Globalisation is characterised by open market-access for practically every supplier. This increases competitive pressure in all markets. The internet enables real-time access to information in the private sphere as well as in business. This dramatically increases the speed at which customers can avail themselves of the many and varied offers there. The combination of both effects – globalisation and the internet – thus increases exponentially the pressure on companies to offer the best and most innovative goods or services in order to compete in the market. Innovative strength has therefore become a crucial competitive factor. Large companies have the means to finance innovation independently. Medium-sized companies, on the other hand, need partners. Large companies usually have partners in the medium-sized sector in order to obtain innovations on a joint basis, which explains why forming clusters is an excellent initiative for the medium-sized sector.
But what are clusters, anyway? A mere geographic collection of companies in a certain sector? Clusters are more than that. Clusters are defined as the regional concentration of companies in the value-creation chain of one or several sectors. These include not only companies but also vocational training institutions, research centres, public authorities, associations and industry chambers. Clusters focus on strengthening a certain profile within a region and specialising in a given sector or market. They are more than the sum of their parts. Clusters develop when people have joint projects. Clusters develop when people form networks, talk to each other and work together. Intensive contacts need to be fostered and the key partners must basically be able to trust each other. Without knowing about each other, businesses are not able to get started and no partnerships can be started without a fundamental relationship based on trust. Clusters therefore mean short procedures, intensive communication, speed and efficiency. By exchanging views and information, new trends can be recognised and research results can be implemented more easily as a result. Double research can be avoided. Joint value-creation also develops as anyone who can get successfully established in the market will ensure economic growth and employment – areas in which Germany basically has potential. We know how to make knowledge out of money but we must turn the knowledge back into money.
Successful clusters can do this. They form a bridgehead between science and business, including in Germany. Clusters are the right instruments for directly promoting innovation and productivity. Clusters are industrial crystallisation centres and motors of innovation, as can be seen in the example of Silicon Valley in California. According to the 2010 Software Atlas for Germany published by the Fraunhofer Institute for Systems and Innovation Research (ISI), the Rhine-Neckar district (around Heidelberg) leads the top 25 of all
locations in the software and IT services sector in Germany. The city of Darmstadt is in third place. The Darmstadt-Rhine-Main-Neckar engineering region is the birthplace of company software, which has become established since the 1970s with innovations on the world market and which is now one of the most important ICT sectors (ICT = information and communication technology). These software solutions make companies in all sectors efficient – for example in the fields of materials handling, personnel, finance, marketing and distributing, production planning and control, logistics and the management of product life-cycles and supplier and customer relations. The Rhine-Main-Neckar software region is the world’s most efficient network of manufacturers, service
providers, research and vocational training centres and users in this field. In Darmstadt alone, major research and vocational training centres are part of the cluster, which is made up of the Darmstadt University of Technology, the Darmstadt University of Applied Sciences and the Fraunhofer Institutes for Secure Information Technology (SIT) and Computer Graphics Research (IGD).
Software AG is the second-largest software house in Germany in the cluster, just like many small and medium-sized companies in Hessen’s company software sector. SAP Research CEC Darmstadt is also a member of the Rhine-Main-Neckar software cluster.
Successful clusters need both medium-sized companies and start-ups (so-called “SMEs”, or “small and medium-sized enterprises”) as well as global players which perform as “locomotives”. Medium-sized companies that try to “go it alone” often have problems with their international orientation in particular; whereas in a group with larger companies, it is easier to obtain international visibility. Medium-sized companies benefit from the “suction” or “bandwagon” effect of the “big guys”. They then benefit in turn from the flexibility of the “little guys”.
Clusters create room for the new. The mobility and the company formation activities within networks are enormously high, which can also lead to an increasing number of patents. Let us take Silicon Valley as an example. This is considered to be an internationally respected example of cluster-forming because of its interface between science and business. In Silicon Valley it is
possible to find ideas, research, skilled employees and services for the IT and software sectors all closely grouped together. Investors based in Silicon Valley do not need to be told the significance of IT. With a good idea and the corresponding business plan, start-ups are able to access the capital they need, which they might not be able to obtain elsewhere. The best examples of this are companies such as Google, Yahoo and Facebook. For SMEs in particular, investors are therefore an important “ingredient” for being able to generate growth.
All this shows that promoting clusters as an organisational principle is the right method of operating targeted and successful innovation, research and economic policies. The top cluster competition is an important step for reinforcing already existing clusters in Germany. The IT industry in Germany is eminently suited for cluster formation and the software cluster is a positive example. According to estimates by the Prognos Institute, the software industry alone, which, as a cross-sectional technology, is of major importance for the competitiveness of our economy, will create over 400,000 jobs in Germany by 2030. We are well on the way to meeting this target but are still only at the beginning. The potential is there and we must use it now.
The author was born in 1952 and studied telecommunications at the Hochschule für Technik in Offenbach. He started his working career in 1981 at Dow Chemical Company. In 1996 he was appointed to the management of debis Systemhaus GmbH, whose merger with T-Systems GmbH he headed. Karl-Heinz Streibich has been chairman of the executive board of Software AG since 2003.