Clustering, Competing Globally and the Northwest Education Cluster

By Geraldine M. Power

The key elements for a cluster to be successful and beneficial include cultivating the unique resources of a region, along with the presence of critical mass and talented people. All this takes place with an eye toward building a world-leading industry that sets the region apart.

Cluster 101

Dr. Fred Phillips, former professor and founding head of the Management in Science and Technology school at the Oregon Graduate Institute (OGI) and former member of the SAO board of directors, was involved in the creation of the Northwest Education Cluster (NEC). Phillips is currently professor and associate dean at the Maastricht School of Management in the Netherlands. He has written a book that will be released in April 2006 called Social Culture and High Tech Economic Development: The Technopolis Columns, which covers technology-based regional development and highlights the Northwest Education Cluster.

In a recent interview, Phillips said that the core issue is building international connections for companies within a region. According to Phillips, a cluster exists to help its members; for example, to find the best customers, suppliers, expansion locations, knowledge, employees and alliance partners worldwide. A networked cluster can also bring different kinds of people to an area, for conferences, product demos and company tours.

Phillips addressed the question of what potential clusters might accomplish as a group, rather than as individual companies. He said this goes back to a basic definition of clusters, Cluster 101. With all that is involved in the transfer of skills, as opposed to the kind of knowledge that can be read in a book, this exchange has to take place face-to-face. That’s why it’s beneficial for industries to be geographically clustered, rather than around the world. It’s what makes a modern high technology cluster something more than a traditional trade organization.

This transfer of skills includes the rapid buying, selling, birthing and dying of companies; competition; movement of employees; and formation and dissolution of alliances. Products use a great deal of licensed technologies, and OEMs have to train suppliers.

According to Phillips, there are no particular “types” of companies or technologies that are more suited than others to gaining advantage as a cluster, nor any specific, defined “timing” in forming a cluster. Clusters typically involve big companies, small-to-medium size suppliers, customers and entrepreneurial start-ups. All these companies engage in the knowledge sharing that is a defining feature of clusters.

Development of the Northwest Education Cluster

Bill Kelly, CEO of Learning.com, said that the presence of critical mass, such as the education companies in Portland, means that clusters develop naturally. He added that the local economic development agencies should focus their attention on things that naturally emerge, rather than spending resources trying to make something happen that is not naturally occurring. Kelly reinforced the idea that every location has its own characteristics of core businesses, the nature of its labor force and intellectual ideas among its population.

In April 2003, Kelly, a Harvard University MBA alum, was asked to speak to the Harvard Alumni Association meeting, and chose the topic, “Being Entrepreneurial in Portland: Culture, clusters, and big ideas.” During the presentation, Kelly highlighted his thoughts about cluster formation, including the idea that there is an emerging education cluster in the Portland area.

Kelvin Ng, one of the attendees at the meeting, felt that Kelly presented a compelling case for forming such a cluster. Ng also has an MBA from Harvard, with an undergraduate degree from the University of Singapore in business administration. Ng was interested in effecting a movement, as opposed to focusing on working specifically within a company.

Phillips asserts, “Ng is what Malcolm Gladwell, author of The Tipping Point, calls a connector. He just lives to build networks, bringing people with common interests and complementary needs together.”

Ng contacted Phillips to help him coordinate the next meeting, and Phillips responded to his request, in part because of his involvement with Cenquest. OGI’s partnership with Cenquest had made it possible for his management department at OGI to be successful in distance learning, so Phillips understood the potential benefit of having an infrastructure of such companies in Portland.

A number of attendees at Kelly’s presentation were already working in education-related companies, so the concept of clustering was appealing, in moving the education industry forward and increasing the visibility and legitimacy of the education industry nationally and globally.

Phillips and Ng coordinated the next meeting, which took place in August 2003. The approach to the meeting was to “just see what happens,” said Phillips. “It was not to force matters. If sparks flew, then more meetings would be scheduled. If no sparks, the group would enjoy each other’s company for the evening, and then forget about it.”

As it turned out, according to Phillips, there were sparks. The sparks were generated by the strong presenters, which included Bill Kelly and Mona Westhaver, co-founder and president of Inspiration Software. Phillips states, “They showed the audience why they were there.” Phillips himself talked a bit about cluster formation.

Ng invited Jim Snyder to this meeting. Snyder is now director of the Northwest Education Cluster and currently works for the Northwest Evaluation Association (NWEA), as an estimating specialist and sales and marketing representative.

After this meeting took place, Ng said that he had never had such an overwhelming number of emails to thank him for staging such an event. Ng attributes this to the idealists and remarkable entrepreneurs that he sees drawn to the education space.

Cluster can be empowering

About 20 companies attended this August 2003 meeting, and most had no idea that 20 some companies were involved in the education market. Phillips thinks they were fascinated to find this out, and felt empowered by the new ability to announce through the Northwest Education Cluster, “Look at all of us, we’re here!”

Phillips presented a flow chart at this meeting, as a view for discussion, entitled, “Why are we here and what can we accomplish?” The flow chart addressed such questions as, “Are we a cluster?” Specifically, “Do we have the critical mass of companies that will attract more companies? At least one company that can be globally competitive?”

The chart also outlined steps to take; for example, hearing from panelists about some of the local education companies and further studying whether it really made sense to form such a cluster. This flow chart provided a framework for the education cluster’s first meeting.

The Northwest Education Cluster has since grown to over 35 companies that are actively involved.

To Phillips knowledge, the education cluster has received no direct government support, though some state education-related agencies participate, and in fact not much financial support for anyone. Phillips sees this as a good example of a decentralized, spontaneous, networked initiative for knowledge-based industry and economic development.

Phillips asserts, “Oregon continues to attract educated people who are passionate about education.”

Phillips went on to explain that Joe Cortright from Impresa, a Portland-based economic consulting firm, can’t quantify passion, but he has documented that Portland attracts more educated in-migrants than other cities, and that these migrants see the universities, the high per capita book sales and other indicators of an “installed base” of an educated population in Portland to be a drawing card. He says that these people are obvious targets for education companies and obvious candidates to become educated-related entrepreneurs.

Clustering in Oregon continues to draw interest

The concept of clustering is drawing more and more interest. April 19 and 20, 2006, the third annual InnoTech is taking place at the Oregon Convention Center, with the focus on learning more about innovative clusters in Oregon, what are Oregon’s cluster strengths, what are the hot technologies and what clusters are collaborating. Watch for information on a complete track on Industry Cluster Development.

Phillips referred to Tom Friedman’s book, A Brief History of the Twenty-first Century, where Friedman writes, “The world is flat.” Phillips said Friedman means that globalization makes everything equally available everywhere.

Phillips stressed, “If Portland doesn’t fight hard to keep and nurture every distinctive advantage it has, people of the 2025 will say of Portland as Gertrude Stein remarked about Oakland, California, in The Columbia World of Quotations: ‘There is no there there.’” (Stein spent her childhood in Oakland.)

Creating industry clusters is one strategy, along with education, to make Oregon’s economy stronger, and to compete nationally and globally.

About the author

Gerrie Power worked at Intel Corporation in marketing, editing and writing and has an M.A. in professional writing from Carnegie Mellon University. She is based in Portland, OR. For questions and comments, email gerrie@powercommunication.biz.