Another full day of immersion in Karlstad, this time on economic development at a very local level focused on wood processing. Here’s a view from on top of the water tower by Karlstad University looking out over the University, town, Lake Vanern and toward one of the paper manufacturing plants in the Varmland region.
First up it was an overview of clusters in action which was great to follow on from Harvard/MIT meeting last week. There are hundreds of industry/regional clusters in the EU, with a Cluster Observatory and there’s also research focused internationally.
Mats built up The Paper Province for 10 years and now works all over EU. Initially the data didn’t identify wood processing as a cluster in this region, so early on they spent time proving it was. Tetra Pak is one company you may know. As mentioned yesterday there was significant consolidation in the industry. It’s quite a story, the cluster started with 7 companies who had a burning platform around getting people to work in an industry which wasn’t seen by future employees as desirable. This was at a time near the late 1990’s tech peak where the talk was about moving to “new economy” and how the ‘old economy” would disappear.
What I really enjoyed about today was seeing the results of pragmatism and determination of people working together over 15 years.
Applicable learnings for industry development were a lot around the people:
- Industry involvement is the bottom line, so long as there’s not too much “our industry is different”
- Being collaborator is like the metaphor – “bridging the gaps and then managing traffic on the bridges”.
- Trust is key
Cluster actions are grouped into 3 activities:
- Cluster identity and attractiveness. Doing this for an “old industry” like paper manufacturing involved opened changing perceptions through marketing, educating and empowering teachers, integrating University and research and developing their own school.
- Innovation and R&D.
- Business development, e.g. Companies leveraging off each others export contacts, sharing space at tradeshows.
Over 100 companies are now in the cluster and as a group they have outperformed other benchmark clusters in most other performance measures (like financial results). It only takes a decade or so…
The future of primary industries?
Building on yesterday’s post about increased competitiveness – what is the future of industries, particularly primary manufacturing?
As an example, Sweden takes a different to wood processing. The ownership mixture of forests is half small lots (200,000 owners!), and the other half split between large companies and government, which means very little vertical integration (ownership of forest and processing/manufacturing). Despite this, almost all the wood is processed in Sweden into a range of products and then exported meaning very few raw log exports (they can import some wood). Depending on the tree it takes 75-100 years for a tree to mature in Sweden compared to NZ’s 25-35 years…check out a comparison. You’ll know of Ikea, which started in Sweden and look what it is today…nearly EU $30b in revenue per annum.
What would happen if companies and regions did nothing more than try and increase the value of their current products/services? Especially when they are primary based (aka provincial NZ). This might employ less people, but they will be higher skilled and higher paid. What could then be leveraged off?