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Markets & Geopolitics

Clustering to compete: Nurturing innovation for prosperity and security

Can - and should - clustering still be relied upon to foster competition and nurture innovation?

World Built Environment Forum Summit
23 April 2018

For decades now, we have understood the importance of clusters and specialisation hubs in boosting regional economic prosperity.

But now that we live in a world where capital, goods, information, and technology can be sourced from all around the world, how relevant can this notion continue to be?

Several distinguished panellists argued this very question at the 2018 World Built Environment Forum London Summit.

Are clusters redundant?

“There’s no doubt that clusters is a mature framework”, explains Christian Ketels, Chief Economist at Boston Consulting Group.
 
“What the cluster approach tells us is that value, innovation and productivity occurs when we have different, but related, things together.”

“But it’s right to question the notion,” he adds. “For instance, why does location still matter in a world where all of us have so many global linkages?”

Margot Orr Jones, Director of Future Cities Development at Jacobs, says that clusters could be deemed old fashioned, but you could just as easily argue the opposite.

“We all identify with the terms industrial cluster or innovation cluster, but for me it’s not about a theme, it’s about synergy. It’s about identifying a group of land uses, and people that feed off each other in a virtual circle. Whenever we are looking at design from a cluster approach, it’s more likely to get built because of this approach.” Margot Orr Jones, Director of Future Cities Development, Jacobs

Richard Templer, Director of Innovation at the Grantham Institute, Imperial College London, said that indeed, the solutions to a better future were often to be found by thinking about how to integrate systems, such as how a building works with a transport system. “The two things together are more than the sum of their parts,” he says. 

Solutions to our problems won’t come from a single company or a single technological innovation, agrees Christian.

“What we need is systemic change, which will only happen where there is collaboration on something, and when we as a group decide this is the way to go.”

That said, the panel agreed that clusters are part of the solution, but not the solution itself. They helped create a platform for collaborative dialogue, identifying where funding should go and how to build up value chains.

Perhaps we need a new terminology, suggested Christian. “Clusters is a loaded term, but the idea is still extremely relevant.”

How do you build a cluster?

The question of their relevancy put to bed, another question arose among the panel.

Should a cluster be left to occur organically, or is it something that can be created from scratch. In other words, is it nature or nurture?

Ultimately, the panel says that it’s a bit of both. 

“It doesn’t happen by magic,” argues Christian. “It’s the result of a concentrated process of understanding of what we are, how to bring people together, and how to move forward.”

He cited the life sciences cluster in Cambridge, Massachusetts as an example:

“If you look back ten to 15 years, there wasn’t a lot of biotech in the city. There was a concerted effort by academia, by government and by private companies to think about what it would take to build a powerhouse in biotech. And there were a lot of things they did, infrastructure, mentoring, training, but basically it was about trying to create an environment where smart, young companies could connect to both research and large companies.” Christian Ketels, Chief Economist, Boston Consulting Group

But some clusters happened organically, argues Margot.

“There are some great examples of clusters that have formed organically, airport cities for instance, like London Heathrow,” she says. 

Richard argues that people still had to be at the heart of any future design.

“I believe you need ways of bringing people together, places where they can meet formally but casually as well. For me, that's about design, physical and geographical, where people can easily find opportunities.”

Government involvement was also key, argued Margot, playing an important role through investment and incentives. “That said, money is only part of the solution,” she says.

“The biggest issue most of our advanced economies have is attracting the right talent.”

In the end, you could only improve what you already had, according to Christian. “It’s very hard to create something out of nothing.”
 
“It matters what you do, but it matters much less this idea that there is a magic innovation, district or accelerator that changes everything. It’s how you integrate activities that matches to the need of a cluster, the needs of the market, and what you do more broadly as an economy. There’s also how you resource individuals and how you organise and train them.

“It has to be a collective action,” he concludes “Everyone has to contribute to every step of the chain.”

“The profile of clusters has changed, they are more specialised and more innovative, but there is no evidence that the role of clusters in the global economy has changed.

“Clusters are very important, but it’s complicated.”

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