Cluster and Eco -System: Formal and Informal Approaches to Innovation

During the 1980s it became apparent to European policy makers that the twin titans of innovation, at the time, the USA and Japan, were better at innovating than were European firms. Or rather Europeans could invent but struggled to get to market.

As the USA and Japan had language homogeneity, they always had access to critical mass (a critical mass of researchers that could communicate freely, a critical mass of early adopters, critical mass market etc). The realization of this critical mass argument led to the development of the “cluster” as a distinct European approach to innovation.

That analysis lay behind European R&D funding and the succession of framework programmes that invest in the development of transnational consortia as much as in the actual research.

Now, in the second decade of the 21st century the cluster is deeply rooted in how Europeans nurture innovation. There is even now a European Cluster Observatory, keeping a watchful eye on how clusters are evolving (with a LinkedIn group!). The German Federal Government now operates a leading-edge cluster competition as a gateway for funding research and development. And we have private sector companies that specialise in cluster management (for example BioRN, public private partnership between the Rhine-Neckar BioRegion, the Heidelberg Technology Park, the Rhine-Neckar Chamber of Commerce and the Rhine-Neckar Metropolitan Region).

Set against this we have seen a new kind of ad hoc but still semi-structured form of innovation emerge. Apple Inc. orchestrates the exemplary version of this. The Apple iPhone now has over 35.000 developers working for it, all from Apple’s point of view, for free. Even better, the developers pay Apple 30% of sales fees for the privilege of innovating on Apple’s platform.

Can clusters offer this type of business dynamic? We ought at least to understand these two forms of innovation better in a comparative sense. It may be that cluster managers can learn from ad hoc innovation processes.

Open Ad Hoc Innovation Systems

The Apple Apps store is only one of a growing body of open innovation initiatives. And it is a systematic approach to innovation, however much a company like Apple also have good luck.

We need to be clear what we mean by open innovation though. In some cases, particularly around Europe, open innovation means an industry-academic partnership. “Open” in this sense means the company is open to academic collaboration. Open in the world of apps means being open to anybody.

Companies that have begun or already run an open, open innovation process include The Guardian Newspaper, Reuters Calais, and Tesco in the UK, the French global telecoms player Alcatel Lucent, and in the USA The New York Times, Best Buy (retail), Amazon, Google, Netflix, Hoovers and a few more. On top of those the global mobile industry was rather rushed into a more open innovation approach by Apple’s success: Nokia, Sony Ericsson, Android and many more are now part of the club.

An important distinction though is that mobile phone and operator companies are offering what is an obvious candidate for an open platform – the handset and the network. Companies like the Guardian, and Reuters are offering something closer to the crown jewels – their own content. Likewise with Netflix and Amazon, the raw material is their own data.

In short, a growing number of major companies are opening up content and data to independent third party producers/developers.

On the face of it once the opening up has taken place, innovation is an ad hoc process governed by chance. Nobody appears to be ensuring that universities, scientists, experts and technology implementers are lined up side-by-side – or indeed that any critical mass gestation is taking place.

We’ll come back to that.

The European cluster approach

In October this year the EU meets to discuss European cluster policy. The objective is to create more world class clusters in Europe to renew European industry:

“Europe needs more world-class clusters, which are hotbeds for turning innovative ideas into new products and services and for providing a particular fertile environment for new business formation that creates innovation, growth and jobs.”

There is (or will be) a Cluster Managers’ Club, a Cluster excellence research consortium , a European Platform for Cluster Cooperation, a regional Pooling4clusters initiative, and a High Level European Cluster Policy Group.

Click here to view the search page of the Who’s Who of European clustering.

Structure in ad hoc innovation systems

I believe the fear of policy makers in Europe is that to have a lack of structure is to leave too much to chance. Clusters underwrite the cost of people coming together. They provide templates for formal agreements. They set the rules that mean any cluster has equal access to formal support mechanisms.  But here too a lot is left to chance.

Perhaps the biggest draw back is a close relative of chance – the lack of random effect, which is what gave us Apple’s Apps store (which market leader Nokia struggles to compete against). At some level we need to trust to randomness and indeed younger generations of entrepreneurs do so. Randomness is in their blood.

But the point I want to make for now is that ad hoc innovation systems are highly structured and should be in the policy maker’s armory.

That structure consists of:

  • A developer kit that has to be created in a highly usable way, as well as being carefully documented
  • A system for tracking accesses to data/content and for charging
  • A developer website and community so that people can interact over the developer kit and data access issues
  • A formal process for drawing good developers, content producers to the community
  • An ingest system for accepting applications, qualifying suitability on technical grounds and a plan for arbitrating applications that are unacceptable on any grounds
  • A system for downloads and payments
  • A system for adapting applications in store, e.g upgrades and allowing users to upgrade with or without charge
  • A plan for marketing the family of applications
  • Dispute resolution guidelines and procedures

These structures have also got a strong element of fail safe built in – there are marketing requirements there, and a requirement to make sure the best developers and content producers come to your platform.

Ultimately of course they are also borderless. So whereas clusters strive to overcome boundaries, ad hoc systems naturally flow around the world.

Conclusion

We make a false distinction between structured clusters and unstructured ad hoc innovation. We fear the ad hoc unnecessarily. The ad hoc is as open to policy initiatives as is the structured. Meanwhile companies need to start thinking how they can get into the action around ad hoc innovation – the path is logical and as structured as any other innovation process.

By Haydn Shaughnessy, contributing editor

About the author

Haydn ShaughnessyHaydn Shaughnessy, senior editor, has worked at the epicentre of innovation in a 25 year career spanning journalism, consultancy and research management. He began his technology career as a manager of application research in broadband, mobile and downstream satellite services and has maintained a continuous production of analysis and intellectual material around innovation since then, having written on Wired Cities, Fibre to the Home, Future Search Engines, and international collaboration. He is an emerging thought leader in systemic innovation building on his PhD research in large scale economic transformations. He was previously a parter at The Conversation Group, the leading global social technologies consultancy where he helped companies such as Alcatel Lucent, Volvo, General Motors, Symbian Foundation, and Unilever adapt to the current transformations in the global digital economy. He has written for the Wall St Journal, Forbes.com, Harvard Business Review, and many newspapers as well as making documentaries for the BBC, Channel 4 and RTE. His consultancy and research work encompasses changing enterprise structures, new business models and long-term trends in attitudes. He is in demand as a speaker on the impact of changing attitudes on business and on gearing innovation to new consumer requirements. More information about Haydn can be found at fiveideasthatmatter.com
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