Finding strength in numbers – are clusters the future for advanced manufacturing?

Toys R Us, Maplin, Woolworth, Blockbuster, Comet, BHS just a few UK businesses whose collective demise have contributed to the changing landscape of our high street; organisations who didn’t evolve fast enough for their target consumer and whilst we sorely miss them there is plenty we can learn from their mistakes. These were successful businesses who missed the shift in demand caused by changing technology and instead of thinking about their future market focused instead on their current consumer.

But spotting an opportunity and realising that opportunity are very different things.

Manufacturing makes up 11% of GVA and 44% of total exports in the UK. Despite the decline since the 1970s, the UK is still the 8^thlargest industrial nation in the world.

The optimism amongst manufacturers is strong with most recognising that digitalisation and automation technologies will enable them to increase productivity and be competitive on the global stage. But here in the North West there is an appetite for a more collaborative approach, to exploit technologies on a larger scale, to work smarter together…there is a growing voice for a manufacturing cluster.

Manufacturing clusters are not a new concept. Sheffield became world famous for its steel industry and Stoke on Trent is known worldwide as ‘the potteries’ for its collective produce. Today, technology enables organisations to be based anywhere in the world and to work collaboratively, and yet industry clusters are still massively prevalent due to the benefits of ‘strength in numbers’ – take Silicon Valley, Hollywood or closer to home Media City in Salford.

The term business cluster was coined by Harvard professor Michael Porter when he argued that businesses in a geographic area were able to achieve a competitive advantage, through a concentration of resources. Increasing the number of similar companies based in an area drives the direction and pace of innovation, which in turn creates future growth and stimulates new businesses.

Clusters have a proven track record in opening up new markets; securing investment from Government and industry. Attracting business and academic expertise and providing opportunities for collaboration, co-operation, mentoring and peer support/learning.The benefits of an Advanced Manufacturing cluster based in the North West would create a strong innovation culture that would positively influence regional economic performance and support the Northern economy as a whole.

Finding strength in numbers

A recent report by McKinsey and Company confirmed that Clusters are a major contributor to growth. The most significant clusters identified in the report contained only 8% of the UK’s businesses, but generated 20% of UK output.
Clusters bring business advantages that cannot easily be replicated. Economically significant clusters are ecosystems of knowledge shared across networks that promote a better understanding of what customers want, but also support emerging innovations. As a consequence they attract investment and talent and mean that they are an important sources of well-paid jobs.
The UK’s top 10 clusters contribute £200bn in GVA to the UK economy p.a.
Within a Cluster, entrepreneurs are able to meet like-minded people to explore ideas or partnerships. Producers/manufacturers, resellers and suppliers form a symbiotic relationship to better understand each other’s business – allowing companies to easily purchase industry specific equipment or services.
Businesses within Clusters attract and retain talent because the opportunities for career development and growth are available across the geographical region.
Keeping the entire manufacturing process – from concept, R&D to development in the same region, doesn’t simply retain manufacturing jobs but has long term positive impact for the area.
Cycle of innovation happens at a much higher rate within a business cluster.

Universities and research organisations are an important part of a cluster

The important role of universities and other higher education institutions in building sustainable economies is increasingly recognised and is one of the reasons why clusters in many sectors have been successful.

Universities play a key role in providing specialist knowledge, particularly on R&D collaboration where they can provide support and facilities to many SMEs wanting to innovate. The region has some of the UK’s most outstanding universities and having these R&D skills as part of the Cluster would ensure products are quick to produce. Clusters foster knowledge flows from universities to businesses and then from business to business.

Summary

It’s not merely a theory. Research has found that, on average, a company located within a business cluster experiences better chances of survival and stronger growth than a company located in isolation. There is a clear opportunity to capitalise on the manufacturing expertise within the region, to harness the momentum for change, to make the region synonymous internationally for advanced manufacturing innovation and the ‘go to place’ in an ever-increasing competitive landscape.

The creation of a new manufacturing business cluster will drive growth and create new prosperity in the region. It is important to recognise that an industry cluster is more than just a group of similar companies geographically located next to each other, this vision is about creating partnerships and strategic alliances to establish a greater competitive advantage and wealth creation for the whole region.

But spotting an opportunity and realising that opportunity are very different things… Policy makers have to back such an initiative, ensuring that infrastructure is established that provides the foundation for this transformational opportunity for the North West.