collaborate, Fairweather says. Clusters are not a new idea. In the 1990s Michael Porter, the Harvard Business School economic development guru, was paid by the government of the day to tell us how to do it. But the so-called Porter project flopped. In 2002 the government had another crack, giving 18 pilot clusters a few thousand dollars each to get underway. Again the project largely fizzled, earning clusters something of a dirty name.
Today the talk is collaboration, hubs and networks.
Call them what you will, clusters are not getting the government support they should despite clear economic benefits, say Fairweather and Kistler.
While the government allocated $21 million over five years for four food innovation hubs nationwide, Kistler says New Zealand still has no science and technology park of international size and standard. Internationally these parks receive massive local and federal government support. Singapore has six.
Fairweather describes the previous attempt at 18 clusters as “just pathetic” given the serious funding clusters receive in other countries and the time they’re given to develop. “It takes three to five years before a business develops an export market so why should it be different for a cluster?”
To succeed, clusters need a unifying theme based on meeting customer needs, Fairweather says. He’ll consider his cluster successful when it hits $100 million in exports, around double the current output.
Kistler thinks ultimate success rests on one of the co-located companies being sold for many millions of dollars to a multinational or alternatively, having a successful IPO and developing into a large, locally-based exporter.
See they’re not so different, these two blokes. They should swap ideas around the watercooler.
Fiona Rotherham is managing editor of Fairfax BusinessDay and the Fairfax Business Bureau and a former Unlimited editor
