Karl-Heinz Streibich: Preserving Germany’s innovative strength with clusters

Innovative strength is increasing in significance as a competitive factor but innovations can only be developed in open cooperation with strong partners. On the international market, high levels of efficiency are necessary in order to be able to keep up with global competitive pressure, and companies can only be efficient by achieving economies of scale and optimizing their processes. Eco­­no­­mies of scale can only be achieved through size or cooperation, so global partnerships are necessary, but only local partnerships – or clusters – can create long-term competitive advantages, thereby generating economic growth.

But what are clusters, anyway? They are not geographical piles of companies in a given sector of the economy. Clusters focus on reinforcing a certain profile within a region and focus on a given sector or theme. The air travel cluster of the Ham­­burg metropolitan region is an example. Clusters are greater than the sum of their parts. Cluster first become real when there are concrete, common projects. Clusters become real when they have been inter­­linked and when they communicate and act with each other. Intensive contacts must be fostered within clusters and the key partners must be able to trust each other. Without knowing about each other, none of them can do business with the other(s) and without fundamental trust, partnerships cannot develop. Clus­ters mean short distances, intensive communication, speed and efficiency.

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This makes it possible to discern new trends and turn the results of research to marketable products or services more easily. This avoids dual research and creates value on a joint basis. It is axiomatic that the ability to commercialize research results in the market also means the ability to ensure growth and employment – and Germany certainly has the potential for that. While we known how to turn money into knowledge, we also need to know how to turn knowledge into money again. Successful clusters do this by forming a bridge between science and commerce – including in Germany. Clusters are the right instrument for directly promoting innovation and productivity and are also industrial crystallization centres and motors for innovation.

Successful clusters are more than the medium-sized sector and start-ups. The networks need medium-sized companies and start-ups but they also need global players as “locomotives”. Without global players, the smaller partners in a cluster cannot grow, and can turn the results of research into commercial success only with much difficulty. All figures in the innovation index point to this. Small-to-medium-sized companies often have difficulty in conquering new markets, especially on an inter­national basis. Nowadays, a single working life is no longer enough for a medium-sized company to build up its international visibility.
This is easier to do in association with larger companies. Medium-sized companies benefit from the strength of the “big guys”. And the “big guys” benefit from the flexibility of the “little guys”. The Finnish city of Oulu is a typical example; its economic region is commonly referred to as the most successful cluster in Europe. Indeed, without Nokia, Oulu would probably never have developed as much as it has over the last 20 years.

Clusters also create space for the new. The level of mobility and start-up activities is enormously high in clusters and they also have a large number of patents. Silicon Valley is a classic example. It has ideas, research, specialists, services and venture capital especially for the IT and software fields all packed closely together. Investors based in Silicon Valley do not need to be told about the importance of IT. With a good business idea and the corresponding business plan it is possible to obtain the necessary venture capital in Silicon Valley whereas such an application might be rejected elsewhere. Google, Yahoo or Facebook did not develop there just by chance. Venture capital enables companies to develop a critical mass quickly and for the long term. For SMIs in particular, investors are an important ingredient in generating growth.

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All this shows that, as an organizational principle, promoting clusters is the right method for implementing targeted and successful innovation, research and business policies. The top cluster competition sponsored by German Federal Research Minister Annette Schavan is an important step in reinforcing already-existing clusters in Germany. As part of its high-tech strategy, the German Federal Ministry of Research is investing the right amount of money for the right purpose. As with its Excellence Initiative, it makes use of existing strengths. The so-called “watering can” method is now history once and for all; Germany’s high-tech strategy is the path that this country must take and even the government coalition agreement points in this direction. Only if Germany strengthens its growth industries, that is its research and technology-intensive sectors, with high levels of added value, will it be able to maintain its competitive position as an exporting nation. According to estimates by the Prognos Institute, the software industry alone, which is of particular importance as a cross-sectional technology for the competitiveness of the German economy, will create over 400,000 jobs here by 2030. Positive predictions have also been made for other future-based sectors such as biotechnology, logistics and medical technology. Germany has not yet reached the end of its journey. On an international scale, its clusters are still too small. The potential is there and the country needs to make use of it now.

Karl-Heinz_Streibich_tcm16-41395The author was born in 1952 and studied information technology at the Offenbach Institute of Technology. He began his career at the Dow Chemical Company in 1981. In 1996 Streibich was appointed to the management of debis System­­haus GmbH, where he was responsible for the merger with T-Systems GmbH. Karl ­­Heinz Streibich has been chairman of the executive board of Software AG since 2003.