Editor’s note: The RTP Product Pipeline is a new feature for WRAL Local Tech Wire. Its purpose is to help entrepreneurs, business leaders, educators and inventors better understand the product commercialization process. Montie Roland and Tom Vass are co-founders of the RTP Product Development Guild, Inc. Vass is an author, investment advisor and owner of Private Capital Market, an Internet-based private equity firm.
MORRISVILLE – The Summer edition of The Park Guide, a publication covering topics of technology, innovation and enlightened living in the Research Triangle Park, contained an interesting, albeit cryptic article. The one page article was titled “The Region’s Business Clusters,” and contained eight bullet points about the RTP’s industrial clusters.
There was no explanation for the bullets, just a brief description of each of the eight business clusters that operate in the central part of North Carolina. The url link at the bottom of the article led to the website for the Research Triangle Regional Partnership, so I dutifully followed the link to see more.
Once at the RTRP site, I found the document for a 2004 study that explained the concept of industrial clusters from the perspective of Dr. Michael Porter, of Harvard University. While understanding Porter’s concept of industrial clusters is interesting as a scholarly exercise, the policy implications are …well… somewhat academic.
His concept of clusters reminds me of Zoltan Acs, who convened a seminar of academics to address the issue of how entrepreneurs would know a good idea when they saw one. In Porter’s cluster case, the question would be: how would you know a good cluster if you saw one.
A more robust interpretation of clusters and their contribution to regional innovation economics was developed by Dr. Ed Feser, while he was a professor at UNC-CH. Feser is now a professor at the University of Illinois, and his concepts of clusters are just now beginning to be applied nationally in the area of new product development and entrepreneurial promotion.
The greatest application of Feser’s industrial cluster concept is helping individual entrepreneurs and inventors identify new ventures that would be commercially successful in a given metro region. In other words, there is a prior question to the one Acs asked, and that is: where do great product ideas originate?
Using the eight clusters identified by the RTRP as an example, it may be useful to see how the RTP Product Development Guild applies Feser’s concept to the process of generating product ideas for entrepreneurs. The article mentions 10 clusters but two of them do not really exist yet, so they are not covered here.
Here are the clusters identified in the Park Guide:
• Biological agents and infectious disease
• Agriculture biotechnology
• Pervasive computing
• Advanced medical care
• Analytical instrumentation
• Nanoscale technologies
From Feser’s point of view, these clusters contain supply chain relationships between members of the clusters. At the RTP Guild, we call these supply chain relationships “intermediate demand markets” because the firms that are trading with each other are supplying unfinished goods that are working their way to the finished goods, final demand market. For example, rather than doing in-house research, the big pharma companies buy the services of the contract research organizations who conduct studies on what happens when humans are given new drugs.
Launching a new product or new venture into the RTP’s intermediate demand market is a great idea because the new product has a built-in market demand. One of the most risky parts about creating a new venture is finding new clients and customers to buy the product, so it makes good business sense to sell into a market that already exists.
However, Feser’s application of industrial clusters has an even better idea for nascent entrepreneurs. Feser applies a statistical technique to these clusters to see which parts of unrelated clusters have similar technological characteristics. For example, it may be that the technology of the pervasive computing cluster is related, somehow, to the technology of the infectious disease cluster.
When technology from two industrial clusters are crossed, the resulting new product has the potential to “disrupt” existing markets.
At the RTP Guild, we are looking for disruptive technology, not because we are 1960’s radicals, but because we suspect that disruptive technology creates wildly profitable new ventures that lead to an increase in regional wealth.
In other words, our economic development goal for the RTP is increased wealth for the residents. We contrast our goal with the goal of the RTRP, which is increasing jobs. The 2004 RTRP report on clusters is all about job creation by recruiting industry to locate parts of their production process in the regional industrial clusters. For example, one of the RTRP recent industrial recruitment success stories is the recruitment of another contract research firm to help big pharma study what happens when humans are given new drugs.
We think the concept of clusters is more important as a tool for providing a mental map to entrepreneurs on what types of products and ventures to create. We call that process deal mapping. The new venture and entrepreneurial process begins with great new ideas for great new products.
We try to help this process along by offering a business network that provides latent entrepreneurs ideas on what products would work best in the RTP regional economy, based on the industrial clusters that share certain types of industrial technology in common.
(c) RTP product Development Guild
Editor’s note: The opinions of the author are his own and do not necessarily represent those of WRAL Local Tech Wire.