This is different. We’ve seen economic downturns before (the 2009 recession, the dot com bust) and unprecedented events (9-11), but we’re now experiencing something different, a pandemic with an uncertain timeframe and very unclear path. Nevertheless, there will be an economic recovery and we need to start planning for it now.

Building upon community and regional strengths through clusters is a sound path forward. Simply put, clusters drive economic development. Cluster strategy and initiatives leverage the strong presence of particular industries within a region or community and then direct activities and resources toward further development of those industries. Cluster initiatives include support and assistance for commercialization of innovations, startup of new businesses and scale-up of growth businesses, in the targeted industry cluster. More specifically, cluster focused accelerators and incubators support those cluster initiatives.

So, what is a cluster (for those of you who are unfamiliar)? The U.S. Cluster Mapping Project at Harvard University defines a cluster as “a geographic concentration of companies, organizations, and institutions in a particular field that can be present in a region, nation, or state. Clusters arise because they raise a company’s productivity, which is influenced by local assets and the presence of like firms, institutions, and infrastructure that surround it.”

Clusters are self-generating. The concentration of companies in a particular industry draws more companies in that same industry. The prospect of employment and future employment within the industry creates a strong pull for talent to a community. Suppliers reap the benefits of having multiple customers in close geographic proximity. Customers enjoy the relationships with nearby suppliers; they are more likely to see innovations and product adaptations that suit their needs. Capital sources are attracted to a community in which the opportunities for investment are greater. Entrepreneurs launch startups spun out of local businesses as they form new ideas for products and business. With a large number of businesses in close proximity, collaborations become easier. The benefits of collaborations and linkages ripple back into the cluster. All of these cluster components build upon one another and perpetuate the cluster. Therefore, clusters are a good path forward.

An important point that I like to emphasize: clusters encourage innovation and entrepreneurship. The presence of a critical mass of businesses in a particular industry, as well as their customers and suppliers, creates pressure to innovate and to stay ahead of competitors. Entrepreneurs are important agents for innovation and the commercialization of innovation. We must be prepared to encourage and support entrepreneurship and small business growth. Developing accelerators and incubators that have a cluster focus is part of a highly effective strategy for supporting a targeted cluster. (See my blog dated August 19, 2019 for information on planning a cluster focused ESP.)

What should you do next? Get ready to pivot. If you have not done so already, assess your community to determine your cluster focus. Alternatively, if your cluster is already identified, then develop a strategy for leveraging the cluster to bring economy recovery. Either way, you will need to designate a staff person to lead the cluster effort and engage your key stakeholders in the assessment and planning process. The goal is to develop an actionable cluster strategy and plan for programs that will work towards leveraging your community’s strengths through clusters. Be sure to include programs, such as accelerators and incubators, to encourage and support entrepreneurship and new business formation in the targeted clusters.