Challenges from the environment and their effect on clusters

1. © BIPE 2010
December 2, 2010
Challenges from the environment
and their effect on clusters
Élisabeth Waelbroeck-Rocha
Partner & Vice President, BIPE

2. 2© BIPE 2010 - December 2, 2010
Challenges from the environment and
their effect on clusters
This powerpoint document constitutes the visual support of the
presentation made at the TCI Annual Conference in Delhi, in
December 2010.
It cannot be quoted.

3. 3© BIPE 2010 - December 2, 2010
Four main drivers will impact the future
of clusters
Demography

4. 4© BIPE 2010 - December 2, 2010
Four main drivers will impact the future
of clusters
Demography Economy

5. 5© BIPE 2010 - December 2, 2010
Four main drivers will impact the future
of clusters
Demography
Technology
Economy

6. 6© BIPE 2010 - December 2, 2010
Four main drivers will impact the future
of clusters
Demography
Environment Technology
Economy

7. 7© BIPE 2010 - December 2, 2010
These four drivers are interdependent
Demography
Environment Technology
Economy

8. 8© BIPE 2010 - December 2, 2010
1. Demography, not only the economy,
will change the way businesses operate
Demographic growth is highly
variable across regions
Continued urbanisation
Reduced household size
Ageing
Demography
Environment Technology
Economy
-100
0
100
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500
600
Europe
Northern
America
Africa
Asia
Latin
America
Oceania
1960-1970
1970-1980
1980-1990
1990-2000
2000-2010
2010-2020
2020-2030
Change in population size, in millions

9. 9© BIPE 2010 - December 2, 2010
By 2050, North America and Europe will merely
represent 12,5% of the world’s population (down
from 17% in 2000)
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Latin America
Asia
Africa
Oceania
Northern America
Europe
0
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Latin America
Asia
Africa
Oceania
Northern America
Europe

10. 10© BIPE 2010 - December 2, 2010
Urbanisation will continue: this causes specific
problems that have to be dealt with
By 2020, 60 cities will have more than 5 million inhabitants, and
13 will have more than 10 million
Source : ONU – World Urbanization Prospects
Cities with more
than 10 million
inhabitants
Cities with more
than 5 million
inhabitants

11. 11© BIPE 2010 - December 2, 2010
Other consequences of these
demographic developments include:
Ageing in Europe, and a reduction in the population of working
age, unless migration flows break from past trends
Strong rise in demand for food products, concentrated in
certain regions that do not all have a high agricultural growth
potential – or whose potential will be curtailed by climate
change
Strong rise in energy consumption
4 For heating and cooking
4 For lighting
4 For transportation
Ever increasing demand for clean water

12. 12© BIPE 2010 - December 2, 2010
2. On the economic front, the recent crisis will
have long lasting effects on the world economy
Volatility is there to stay
Diversification strategies of
companies
Emphasis on flexibility
Reduced role of government
Demography
Environment Technology
Economy
Risks of bubbles
Risk aversion / difficult access
to financing for SMEs
Continued strong competition
Business cycles will be deeper, creating
market disruptions

13. 13© BIPE 2010 - December 2, 2010
Why volatility ?
A result of:
4The massive externalisation strategies
— Production / delivery volumes can be adjusted at short notice
4Zero stock policies
4The strategies of dominant players on resources markets
— Dual markets will emerge, characterized by different prices depending on the
client …
4Reduced government’ capacity to offset turnarounds in
business cycles

14. 14© BIPE 2010 - December 2, 2010
2. On the economic front, the recent crisis will
have long lasting effects on the world economy
Volatility is there to stay
Diversification strategies of
companies
Emphasis on flexibility
Reduced role of government
Demography
Environment Technology
Economy
Risks of bubbles
Risk aversion / difficult access
to financing for SMEs
Continued strong competition
Business cycles will be deeper, creating
market disruptions

15. 15© BIPE 2010 - December 2, 2010
Demographic developments will impact
the economy
Demography
Environment Technology
Economy
Development of
complex markets
Growth in
services sectors
è In addition to the above changes, there will be growing
opposition between mature / growing markets

16. 16© BIPE 2010 - December 2, 2010
3. On the technology front, several breakthrough
innovations could change the way we work,
produce and consume
New promising fields:
Biotechnologies
Nanotechnologies
Vehicle propulsion
Laser and optics
Etc …
Demography
Environment Technology
Economy

17. 17© BIPE 2010 - December 2, 2010
The speed of change is evolving. Product
innovation cycles are shorter and deeper
We are in a process innovation phase,
with low product innovation
Product cycles
2010 ?
Demography
Environment Technology
Economy
Process cycles

18. 18© BIPE 2010 - December 2, 2010
Demographic changes and the economy also
impact the future of technology – and vice versa
Demography
Environment Technology
Economy
Innovation =
new players
new processes

19. 19© BIPE 2010 - December 2, 2010
4. Environmental changes are underway
New scarce resources:
Raw materials, energy
Food
Space
Time
Silence / quietness
Darkness in urban areas
(clean) Water
Privacy
Comfort
Demography
Environment Technology
Economy
People will accept to pay higher prices to have access to the
scarce resources
This will change the relative price of goods / services

20. 20© BIPE 2010 - December 2, 2010
Demographic changes are speeding up
changes in the environment
Demography
Environment Technology
Economy
Anthropic
pressures on
environment

21. 21© BIPE 2010 - December 2, 2010
Between 2010 and 2030, world primary energy
demand will grow by more than 40%
Source: IEA Energy Outlook 2010
Source: IEA Energy Outlook 2010

22. 22© BIPE 2010 - December 2, 2010
Given the oil peak, coal fired electricity generation
will have to grow – with major consequences on
the environment – not on prices
Source: IEA Energy Outlook 2010

23. 23© BIPE 2010 - December 2, 2010
Greenhouse gas emissions accelerate climate
change and will have a major impact on
agriculture
Source: European Commission, PESETA model results
Changes in average mean precipitation and temperature between 2011-2040, from
the 1961-1990 period

24. 24© BIPE 2010 - December 2, 2010
Again, economic factors and changes in
the environment are linked
Demography
Environment Technology
Economy
Anthropic
pressures on
environment

25. 25© BIPE 2010 - December 2, 2010
The same holds for technology
Demography
Environment Technology
Economy
Anthropic
pressures on
environment
Efficiency
search

26. 26© BIPE 2010 - December 2, 2010
Impact on clusters
— Urbanisation
— Development of scarcity
— Emergence of complex markets
— Reduced role of government
— Increased competition, low price
— Localized pressures on resources
— Cost increases
— Internalization of external costs
— Change in values
— New value chains, defined by
market rather than by product
— Increased delegation, development
of PPP
— New business models, new price
setting mechanisms
4Change in the firms’ scope of
activity, development of
multiproduct companies

27. 27© BIPE 2010 - December 2, 2010
Impact on clusters
— Urbanisation
— Development of scarcity
— Emergence of complex
markets
— Reduced role of
government
— Increased competition, low
price
— Localized pressures on
resources
— Cost increases
— Internalization of external
costs
— Change in values
— New business models, new
pricing schemes
— New value chains, defined
by market rather than by
product
— Increased delegation,
development of PPP
— New business models, new
price setting mechanisms
4Change in the firms’
scope of activity,
development of
multiproduct
companies
— Location of clusters
— Ressouce efficiency of
clusters
— Scarcity niches develop
before scarcity spreads
throughout the economy
— New borders of clusters
— New stakeholders in
cluster
— Relocation closer to end
client

28. 28© BIPE 2010 - December 2, 2010
Impact on clusters
—Production starts after orders
have been confirmed / paid
—Increasingly customized
products
—Co-conception, value chains
built from the end-market
upwards, starting from the
recycling stage
—Increasingly difficult financing
of SMEs
—Zero stocks
—Need to reduce delivery time
—Involvement of the final
consumer in the value chain
—Innovation in financial
engineering
—New stakeholders in cluster,
new cluster frontiers

29. 29© BIPE 2010 - December 2, 2010
Impact on clusters
— Zero stocks
— Need to reduce
delivery time
— Involvement of the
final consumer in the
value chain
— Innovation in
financial engineering
— Internalization of
external costs
— Change in values
— New business
models, new pricing
schemes
— Process
optimisation
— Relocation
— Cluster = living lab
— Innovation zones
— New stakeholders
in cluster
— New frontiers for
clusters
— Production starts
after orders have
been confirmed /
paid
— Increasingly
customized products
— Co-conception,
value chains built
from the end-market
upwards, starting
from the recycling
stage
— Increasingly difficult
financing of SMEs

30. 30© BIPE 2010 - December 2, 2010
Consequences for cluster initiatives and
cluster managers
Need to internalize environmental issues:
4 Take into account local conditions (assets and weaknesses)
4 Pay attention to the location of activities / relocate ?
4 Adapt the cluster and companies’ organisation
4 Choice of process
4 Choice of market
(Continuously) Review the cluster’s frontiers
4 Broaden the scope ?
4 Prepare the « transformation » stage in the cluster life cycle
4 Focus on services ?

31. 31© BIPE 2010 - December 2, 2010
Consequences for cluster initiatives
Review the clusters’ stakeholders
4 Open to new players of tomorrow (insurance, etc.)
4 Review the roles and responsibilities of stakeholders in clusters
— Means of governments / regions will shrink
— è find new leaders for the initiatives
Interact with individual consumers
4 Reach outside the cluster to the final consumer – wherever
he/she is – in order to adapt to permanently evolving customer
needs
4 Use local residents to create living labs

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