1. Managing the New Competition a. Clusters b. Ottawa: Silicon Valley North c. Bell Northern/Northern Telecom d. Spin Offs e. Considering Clusters 2. “Clusters” a. “...geographically proximate group of interconnected companies and associated institutions in a particular field linked by commonalities and complementarities.” (Porter) b. Why interest? Innovation and global successs i. Fostering Entrepeneurship, Boosting Innovation, Drivers of National Innovation Systems (OECD) ii. US Silicon Valley 3. Ottawa: Silicon Valley North a. By 1980 - 85 firms, 15,000 employees; by 2000 1200 firms, 85,000 (collapse? 2003, 1500 65,000) b. Strong research focus – information technology: ***telecommunications***, semiconductors, software, photonics c. 90% of Caanda’s R&D in industrial telecommunications d. International markets (only 1/3 product for national market) 4. Bell Northern/Northern Telecom a. Strategic response of Bell Canada and Northern Electric to US 1956 AT&T/Bell consent decree b. Pre-1956 dependent on US Bell Labs, manufacture for Bell Canada c. 1961 - set up lab in Ottawa i. National Research Council (1916) spearheads science and research in WW II, 1948 spin off: Computing Devices Ltd to produce military computer hardware ii. Proximity to universities, and to Montreal headquarters 5. Bell Northern/Northern Telecom a. 1970-1982, from 10% to 82% of sales its own products b. R&D “Canadian” successes i. Switching systems for small towns and rural areas (markets not just in Canada) c. Bell Northern Research (1969-71) i. 70% Northern and 30% Bell ii. Manufacture for US and international markets d. Digital World i. 1976 - would produce full line of digital products 1976-1980 - first mover ii. Timing: 1982 US breakup of AT&T - baby Bells as market for product (1) 6. Bell Northern/Northern Telecom a. Digital World i. 1976 - would produce full line of digital products 1976-1980 - first mover ii. Timing: 1982 US breakup of AT&T - baby Bells as market for product (1) 1977-1985 - from 16% of sales revenue from US to 67% of revenues ($3.9 billion) Critical mass of r&d science and engineers 1. Spin Offs a. Advance Devices Centre (1962) in BNR works with NRC and Defence Research Board -semiconductors -late 1960s 600 employees, 260 semiconductors b. Meddling: govt supports creation of Microsystems International (1969): Canadian capacity in high technology/semiconductors i. $36 m R&D subsidies, $12 m interest free lkoan ii. Loses $50 million, collapses 1975 c. Consequences: i. More than 20 high technology startups in Ottawa 2. Spin Offs a. Mitel - Michael Cowpland and Terrence Matthews i. Impatient with conservative management at Microsystems - 1971 - MC research and TM marketing ii. Semiconductors for telecommunications iii. Touchtone to dial pulse converter attracts US customers, then PBX machines iv. 1975-84 - 30 to 6140 employees; 60-70% exports to US and Europe v. 1982 deregulation hurts as AT&T a significant customer, deal with IBM falls through, overexpansion, 1985 British Telecom acquires, reinvented in 1990s 3. Spin Offs a. Michael Cowpland i. $7 million from Mitel, 1986 creates Corel ii. Computer equipment (laser printers) to desktop publishing and other systems, then CorelDraw iii. 1987 total sales $6 m; 1988 CorelDraw sales only $7 m, 1989 CorelCraw sales $17 m iv. 7% of revenue on R&D v. Overreach – WordPerfect and competition of Microsoft - collapse after 2000 vi. Founds Zim Technologies 4. Spin Offs a. Terrence Matthews i. $14 m from Mitel - 1986 Newbridge Networks; employees invest $7 m ii. Telecommunications products - switching and other products designed for customers (1) Sears, Sony, British Rail and then shift to telephone companies iii. 1990 exports 94% of $200 m sales iv. Moves out after 2000, founds March Networks b. Matthews and Cowpland - serial entrepreneurs and business angels, using profits for venture capital in other projects 5. Spin Offs a. Bridgewater Systems Corporation (1997) i. Doug Somers Northern Telecom to Newbridge ii. Russ Freen: Bell Northern to Mitel to Newbridge to firms elsewhere, back to Newbridge iii. Newbridge offers to fund company if agree not to steal employees iv. Personal networks and contacts in many firms make it easy to hire employees v. Long experience in business gives access to finance 6. Considering Clusters a. Magnet organizations - core institutions of NRC and Northern - public and private R&D b. Labour market pool – key firms attract pool of employees to area, critical mass enough to stay c. Large core organizations supplement technical with management training d. Venture capital and place i. “Two phone calls and I can find out everything...” e. Ottawa and quality of life?