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Every month, The Moxie Sessions bring together a small group of Auckland business thinkers to discuss ways New Zealand can take advantage of the Internet and boost its competitiveness. For more, see http://themoxiesessions.co.nz. This month, we visited technology and innovation precinct GridAKL to talk clustering and collaboration: how are we going at building a coherent, connected tech ecosystem? What can we do to work together better? And, if bigger cities are ever more important as centres of economic activity, what are the implications for the nation?
The No 1 fried rice flavour at my favourite takeaway isn’t pork, chicken or even the “feeling fancy tonight Mr Davis” $2-extra prawn. It is and always has been “combination.” It’s not surprising. You never know what each mouthful will deliver, with always different but inevitably delicious consequences (OK, MSG might just help that inevitability a little). While even the freest-ranging pig is unlikely to ever come snout to mandible with a prawn, fry them together with a little of whatever else is on the shelf and you have a meal to remember.
The last Moxie Sessions event left me feeling a little bit like that about business collaboration.
Despite all that the cloud promises and delivers, the argument for physical agglomerations is compelling and well supported by the economic numbers. Creating clusters within those agglomerations is a little more tricky. And like that fried rice, combinations are what make clusters click.
Patrick McVeigh is GM for Economic Growth at Auckland Tourism Events and Economic Development (ATEED). Despite this, and despite the fact that we are ourselves clustered around a table drinking comically small glasses of wine at a partly ATEED-funded cluster, Patrick is refreshingly critical of the concept.
While Patrick has been part of cluster initiatives in the UK (particularly in London) he claims that he “didn’t inhale” and is critical of businesses and particularly governments who see clusters as a magic bullet.
“Clusters exist, certainly, and there’s evidence of them working. The real question is around whether the public sector can get good ROI from funding them or if there is a magic set of ingredients that will create a successful cluster.”
Instead, Patrick suggests focusing on some (possibly less sexy) fundamentals will deliver more bang for buck: increased investment in skills, research and development, productivity and entrepreneurship and of course collaboration and networking.
Anna Guenther works mostly in Wellington where, famously, you can’t stop to restring your ukulele by the bucket fountain without bumping into a fellow social entrepreneur. As founder of crowdfunding platform PledgeMe she’s a big fan of openness and collaboration, providing it has a focus. “Collaboration needs to be action-oriented, not just for collaboration’s sake.”
Openness matters too. Overcoming the reluctance to share ideas before they’re fully formed, she says, is a key step to getting the critical feedback that makes ideas better.
And the more isolated you are, the smaller your city, or office, the less likely you are to have those opportunities to share.
Geoff Cooper is chief economist for Auckland Council and not surprisingly he’s a big fan of cities as engine for economic growth. Not all cities, though.
Worldwide, the largest cities are growing the fastest, and that pattern holds true for New Zealand. Auckland’s population growth leads the way but at between 1.5-2% annually it’s still quite modest by global standards. Elsewhere in the country the picture isn’t so rosy. Dunedin’s population, for example, has barely moved in 100 years and Wellington, as famously pointed out by the Prime Minister, is dying.
For people and businesses choosing to make their homes in Auckland, though, the upside is significant. A 2008 report showed that the value added per worker of an employee in Auckland’s CBD is 139% higher than the rest of New Zealand. Even after controlling for the sectoral structure in Auckland’s financial-heavy city centre, the number still tops 72%, which can be interpreted as a productivity premium for firms located in areas of high employment density.
The benefits are not just for business owners. Higher productivity allows for higher wages, and in productive cities these spill over into all sectors – not just the most productive. A 10% increase in the number of graduates in metropolitan area employment, Cooper says, will lead to an 8% wage boost for current workers.
The proximity cities create leads to a lot of their economic upside, Cooper says. “Two people in a room beats two rooms with one person in each.”
That said, it’s also important that the two people aren’t exactly the same. While there’s a lot to be said for sector-focused centres of excellence, filling a whole part of town with nothing but, say, furniture makers, doesn’t create many opportunities for cross pollination. Put a furniture maker next to a musician, a chef and a book publisher and the combinations start to get interesting.
Monocultural clusters can be risky at a macro level too. When the US auto industry took a dive, Detroit went with it. Over in Seattle, meanwhile, the intersection of aerospace, software and coffee (think of the three biggest global brands) has led to a resilient and mostly thriving local economy. (Seattle’s ATEED equivalent has helpfully posted a list of all the Top 10 lists the city has featured on recently)
So what’s the best way to cook up some collaboration? Patrick McVeigh doesn’t deny clusters can be great places for it to happen, but believes the most effective ones are organic rather than manufactured. Geoff Cooper reckons the bigger the pot the better and make sure you have a good variety of quality ingredients on hand. And if you do come up with something tasty, Anna Guenther says, make sure you invite some friends around to share.
The Moxie Sessions is an internet economy discussion group held once a month in Auckland. Its purpose is to bring together a group of interesting folks from across the economy to talk about how New Zealand can take advantage of the internet to improve its economic performance.
Vaughn Davis is principal at social media and advertising agency The Goat Farm.