The Royal Society of Edinburgh welcomes the opportunity to comment on the approach and focus of the four cluster areas in Scottish Enterprise’s cluster strategy. The Society has been actively engaged in the national Technology Ventures initiative to promote the commercialisation of the Scottish science base, and has partnered Scottish Enterprise in delivering a programme of activities over the past three years to promote a better understanding of the issues involved in innovation and commercialisation. This response has been compiled with the assistance of a number of Fellows many of whom have been involved with the RSE’s work on Technology Ventures and Foresight, in partnership with Scottish Enterprise. They come from a range of backgrounds including universities, small and medium sized enterprises and multi-national companies.
Reasons for Clustering
Where commerce develops, it is not unnatural to find a number of companies being formed or created as part of the development for a particular market. In Scotland, as elsewhere, certain industries have always clustered, for example, textiles in the Borders, ship building on the Clyde, the financial community in Edinburgh. These historical clusters have typically formed due to the attraction of economic logistical benefits. However, without such advantages, or a large UK or Scottish market, specific attractions will be needed to generate new clusters. There are, nevertheless, general benefits in establishing a framework to encourage links between the customer, the contractor, research facilities and training providers. Such links encourage support and generate business because of the opportunities and strength provided. They can also make universities more aware of the problems faced by industry in the supply of good university graduates, specialist training, and in meeting the R&D requirements for next-generation products. Given modern communications, however, physical nearness may not now be as important as was once the case, and clusters could be considered on the level of Scotland as a whole.
Choice of Clusters
However, while the cluster approach will be useful in some sectors, it may be unsuccessful in others.The key will be whether the parties concerned can genuinely identify some common problem or interest to provide the motivation to overcome competitor attitudes. A similar issue was raised in the RSE’s response to Scottish Enterprise’s consultation on A New Strategy for the Scottish Enterprise Network, namely where and when to lead; where and when to seek partnership; and where to stand back and let others act. The last of these is critical - to know when a proposed course of action should not be followed. A quality analysis of strengths and opportunities should lead to a focus on the topics and projects that are most likely to succeed. This is not just a fine academic point; it is absolutely essential to appreciate the impact of early success on a new national venture, such as this initiative. Success rewards, motivates and opens doors that would otherwise have stayed shut.
The RSE supports Scottish Enterprise’s efforts in this strategy and will continue to take an active interest in its development. In encouraging the Cluster Strategies, however, a high degree of prescription and set roles for different stakeholders in the process should be avoided. Industry members should be heavily involved in policy creation and set the framework for co-ordinating strategies in which these stakeholders are signed up from the start. In this way strategies can avoid including components at odds with the understanding of those in the industry. Much will depend on the calibre and experience of the team leaders, and well defined performance indicators will be important in judging the success of any strategy.
The specific approaches and focus of the cluster teams in the four pilot areas are addressed below:
Oil and Gas Cluster Update
The oil and gas industry came to Scotland specifically because resources were available in fairly large quantities. The number of companies which moved into the Scottish economy as a result was significant and the oil and gas industry has had a considerable impact on the Scottish economy. However, there have been very few major Scottish or UK companies created, and it is surprising that the paper states that an effective and competitive oil and gas cluster exists. Most commentators take the view that the economic and industrial impact of oil and gas in Scotland is much less than it ideally might have been.
Those international companies in Scotland which serve the global oil industry are likely to go elsewhere when Scottish reserves are depleted, but it is possible that the UK could form some part of their international operations. However, in 25-30 years time it is likely that there will only be a small number of Scottish based companies serving the international oil industry. These will have developed capability and technology which can be sold worldwide. As the sector’s Cluster Strategynotes, the strength Scotland currently has in the oil and gas industries is probably not reflected in the services provided overseas. Expansion overseas should be one of the important objectives of the programme. The service companies supplying the oil & gas, and other, sectors represent world leading hi-technology activities, and in some areas there is the opportunity to make Scotland the hub of such a hi-technology service sector by providing improved co-ordination of services and better international marketing. The universities can also satisfy one of the other issues identified, namely skill shortages, by encouraging industrial training services. However, given the competition, the tendency towards mega-companies and the international nature of the industry, there will be difficulties in sustaining this cluster in Scotland.
Food and Drink Cluster Update
In the food area as defined, a cluster is more likely to be found within a subsector of the industry. For example, a distinction is best made between the food and drink sectors which have very different characteristics. The chance of success in this Cluster, however, is enhanced by recognition of the need for food growers and manufacturers to improve quality control and branding, and to address the aggressive buying policy of major supermarkets.
The document rightly identifies high added value supermarket food products as a key area for focus, as well as smart packaging (such as built in quality monitor systems). Much of the manufacturing part of the food industry imports raw materials and therefore sourcing, and all that goes with it, will be an important area.
Semiconductor Cluster Update
In general terms the approach taken is sound, following the USA pattern. However it should be recognised that a critical mass needs to be realised in order to support a range of infrastructures. Foreign companies primarily control this sector. Whilst inward investment provides job opportunities, and therefore attracting it has its own importance, there will be difficulties for this cluster strategy to evolve in ways which strike any different notes from those controlling the investment flows. One of the reasons that semiconductor fabrication in Scotland is not linked strongly to the University R&D base is because most of these plants are foreign owned, with their R&D being done elsewhere. It is, therefore, difficult for Scottish universities to influence the product or the production philosophy of these plants.
The sector’s Cluster Strategy rightly focuses on skills requirements and the targeting of research and design. Another important area of focus should be freight transport, and specifically air freight transport. With 60% of the inputs imported and nearly 100% of the output exported, and with much of the intermediate processing (such as test and assembly) done overseas, a reasonable air freight service will be very important.
Biotechnology Cluster Update
A well conceived and properly executed biotechnology cluster approach has the potential to be successful and contribute to Scotland's future prosperity It also has the considerable advantage with the first stage in the production chain (i.e. research and pre-market development) having some distinctive roots in Scotland. However, the document paints a picture of all the things that are possible in an ideal world. In practice, one cannot set out to build a fully comprehensive biotechnology industry without recognising issues like the time and large sums of money required to kick-start the growth of certain of these new industries. It follows that part of the strategy must be to focus sharply on a small number of priorities.
The priorities must arise from an analysis of what has medium-to-long term commercial prospects and what it is that the existing Scottish scene is good at doing. The answers to these questions have to be related to other issues of a broader nature. For example, if it is envisaged that the Scottish universities represent a powerful innovative drive, will the subsequent spin-off initiatives be expected to develop vertically, doing their own scaling-up, their own clinical trials, their own marketing and production? Alternatively, will the spin-off companies licence out to larger (UK or EU or global) companies, and then go back to more basic discovery and development work? These are illustrative of the kinds of issue that need early consideration to set an achievable and enduring strategy.
Finally, a few points about communication and attitudes, because these are areas in which the seeds of project failure are often sown. Biotechnology investment not only is high risk, but also has to be relatively long term. Several UK biotechnology sector companies have made too many unjustified bullish claims about projects and products, and this has undoubtedly sullied relationships with both the media and investors. There is a lot to be learned about presenting complex biomedical science in an exciting and understandable way, without over-hyping the prospects and ignoring the practical difficulties still to be overcome. Some of these people issues are indeed pointed out in the document, but it needs to be appreciated that changing attitudes is a very slow process. It is tempting to think of the biotechnology industry in terms of complex scientific concepts and technical fixes alone but, in the end, it is a people activity and success will depend on bright, innovative and motivated people, working in teams based on mutual understanding and respect.
In developing cluster strategies it should be remembered that Scotland still appears to have a population in which many are poorly educated and have low levels of training and few industrial skills. It will be essential, therefore, to encourage developments providing both high and low technology jobs. In the longer term, if we can generally improve educational standards to be amongst the best in the world, then the vision for Scotland might be clusters of high technology companies built around a Scottish education system renowned for its teaching and research. The early priority being given by the Scottish Parliament to raising standards in education encourages such thinking and is very appropriate for Scotland in the 21st Century.
In commenting on this document the Society would like to draw attention to the following Royal Society of Edinburgh publications which are of relevance to this subject: Commercialisation Enquiry: Final Report (1996); The Innovation - Exploitation Barrier (January 1997); The Scottish Semiconductor Industry (February 1997); The Scottish Oil and Gas Industry (April 1997); Molecular Medicine and Healthcare (October 1997); The Software Industry (November 1997); Engineering and Physical Sciences Based Innovation (March 1998); A New Strategy for the Scottish Enterprise Network (October 1998) and Devolution and Science (April 1999).
Further information is available from the Research Officer, Dr Marc Rands