This document outlines a 12-step process for developing and upgrading the competitiveness of industry clusters. It begins by introducing the concept of industry clusters and the relevance of cluster development initiatives. The first three steps involve: 1) Mobilizing support for cluster development from potential funders; 2) Identifying and prioritizing key industry clusters in the local economy through economic segmentation and analysis of traded sectors; and 3) Conducting an initial competitiveness diagnosis and analysis of the prioritized clusters to develop a shared understanding of strengths, opportunities, and challenges.

1. TCI Delhi Cluster Development: The How
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1. Introducing a process for star%ng
a clustering ini4a4ve, or
2. For renewal, revitalisa%on of a
current clustering ini4a4ve
Cluster Development:
The How, in Twelve Steps
TCI Delhi November, 2010
Ifor Ffowcs‐Williams
CEO, Cluster Navigators Ltd, New Zealand
A clustering ini%a%ve is …
… an organisied collabora%on with
firms, government and academia within a
concentrated geographical area
• coopera'ng towards common goals,
• establishing close linkages and working
alliances
…to upgrade compe%%veness
Upgrading a cluster’s
compe%%veness
Design principles, 12 Steps
• Moving from clumps of firms and a cluCer of
public agencies
• Change never comes easy, and takes 4me
• Successful transforma4on needs a coali4on of
volunteers
• Short term wins builds the credibility to address
substan4ve ac4vi4es
Cluster development
Drawing on both sides of the brain
Logic
Details
Safe
Feelings
Big picture
Risk taking
Step 1: Introducing relevance
Mobilising support
• Introducing the relevance of clusters to poten4al
funders, usually a public agency
• Obtaining the resources to proac'vely engage in
the development of priority clusters
• Much more than an analysis exercise

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Posi%oning cluster development
A centre stage strategy
Not ‘another project’
A comprehensive framework for a range of
economic development agendas, including:
• Skills, training; workforce development
• SME development; New business start‐ups
• Investment aRrac4on; migrant aRrac4on
• Export development, interna4onalisa4on
• Rural, community development;
• Incubators; Industry/Technology Parks …
Step 2: Iden%fying, priori%sing
clusters
Segmen%ng the local economy
• The majority of jobs and businesses in every
local economy are the same:
• Restaurants, retail, health care, house
building, vehicle repair…
• About a third differ:
• The traded sector
• Firms in this sector drive the local economy,
pull in the wealth
Iden%fying the traded clusters
The priori%es for early public aCen%on
Short listed clusters should:
• Draw on the region’s strengths, specialisa4ons
• May center on a specialised capability, a cultural
strength, a technology plaYorm
• Already aRract income to the region
• Already have a range of firms
• Have appeal for funders
• Focus on the strong clusters, not the weak
Silicon Alley, ManhaRan, New York; Silicon Beach, Santa Cruz; USA; Silicon Bog, Limerick, Ireland; Silicon
City, Chicago, USA; Silicon Coast, Auckland, New Zealand; Silicon Corridor, M4, UK; Silicon Desert, Phoenix,
Arizona; Silicon Ditch, M4, UK; Silicon Dominion, Virginia; Silicon Fen, Cambridge, UK; Silicon Forest,
Portland, Oregon; Silicon Forest, Australia; Silicon Freeway, Southern California, USA; Silicon Glacier,
Montana, USA; Silicon Gorge, Bristol, England; Silicon Glen, Scotland; Silicon Gulch, San Jose – California,
USA; Silicon Gulch, Aus4n, Texas, USA; Silicon Gulf, Davao, Philippines; Silicon Hill, MassachuseRs, USA;
Silicon Hills, Aus4n, Texas; Silicon Holler, Washington DC, USA; Silicon Hollow, Tennessee, USA; Silicon Island,
Virgin Islands; Silicon Island, New York, USA; Silicon Island, California, USA; Silicon Island, Taiwan; Silicon
Island, Whidby Island, Washington, USA; Silicon Isle, Ireland; Silicon Kashba, Istanbul; Silicon Mesa, New
Mexico, USA; Silicon Mountain, Colorado Springs; Silicon Mountain, Pennsylvania, USA; Silicon Mountain,
MassachuseRs, USA; Silicon Necklace, Boston, MassachuseRs, USA; Silicon Oasis, Dubai; Silicon Orchard,
Wenatchee Valley, Washington, USA; Silicon Planta%on, Virginia, USA; Silicon Plateau, Bangalore, India;
Silicon Polder, Netherlands; Silicon Prairie, Champaign‐Urbana, Illinois; Silicon Rainforest, SeaRle,
Washington, USA; Silicon River, Missouri, USA; Silicon Sandbar, Cape Cod, MassachuseRs, USA; Silicon
Saxony, Saxony, Germany; Silicon Seaboard, Richmond, Virginia, USA; ; Silicon Seaside, South Norway; Silicon
Slopes, Utah, USA; Silicon Snowbank, Minneapolis‐St Paul, Minnesota; Silicon Spires, Oxford, UK; Silicon
Swamp, Florida, USA; Silicon Triangle, Durham, Nth Carolina, USA; Silicon Tundra, ORawa, Canada; Silicon
Valais, Switzerland; Silicon Valley North, ORawa; Silicon Valley East, Malaysia; Silicon Valley Forge,
Pennsylvania, USA; Silicon Valley, Iowa, USA; Silicon Valley of China, Zhongguancun; Silicon Valley of Europe
(Dublin); Silicon Valley of Russia, Moscow; Silicon Valley of South Korea, Incheon; Silicon Valley of Sweden
(Kista); Silicon Valley of Taiwan; Silicon Village, MassachuseRs, USA; Silicon Village, California, USA; Silicon
Vineyard, Okanagan, Bri4sh Columbia, Canada; Silicon Vineyard, Napa Valley, USA; Silicon Wadi, Israel;
Silicon Welly, Wellington, New Zealand; and Cwm Silicon, Wales.
Not another ‘Silicon Somewhere’

3. TCI Delhi Cluster Development: The How
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© Custer Navigators Ltd 2010
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The Cluster Muster
High profile, kick‐off public mee%ng
Rounding up the ‘usual suspects’…and
the unusual ones
• Publicly announcing the ini4a4ve
• Introducing the facilitator(s)
• Reques4ng the cluster’s stakeholders to be available
for an early 1‐on‐1 mee4ng
• Announcing the date for a first workshop
• Presen4ng feedback on the interviews and analysis
Solo players, hard to muster
Don’t wait for all
Step 3: Ini%al cluster analysis
Two thrusts
1. Ini4al compe%%veness diagnosis, fact based,
understanding cluster’s current situa4on:
structure, scale, opportuni4es, constraints,
culture …
2. Establishing a pla]orm for ac%on,
Introducing the process; mo4va4ng key
stakeholders to par4cipate; iden4fying the
cluster’s talent & poten4al leaders ...
Cluster analysis
Developing a shared understanding
across the cluster on compe%%veness
Step 3: Ini%al analysis essen%als
Inward looking emphasis
• Iden4fying the cluster’s lead firms
• The innovators…and their success factors
• Iden4fying other stakeholders…support
firms, soi infrastructure
• Need to diligently iden4fy;
• Detec4ve work needed
• Much more than a ‘Yellow Pages’ or industry
associa4on list
• Securing their involvement

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History maCers!
Understand the cluster’s founda%ons
• How did the cluster start? Why?
• How did it grow? What changes?
• Evolu4on of the local specialisa4on?
• What challenges along the way? What public support?
• Development of links, trust within the cluster?
• Level of social proximity? Subcontrac4ng? Interdependencies?
Joint ac4ons? University ac4vity?
• Development of global links
• Exports? Overseas investment? Interna4onalisa4on?
Gathering cluster sta%s%cs
Cau%on!
• Clusters are broader than an ‘industry’;
may be a technology
• Cluster boundaries ≠ regional boundaries
• Establish the cluster’s func%onal boundary
• Importance of surveys, rather than an
over‐analysis of published data
Ini%al analysis process
Face‐to‐face interviewing
• Interviewing oien merits 80% of the analysis effort;
Gemng behind the wriRen word
• Introducing the cluster concept to scep4cs
• Building allies for subsequent mee4ngs
• Ini4al assessment of leaders
• An overt agenda, and a covert one
Establish the Baseline Data
What will be on the cluster’s
dashboard to measure progress?
Establishing the performance indicators
• Number of firms? Employees?
• Number of new firms to the region?
• Total sales?
• % local, % na4onal, % interna4onal?
• Number of students in local training directed at the
cluster’s needs?
• % workforce with higher educa4on?
• ……………
Based on Oxford Research, Norway
Step 4: Forming the
Leadership Group
Ac4ve clustering demands:
• A coali4on of preferred leaders who
understand and care about the big picture
• A Group with a balance of skills, able to
aggressively work as a team
Facilitator plays a key role in establishing Group

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Building the Leadership Group
Takes %me to get the
right people on the bus…and in the right seats
the wrong people off the bus
Cluster Leadership Bus
Step 5: Developing the
preferred future
• A preferred scenario … the
cluster at it’s future best
• A common reason for the
failure of clustering ini4a4ves
is lack of agreement on the
direc4on
The Preferred
Future
The vision
The preferred future
The Vision
Building on the cluster’s current
competitive position … with a challenge,
a s t r e t c h factor
Preferred future example
Film cluster Auckland, New Zealand
A vibrant, growing screen
produc%on industry in
the Auckland region.
Ac%vity doubling over the
coming 5 years.

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Step 6: Standing in the future
Iden%fying the stepping stones
• Looking back from
the future:
Back cas%ng
• Not a con4nua4on
of the present …
Forecas4ng
Auckland, NZ Film Cluster
Vision: vibrant growing industry
doubling ac%vity in 5 years
Key steps Voting
Culture 28
Skills, training 25
Hard infrastructure 19
New investment 18
International marketing 18
I P & R & D 14
Step 7: Short term,
tac%cal agenda
For each of the Priority Steps
• Pick the ‘low hanging fruit’
• Not wish lists for others
Immediate projects that
demonstrate the value of
collabora4on
Just do
it!
Project implementa%on
Moving quickly into ac%on
• Build teams around the priority ac4on projects
• CATs…Cluster Ac%on Teams
• Teams work best with voluntary members
• And self‐destruct on task comple4on

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Step 8: Launching,
formalising the cluster
1. Launching the cluster
• A ‘Town Hall’ public event
• 3‐6 months aier final workshop
• Highlight ini4al successes
• And the forward agenda
• Ensure media coverage!
Cluster launch
Lake Katwe salt cluster, Uganda
Take %me in formalising
the cluster’s structure
• Firms want early benefits
• Not delays through discussions on structure
• Avoid early stakeholder fa4gue
• Can take 4me for:
• The cluster’s boundaries to emerge
• The cluster’s Leadership Group to be iden4fied and
solidify as a team
Step 9: In‐depth analysis,
benchmarking
Fact based, outward focussed analysis
• Fundamentally understanding the cluster’s
compe44ve posi4on, the local specialisa4on
• Frameworks: Porter’s Five Forces & Diamond
• Benchmarking v. reference clusters
Benchmarking visits
Example: Norway’s Mountain
Tourism cluster visit to Banff, Canada
• Iden4fy an appropriate (model)
reference cluster
• Benchmarking visits provide a
collabora4ve learning opportunity
• Business + public agencies +
academics sharing their learning
• Establishing B2B links
• Visits can provide mobilising data
shocks

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Step 10: Long‐term, strategic agenda
More substan%ve, more strategic ini%a%ves
Moving beyond the ini4al ac4vity…the ‘low hanging fruit’ e.g.
• Technology & SME related
• R&D centers; Centers of Excellence; Incuba4on facility
• Technology Park; One‐stop‐service centre
• Interna4onalisa4on
• Cluster branding; Export development; Investment aRrac4on
• Skills development
• Ter4ary course development; Partnerships with local schools
• Finance
• Equity and debt funding, venture capital, angels, seed funding
Developing the cluster’s
Strategic Agenda
A Strategic Agenda is not constrained by the current
availability of resources
• It highlights the priority ac4vi4es, and then seeks to
find the resources for implementa4on
In contrast, a Strategic Plan iden4fies the priority
ac4vi4es to be undertaken within the resources
that are available
Step 11: Linking the cluster
Based on a clear understanding
of the cluster’s strengths
Three levels of leverage:
1. With other regional clusters
• Linking related clusters, e.g. wine & tourism
• Developing the Regional Innova%on System
2. Na4onally, with clusters in the same sector
• Developing na4onal strategies from the boRom‐up
3. Interna4onally, with clusters in the same sector
• Fostering specialisa4on between clusters
• Building value chain, B2B links
A por]olio of clustering ini%a%ves
Gävle, Sweden’s Cluster suitcase
The Regional
Innova%on System

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Linking regional clusters
Developing new combina%ons in
Catalonia, Spain
• A ‘Kids Cluster’ drawing on competencies from
3 regional clusters:
• Children’s clothing, children’s publica4ons and toys.
• A ‘Habitat Cluster’ drawing on 5 clusters:
• Two regional home furniture clusters, a ligh4ng
cluster, a taps/valves cluster and a home tex4le
cluster
Linking Ontario’s top three ICT clusters:
Linking regional clusters
Ontario’s Technology Corridor
+ +
Step 12: Review, evalua%on
24 ‐ 36 months aler the launch
1. The pay‐off from the clustering process
2. Is the compe44vness of the cluster being
upgraded?
1. Pay‐off from the
clustering process
• ‘Return on Investment’ review
• Qualita4ve rather than quan4ta4ve
• Review both successes & failures
• Feedback from cluster stakeholders
• Value‐added by the clustering ini4a4ve
Reviewing the Baseline Data
Against agreed performance indicators
What were the key performance indicators for the
clustering ini4a4ve?
• Growth in employment? Number of Ph.D.?
• Growth in exports?
• Number of firms in the cluster? Start‐ups?
• Increased compe44veness?
• Measured by market share? Produc4vity?

10. TCI Delhi Cluster Development: The How
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2. Upgrading compe%%veness?
Hard data
• Are the cluster’s firms able to profitably service
even more distant customers?
• Has the cluster’s market share grown?
2. Upgrading compe%%veness?
Qualita%ve
• Clump removal? Closer links amongst firms?
– Increasing trust, tacit informa4on flows?
– Out‐sourcing, sub‐contrac4ng, co‐specialisa4on?
• CluCer removal? Are public agency priori4es
strongly influenced by the cluster’s agenda?
– Universi4es, schools, training, technology providers,
investment aRrac4on agency, export development agency …
• Is the cluster a demanding customer for R&D
centers and universi4es?
• An incubator without walls?
Cluster review: Implementa%on
From Review to Ac%on
• Following review of project milestones, budgets
• Close down slower ini4a4ves?
• Current relevance of the Preferred Future?
• Opportunity to stretch further?
• Are the key Stepping Stones s4ll valid?
• Have circumstances changed the strategy?
• Revisit the Leadership Group’s membership?
• Extend gene pool? Bring in next genera4on?
Cluster workshops
Fundamental to the cluster
development process
• ‘The wisdom of the crowd’
• Consensus building, transparent
• Workshops open to all
• Broad agreement on priori4es
• Not a few deciding for many
• Capturing hearts as well as
minds
Addressing
Compe%%veness
Thursday alernoon breakout
An interac%ve workshop
1. Lars Eklund,
Scandinavian Compe44veness Group, Sweden
2. Ifor Ffowcs‐Williams,
Cluster Navigators, New Zealand

11. TCI Delhi Cluster Development: The How
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© Custer Navigators Ltd 2010
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Ifor Ffowcs‐Williams
CEO, Cluster Navigators Ltd
22 Examiner St, Nelson 7010
New Zealand
E4@clusternavigators.com
+ 64 3 548 0606
www.clusternavigators.com
www.linkedin.com/in/clusterdevelopment
Skype: ‘clusterguy’
Blog: www.e4oncompe44veness.com