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What is a cluster anyway?

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WMCO by Mike Baker
Mike Baker is the Chief Executive Officer of the Wood Manufacturing Cluster of Ontario. He can be reached at: mbaker@wmco.ca
We are finding more and more that a vast majority of Canadians in our industry doesn’t understand the concept of industry clusters. The biggest culprits are various levels of government and their programs that use the word cluster so loosely it has lost its true meaning from what it was intended to be.
We also have many people who can’t understand it because it is a different way of thinking and a learned behaviour for many. I addressed this aspect in past columns about culture change for our wood manufacturing industry.

So, what is it about this word cluster? What does it really mean?
The true definition and discipline behind industry clustering was theorized by economist and business strategist Prof. Michael Porter of Harvard University back in the early 1990s. His cluster theory has been embraced and formally operationalized to guide local and regional economic development policy and strategy by most countries in the EU, by the Organization for Economic Co-operation and Development (OECD), and other countries around the world (Google Michael Porter and clusters and you will see hundreds of articles and news feeds). So, clustering has been around for 30 years, and the EU countries are 30 years ahead of us.
Porterian clusters focus on one industry, one region, the manufacturing companies (SMEs), the supply chain, academic partners, other industry partners, and government stakeholders. The idea is that when you combine all of these stakeholders; and facilitate collaboration between competitors and the supply chain, channel feedback to post secondary institutions for workforce development, involve government for support of collaborative projects, and facilitate collaborative activities that provide impact and value to the companies, the industry at large becomes more globally competitive vs. expending energy competing within itself.
Clusters take 10-15 years to mature, with government assistance to get them started, and gradually building revenue streams to be sustainable; but a small amount of support from government partners always remains to support collaborative project activity.
Some examples of how the WMCO cluster adheres to the cluster model can be found in our programming (training), events (digital adoption/industry 4.0, plant tour kaizens, networking, round tables, member driven topics) and collaborative projects (export readiness, international trade shows, and). These collaborative projects, programs and events get competitors talking to each other and finding common ground: a central focus of the strength of clustering and global competitiveness.
For the academic partnerships, the focus is workforce development and education. WMCO has a seat on the program advisory committees (PACs) for three post secondary woodworking programs: Conestoga, Humber, and CEO Mike Baker is chair of the PAC for Georgian College. The role on these committees is to make sure the voice of the manufacturer is heard when it comes to course curriculum and program development. This is so that the colleges are teaching the right things, and graduates from these programs have the right skill sets to enter the workforce in your shops. Members attend these meetings with us, and give advise to the teachers. At the Georgian PAC, we review courses at every meeting, so this feedback is in real time. WMCO also informs and shares resources with instructors where appropriate and necessary to share with students.
WMCO also sponsors 25 high schools in Ontario for the Wood Manufacturing Council’s WoodLinks program: a curriculum for high school shops; since many young people enter our workforce right after high school.
The role of academia in EU clusters is also to conduct research to quantify the impact of clustering, by studying and monitoring impact on the aggregate of companies KPIs; thereby justifying support of the clusters. WMCO is now aggregating metrics of its members and gathering data to tract impact of the cluster activity. We are currently working toward getting this level of engagement with academia here in Canada.
As mentioned, EU countries have made clustering central to their local, regional, and national economic development polices and strategy. For many EU regions, you need to be a member of an industry cluster to even get a business license! This is how entrenched it is in their industry culture, and with government, with funding models to support industry. The results for countries like Germany (industry 4.0 adoption, which is 15 years old now) and Italy speak for themselves; who are our benchmark countries for our industry for technology, automation equipment and design respectively. For those of you reading this article that have friends, acquaintances, or business partners or customers that have manufacturing operations in the EU, ask them about industry clusters in their regions. The answer will likely be a long one explaining what clustering activity is taking place.

So what makes clusters different from associations?
One answer can be found in geographic coverage. Clusters are very regional in focus whereas some associations have national mandates. Another difference is the focus on collaboration, leveraging government funded projects, and events, designed to get competitors talking to each other and sharing best practices and challenges. The academic link described earlier is another example. In Upper Austria for example, they have seven different clusters making up one large national cluster.
Where a cluster may not exist, enhanced virtual engagement now allows companies to participate in clustering activity outside of their region with other clusters, as is the case now with WMCO, with member interest coming from not only all parts of Ontario, but across the country as well.
The engagement and management of supply chain is another difference: while supplier members are embraced for their expertise and knowledge to support the industry, they do not have all of the same privileges as the manufacturers.
Another example is with the WMCO cluster board governance; suppliers cannot become chair, and while suppliers can vote, they cannot contribute to a quorum.

Why is clustering so new here in North America and not as common?
The answer to this question lies in the need for trust and foresight in our business culture in North America to be open to collaboration for the greater good. For many this is a new behaviour to adopt, and the WMCO is leading the charge for our industry in Canada as the only true cluster in existence for the value-added wood industry in the country. It also lies in the lack of true understanding on the part of our governments to support the core activities of clusters. Clusters are a long play taking up to 15 years to truly mature. It takes political will and commitment across government mandates to establish clusters. The proof of their success is evident around the world.

WMCO Cluster Vision:
WMCO’s leadership is strengthening the performance, innovation and agility of Ontario’s value-added wood manufacturing industry.

WMCO Cluster Mission:
WMCO’s cluster model generates collaborative relationships to share knowledge, stimulate innovation, and foster new mindsets and ways of working together.
WMCO Guiding Principles

We will do our best work together when we:
Collaborate with each other;
Share best practices and emerging new ideas/technologies;
Create an engaged community;
Respect diverse viewpoints;
Seek synergies between our companies and partners (government and academia);
Value the support and innovation of our supplier members; and
Conduct our business in a fair and ethical manner.

WMCO Strategic Directions
Invest in Building Strong Relationships
Attraction of members/partners
Retention of members/partners
Outreach to Strategic Partners (Regional, National and International) to support sustainability, programming, and new initiatives
Design and Provide 
High Quality Programming Events
Training programs
Collaborative Projects
Enhance our Sustainability
Internal Revenue Development – membership and programs
External Revenue Development – government funding, special projects, and emerging opportunities  

You can learn more about the WMCO cluster here: www.wmco.ca

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