Fibre Optic Valley: high-speed networking for northern

Norra, Sweden

SYNTHESIS

Fibre Optic-Valley1 is a cluster, or arena2, for the development and testing of products and services based on fibre optics technologies. It is situated on the north-east coast of Sweden between Gävle and , with its centre in the town of Hudiksval. Launched in 2000, and co-funded by the European Regional Development Fund, a Swedish cluster programme, and regional public and private sponsors, the cluster rapidly made a name for itself at both national and European levels. By the end of 2006, 230 new jobs had been created in the region, and about 500 nationally thanks to the activities of Fibre Optic Valley.

Until the end of the 1990s, Ericsson Network Technologies with other large companies in the region had helped to create a favourable climate for optic fibre development. However, a severe reduction in market demand led the companies lay people off and put their development projects on hold. In order to maintain the fibre optic expertise and resources within the region, the municipality of , the regional university Mitthögskolan and the local trade and industry organisation Via Futura joined forces and attracted the research institute Acreo to the region. This led to the launch of the InfoCom project in 1999, which was later renamed Fibre Optic Valley.

The overall objective of Fibre Optic Valley is to create a world-class 'breeding climate' in this technology field for researchers, innovators and entrepreneurs, thus attracting knowledge and actors to the region in order to create synergies and benefits for all involved. Fibre Optic Valley focuses on three specific technology fields: fibre to users (FTTX3), e-services, and fibre-optic industry based applications. Activities in each of the three fields cover six main topics: financing innovation, enterprise development, gender equality, continuous learning, quality assurance and marketing support.

Since 2000, Fibre Optic Valley has benefited from co–financing by the European Regional Development Fund in addition to funding from the national regional development and cluster programmes; notably the Vinnväxt programme of the national innovation systems agency (Vinnova4). This funding stream, disbursed in a number of distinct if inter-linked projects, has been critical for building a strong and sustainable foundation of co-operation in Fibre Optic.

Some of the main activities of Fibre Optic Valley are: the installation of optic fibre broadband in the region; construction of an apartment complex where testing of end-user products can be conveniently carried out; the installation of fibre optic test beds and lab environments. Other results are innovations related to fibre optic usage, both connected to

1 http://www.fiberopticvalley.se/ 2 Arena” is commonly used in the Swedish context to refer to meeting places, both formal or informal and physical or virtual. 3 http://en.wikipedia.org/wiki/FTTX 4 http://www.vinnova.se/ its capacity to transfer large amounts of data, and to the potential to transport visible light, such as torch flames, and innovative surveillance systems.

Another innovative aspect is the way Fibre Optic Valley has managed to use the potential in the various projects - boosting of ideas regarding projects and initiating programmes on such different subjects as how to achieve a more beneficial gender balance, or how to achieve more reliable internet-based knowledge for school usage - which, in turn, further adds to Fibre Optic Valley’s innovative development and results in maintained knowledge as well as job opportunities within the region5.

Fibre Optic Valley’s success factors are that it has been driven by 'real enthusiasts'; benefited from a steady stream of sufficient financing; that it formulated clear goals to which all involved are prepared to commit, and last but not least, has built up a critical mass of people, knowledge, partners and projects for successfully developing the cluster.

Background information

Country: Sweden Region: Norra Project title: Fibre Optic Valley, Hudiksvall, Sweden

Key words: clusters and business networks, research activities and infrastructures, technological and market innovation; information society: ICT access, e- inclusion

Duration of project: 1999-2007

Funding: Total budget €26,608,608 ERDF contribution €6,304,348 National budget €8,760,870 Regional budget €6,717,390 Private contribution €4,826,000

ERDF Objective: Objective 2

5 A May 2007 report of Vinnova on the results of the Vinnväxt projects, including Fibre Optic Valley, underlines that the projects have been important in building regional innovation and technology platforms and in strengthening regional triple-helix organisations. However, the report did not present significant quantified evidence of results in terms of innovation or enterprise development.

2 1. PROJECT DESCRIPTION

Fibre Optic Valley is a cluster initiative that has the ambition to become Europe’s leading area in this field of technology, thereby creating thousands of jobs by 2015. The goal of the members of the cluster is to create Europe’s most favourable development climate for new companies in the field of Fibre Optics: through creating an arena of competence and knowledge within this field. It is expected that this will attract financiers, entrepreneurs and innovators to the region.

Activities within the framework of Fibre Optic Valley aim at supporting regional growth through developing know-how and innovation in the digital communication sector. This includes offering support to business development from an initial idea to a final product.

The cluster focuses on the following three areas: - fibre to the users (FTTX): constructing the “true broadband society”; - e-services: as fibres are installed in all homes, which (capacity demanding) services are in demand? - fibre optic industry based application: e.g. fire alarms, information systems in tunnels, transporting of welding flames, and other new techniques where interesting innovations are made.

Fibre Optic Valley works to create an innovative climate in these three technology areas by co-ordinating and mobilising resources in order to offer a test bed with contracted test pilots, qualified evaluators, research, training, business models, behavioural analysis, statistical models and an advanced fibre laboratory. The cluster is based on the philosophy that the activities and ventures supported must create an added value for the co-financiers and partners. It is the business perspective that sets objectives since it is the companies who bring innovations to customers and where the new jobs are created.

Since 2000, Fibre Optic Valley has been developed through a combination of six inter- linked projects support a laboratory, research and development facilities and services, a test bed, users studies, R&D driven business development, and marketing and information support. The three focus areas are the driving force of the valley with each following specific development steps and processes. Project participants underlined that the experiences gained and actions taken within one project have been the basis for the next, so that knowledge has been built up over the entire chain of projects.

The direct beneficiaries are the members of Fibre Optic Valley, who take part in projects and benefit from the added value created through the user-driven research initiated within fibre optics. Additionally, the local higher education institutes (Mid Sweden University and the Högskolan i Gävle, Gävle University6) and local research institutes have been given a better framework in which to pursue contract research in the fibre optics fields.

Indirectly the valley creates new job opportunities for the region's inhabitants in the region and increased income and revenues for the municipalities. Other small enterprises who are not members of the cluster also benefit from being in a region at the forefront of the

6 http://www.hig.se//ufk/is/introduction.html

3 development of new services based on fibre optic broadband. Even Ericsson7 and Iggesund8, the two largest international companies with production in the region, benefit from the project, since the actions within Fibre Optic Valley offer a more 'open innovation' environment in the region, sustaining a broader approach to new product development.

A number of striking results of Fibre Optic Valley can be highlighted: - fibre optic broadband has been installed and is accessible to actors in the region; - a research institute, Acreo, has been attracted to the area; - the construction of an apartment building fully equipped with fibre optic systems where inhabitants’ usage can function as a test environment for e-solutions; - a complete test-bed and fibre lab for worldwide use has been created.

The 'test-bed' is an open network of 300 technology testers, all with 100 Mbps triple play (Internet, telephone, TV) access into the home. The test bed also has a wider network of 1,500 testers which evaluate e-services. Here, systems developers, network operators, service developers and researchers can test new products and services, such as IP- distributed HDTV, in an environment that combines technology tests with behavioural studies. Some 15 international and national systems suppliers are present in the test bed, which is the official testing ground for three EU broadband research projects (MUSE9, NOBEL10 and MUPBED11). Acreo is present in all three projects.

According to project reports, by-mid 2007, Fibre Optic Valley had indirectly supported the development of 230 new jobs in the region, and 500 in all of Sweden. Seven new enterprises in the field of fibre optics have been created in the region. Moreover, 19 doctoral students have graduated thanks to funding or studies initiated by Fibre Optic Valley. In the longer run, the expected impact of this project is to have added about 2000 new jobs in the region by 2015. Additional growth is to be created within the three focus areas: fibre to the user; e-services; fibre optic industry applications.

The European Regional Development Fund (ERDF) has been a very important financial contributor to the pipeline of project funding in favour Fibre Optic Valley. The ERDF co- financing, together with the long-term regional and national financing, provided a foundation for the cluster and enabled it to build capacity to launch new activities. In particular, the possibility to work on the three focus areas in parallel, fostering important synergies and cross-cutting activities, would not have been possible without the additional financial means provided by the ERDF.

2. POLITICAL AND STRATEGIC CONTEXTS

At the end of the nineties, the municipality of Hudiksvall recognised that there was a need to take action to revitalise the region, since production and employment within traditional industries were in decline. It considered focusing this regeneration action on the information technology sector, since the region already possessed the necessary conditions

7 http://www.ericsson.com/ 8 http://www.iggesund.com/ 9 http://www.ist-muse.org/ 10 http://www.ist-nobel.org/Nobel2/servlet/Nobel2.Main 11 http://www.ist-mupbed.org/mupbedhome.html

4 with broad know-how and experience within the field, based at Ericsson Network Technologies (ECA) and associated spin-offs and suppliers. In 1999, the Infocom Project was launched (the project later adopting the Fibre Optic Valley label) with the aim of maximising the potential of the existing fibre optic broadband infrastructure in the Hudiksvall region. The Infocom project aimed to use this existing infrastructure in order to support regional companies survival and capacity to compete in information technologies.

Even at this early stage, the municipality as well as the county administrative board, the universities, and representatives from trade and industry were involved in order to create a broad approval and support for innovation and development in the region within the field of fibre optics. The initial activities, which were locally financed, were: making an inventory of regional know-how and need; starting a lobbying group to promote the concept, convincing the Acreo research organisation to settle in Hudiksvall; creating interest for research cooperation at the universities; and finally, seeking additional financing in order to extend and widen the activities.

The authorities in Hudiksvall understood it was too small an area to create a cluster in fibre optics strong enough to compete on the world market. The initiative was opened to other partners and in the end some 48 co-financiers, drawn from the area between Sundsvall and Gävle, were mobilised. Among them were businesses, county and municipality authorities and university and research institutes. The area covered by the project was thus expanded to cover a population of about half a million citizens.

3. IMPLEMENTATION

3.1. Project design and planning The Hudiksvall division of the multinational corporation Ericsson left many innovations unfinished when the market climate turned for the industry around 1999. Some fibre optic installations were abandoned and people were laid off which released know-how. The downturn put the municipality under pressure and the solution found was to support local development using these available resources.

The idea for the project came from a couple of different sources simultaneously. The organisation ViaFutura, a regional trade organisation, in combination with a few resourceful people, managed to convince the research institute Acreo to locate a laboratory in the region in order to absorb the knowledgeable researchers Ericsson was letting go. This group of stakeholders, some of the researchers in Acreo and the trade organisation ViaFutura planned the Infocom project at the end of the 1990s. The purpose was to maintain and develop the fibre optic related knowledge and infrastructure initiated but now abandoned by Ericsson due to the market dip.

Initially, there were a few core individuals running the project, these people saw the potential offered by the existing know-how and were willing to spend the time and effort required. Today, Fibre Optic Valley has 150 members and 47 co-financiers but still only a handful of employees to co-ordinate the activities. The aim was to create a sustainable basis for change through exploitation of research results and transferability within fibre optics and related services. Ensuring development and innovation from idea to production on a wider range of technologies was part of the concept. This approach appears to have

5 worked, as currently, Acreo has, for example, a number of innovative ideas ready for commercialisation.

Currently, Fibre Optic Valley is financed by the ERDF Objective 2 North programme, the European Social Fund (ESF), Vinnova, the County Administrative Board of Gävleborg, and the Wallenberg Foundation.

3.2. Management, monitoring and evaluation system The initial project managers were selected based to their capacity, enthusiasm and ambitions. They had the knowledge and the contacts needed to establish the organisation in full, to create a triple helix (linking government, academic and industry) structure and to bring forth ideas, in collaboration with a handful of other strongly involved individuals.

Today, the organisation has one process manager per field, and a general manager coordinating the efforts. The general manager was invited to join the team in 2000. He has a management level background within the IT-industry, and was initially appointed to develop the World Internet Institute12. In January 2007 he was appointed as the general manager for Fibre Optic Valley.

Fibre Optic Valley has been closely linked to the Hudiksvall Municipality’s Enterprise Development Corporation (HNA13, owned by the municipality and run by a politically appointed board). This has at times been a matter of debate, since the region covered by the cluster is larger than Hudiksvall encompassing Gävle and Sundsvall as well. In 2007, Fibre Optic Valley decided to re-structure its organisation, and create a private company to manage the cluster operations. As a result HNA is only one of the public actors on the board, and representatives from other municipalities have joined. Other actors on the board are representatives from the local newspaper, , Ericsson Network Technologies AB, Acreo, Mittuniversitetet, HNA and Kungliga Tekniska Högskolan (the Royal Institute of Technology). This is an excellent combination of people and organisations to support Fibre Optic Valley in its ambitions to create sustained regional growth.

The number of man months used for this project is difficult to estimate. Only a handful of persons are employed by Fibre Optic Valley, yet many more are working for the development of the cluster and the region on a non-funded basis. A huge amount of time has been spent on meetings, networking, planning and discussions by many people both formally and informally. Without the immense efforts made by a number of ‘project- champions’, the cluster would never have developed to the same extent.

Fibre Optic Valley has been externally and internally evaluated on quite a few occasions. On their initiative, regular audits are made, and surveys are distributed to find out if their goals have been met. Targets are regularly quantified and indicators assigned to assure fulfilment.

In terms of financial management, the pipeline of different projects, including ERDF co- financing, which has helped Fibre Optic Valley to expand, has also introduced some complications in terms of the taking into account different regulations and rules (national and ERDF) on how financial support can be used. Moreover, since funding is unevenly

12 http://www.wii.se/ 13 http://www.hna.se/default.asp?lng=en

6 distributed over time, cash-flow has been an issue which Fibre Optic Valley has resolved through a credit system with HNA. Programme funding regulations stipulate that personnel should be employed and not working on short-term contracts, which is complicated with project funding. This in turn leads to it being hard to compete for the most knowledgeable and capable team, since they may not be willing to accept the insecurity or be concerned about the difficulty to accomplish anything in such a short time.

3.3. Governance: partnership and leadership The municipality of Hudiksvall and the Mittuniversitetet (Mid Sweden University) were interested in the development of the cluster from the very beginning. The municipality saw the benefits in integrating Fibre Optic Valley in its strategic plans through the HNA (Hudiksvall enterprise development association), and a triple helix organisation was set up with Mittuniversitetet, HNA and local enterprises through the Infocom Project.

The interest for each partner to participate was the potential of keeping knowledge within the region, developing it and using it to potentially draw new actors to the area, which would create new opportunities and, in that way, create sustainable regional development.

At present, Fibre Optic Valley is going through a transition phase, changing from a small non-profit organisation, the structure now needs to be supportive of employment, of profit related investments, and also capable of inviting additional strong actors without being taken over. The change of legal structure to a private company will make the organisation less vulnerable to the Swedish legal system, when it comes to employment, taxation and other financial and legal issues.

During this transition, Fibre Optic Valley has found that going from a smaller non profit organisation run by enthusiastic people, to a larger profit based concern has not been without conflict and effort. The most troublesome issues have been related to questions such as: how can we grow organically and meet structural needs and still maintain the creative and innovative culture of a small and flexible organisation? Additionally, the shift to a private structure creates some risk that the initial beneficial political support and the integration in the municipal strategy may be jeopardised. As the organisation grows larger and adopts more of a profit profile to simplify administrative issues, it is important to inform politicians that Fibre Optic Valley is still focused on regional development and is still in need of municipality support.

3.4. Innovative elements and novel approaches to implementation The partners had been already collaborating within the Via Futura organisation, but new terms for partnership developed in order to better support the realisation of ideas on fibre optics: firstly in the Infocom Project and later in Fibre Optic Valley. This willingness to adapt the legal structure over time has been an important innovative element. Fibre Optic Valley was initially set up as a non-profit organisation (ideell förening). As the valley developed, the need for a more commercial vehicle arose and private company was set up, Fibre Optic Valley AB, run and owned by the non-profit organisation Fibre Optic Valley. The organisation has proven to be capable of adapting to various needs, and as ERDF funding is coming to an end in October 2007, the on-going Vinnväxt funding is moved to the corporation, which then will become the legal structure running the project.

7 A key innovative aspect of Fibre Optic Valley lies in the capacity to predict and plan for future needs and choose between available alternatives in a beneficial way. The goal has been to avoid old-fashioned management structures, and maintain a level of innovation even in management and implementation.

One interesting novel sub-theme for such cluster projects was the integration of the gender equality issue. The regional stakeholders were concerned about the degree of gender inequality with men predominantly in positions of power, notably in trade and industry. Therefore, Fibre Optic Valley responded positively to a proposal from Vinnova for additional funding through Vinnväxt to launch an initiative to improve gender balance. The project called Förändring Pågår (“Things are changing”) aimed at creating change regarding gender related issues in the region. The project focuses on attitudes, for instance, one of the slogans is: “Are we men who only appreciate men?”14

3.5. Key implementation obstacles and problem-solving practices The main obstacles experienced during the implementation period have been: - finding the correct support structure for the organisation; - identifying the best forms of co-operation between organisers and entrepreneurs, indeed between all actors, so that each does what they do best; - knowing when to add in the correct skills at the right time in order to achieve goals.

Most of these obstacles are connected with communication, understanding and trust. Fibre Optic Valley and its actors needed to prove that they are a reliable partnership supporting innovative development. It is also a question of know-how and being aware of potential opportunities and which competences would be fruitful at which stage of the project.

When asked if they would have done things differently, were they to start a similar project again, the answer from the project stakeholders is, in general, negative. However, one of the interviewees stated that he would have liked to spend more time on networking, being more present and supportive. In retrospect, he also claims that it could have been more rewarding to push harder and try to enforce things at an earlier stage. Spending more time showing members the value of investment is also something another of the interviewees would advocate. Another would increase the time used to influence politicians to think positively and be supportive of the organisation, as that would most likely simplify the political decision processes.

4. INNOVATION RESULTS

Due to regulations, direct support for innovation in forms of grants, loans or subsidies is not offered in this type of establishment in Sweden. However, indirect support such as consulting services on competence and knowledge, development support through providing testing facilities, and/or support in networking for partners are examples of services offered by Fibre Optic Valley.

14 A 2007 VINNOVA review of the results of the Vinnväxt programme notes that no observable results can yet be identified from the three gender projects funded in the Swedish cluster projects supported. However, the review does underline that thank to the additional funding (200,000 SEK), that gender equality has been much more actively promoted in Fibre Optic Valley than elsewhere.

8 The strategic and policy-making capacity at a regional level is viewed by Fibre Optic Valley as a basic condition to sustain growth and prosper. Constant discussions are held and actions taken within the triple helix organisation on supporting regional development for mutual gain as well as creating an even more innovative culture.

One of the key factors of the success of Fibre Optic Valley is the innovation linkage and knowledge flows between different actors in the innovation system. Another factor is the general development of support services for innovation in terms of innovation finance, intellectual property right and knowledge management. Fibre Optic Valley is also supporting regional education within the fibre optic field and the attraction of human resources able to contribute to innovation projects in this field.

Fibre Optic Valley has taken part in initiating several innovations within the focus areas: fibre to the user, e-services and fibre optic industry applications. A first example is Old@Home2, which focuses on information about elderly people in need of care, and how to distribute patient information to different care-givers, giving them correct information when needed. There is a technical platform constructed for this information exchange, which supports mobile intervention teams. Another example is the Digital School in Hudiksvall, where the aim is to organise secure sources of interactive information for young adults, for example, in the secondary school, creating a multimedia digital library accessible over the Internet.

Both of these examples need immense information capacity transferable through fibre optic cables. Another example of innovative usage of fibre optics is the transportation of beams of light – fibre optic cables can be used to bring sunlight into caves and other dark areas, it can be used to transport high powered lasers for spot welding, and it can be used for surveillance. Products in these areas are invented, tested and brought to the market within the Fibre Optic Valley.

Fibre Optic Valley has the potential for a large future impact on innovative activities within the field. As development takes place within the three technology fields, this helps to spreads risk and offers opportunities for cross learning and exchange.

However, since so much effort is put into the invention part of innovation, there is a future challenge of fostering the innovative process with entrepreneurs skilled enough to carry innovations through to the market. More effort may be needed to find, attract and support future entrepreneurs that are not already in the cluster. Otherwise, there is a risk that in order to commercialise research results from the local institute, innovators may need to turn to other places for entrepreneurial support, meaning that the region will lose potential jobs and valuable development. This may negatively affect Fibre Optic Valley’s future potential impact on the regional innovation system.

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5. SUSTAINABILITY AND TRANSFERABILITY

5.1. Sustainability The Fibre Optic Valley project was still underway at the time of the case study. The legal structure is as described in the previous section, going through a reinforcement phase, broadening the competence of the members of the board, focusing on the three fields and further developing the innovative culture. The creation of the private company linked to the existing non-profit association is a sign of the commitment to the future of the project partners.

5.2. Transferability The transferable implementation practices and innovative results presented below are the lessons learned from this project, on a generalised level. The features that made the Fibre Optic Valley approach a success and which are useful pointers for other regions launching similar projects, include: - finding an area of competence in which you have regional know-how in combination with a capacity to further develop and become more innovative within the field; - finding partners within academia, the local authorities and trade and business representatives (triple helix), and finding common and dynamic means for driving this development; - finding support among groups outside of the inner core of the project in order to succeed with the ambition and spread information on accomplishments on a broad basis; - set up measurable goals and milestones, both quantified and ‘softer’ goals.

What makes Fibre Optic Valley innovative may not be the way the organisation was set up, or the way innovations are developed. What makes Fibre Optic Valley innovative is the way in which the municipality, the university and the regional trade and industry came together and managed to adapt to a negative trend through turning ‘discarded' resources from into levers of development for a new innovative environment.

6. CONCLUSIONS: MAIN SUCCESS FACTORS

The five key success factors of Fibre Optic Valley can be summarised as follows:

- access to real enthusiasts or driving forces; - access to sufficient financing; - capacity to formulate clear goals; - critical mass of people, partners and projects in order to get a large enough pool of spent time and knowledge; - the possibility of getting people to work together towards a common vision.

Fibre Optic Valley has found it beneficial to adopt a double-head managment team: ensuring that one person does not have all the responsibility. This makes the leader(s) less vulnerable, and less exposed. It has given the cluster organisation flexibility "when storms

10 were blowing". The combination of two people at the top has been useful and although there might be an increased risk for potential disagreements, the project participants found that the benefits of "learning from disagreeing" outweigh the negative aspects.

Another lesson learnt is that it is vital to be aware of the role an organisation such as Fibre Optic Valley can really play in supporting innovation. It is important to identify the key factors to ensure success of the relationships within the network. There is also a need for developing strong relationships between the board, which should work politically, and the actual activities within the organisation.

It is also essential to recruit the right people: people who are communicative, sales- persons, who are not overly obsessed with administration, who are open to warning signals and are capable of acting upon them. It is also important to create an organisational culture, so that the team can change, without this affecting the outcome. Indeed, as the project manager said, “this is all about people”, “ We need to work strategically and view ourselves as the lubricating agent in the ongoing process”. This may be one of the vital factors of FOV success – a management that perceives needs within the innovation field and can facilitate the interchange between knowledge and the market.

PROJECT CONTACT DETAILS

Contact person

Name: Magnus Burvall Position: Project Manager Organisation: Fibre Optic Valley

Address: Stationsgatan 7, S 824 80 Hudiksvall Sweden

Telephone: +46 650 556 618

Email: [email protected] Project website: www.fiberopticvalley.se

The information contained in this case study is up to date as of: September 2007

This case study has been prepared by Karin Eduards in the framework of a study carried out by Technopolis Group on behalf of the European Commission. The contents and views expressed in this case study are those of the author(s) and do not necessarily reflect the opinions or policies of the European Commission.

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