MUCH TO the disgust of hipster-bashers alike, Cape Town’s Bree Street, home to trendy restaurants and local designer merchandise, is believed to have more to it than fever trees, fixie bikes and foie gras.
In fact, hubs like Bree Street or Johannesburg’s Maboneng Precinct, creates the opportunity for resident businesses to derive value from the geographic concentration of complimentary and competitor businesses, as a result of economic clustering.
Harvard Business School’s Michael Porter popularised the term in 1990 with release of his book “The Competitive Advantage of Nations”. He believes geographically-concentrated clusters often unlock the greatest competitive advantage, by leveraging the power that lies in local relationships, knowledge and motivation.
A concentration of collaborating businesses, or a cluster, gives members the opportunity to leverage a network of resources. Through engagement and sharing, comparable businesses can innovate and tackle challenges together instead of individually, with collective benefit outshining isolated effort.
Clustering has its roots in the automotive industry, notably supply chain wiz Toyota, which benefited from having suppliers in close proximity to its factories. Although competing and collaborating simultaneously, the suppliers are more efficient as a collective unit through cluster participation.
One of IT’s great success stories is Silicon Valley, which is a sterling example of a sector-specific geographically concentrated cluster that benefits from knowledge sharing, talent attraction and retention as a global hub of tech excellence.
Although on a smaller scale, Cape Town’s Bandwidth Barn encourages start-ups to take advantage of cluster benefits the shared office space offers, through more efficient value chain connections, information sharing and collective innovation.
There are over 50 murals and graffitis in Maboneng Precinct, one the coolest areas of Joburg. Explore them on a Mab… pic.twitter.com/EaruxHXYLM— alett (@alettlewis) March 10, 2015
To go fast go alone, to go far go together
Contrary to conventional wisdom, Porter believes firms benefit from having more local competitors.
To this point, local e-commerce retailers have encouraged the entry of new players to the South African market, to collectively grow the industry.
This strategy is believed to increase market size with consumers likely more comfortable to transact online as a result of a more credible, competitive market place.
Through clustering it need not be a case of rob Peter to pay Paul, as efficient leveraging can enable market growth, where it no longer needs be a zero-sum game.
Similarly, the South African clothing and textiles industry is starting to derive benefit from clustering, with the Cape Clothing & Textiles Cluster (CCTC) and KZN Clothing & Textiles Cluster (KZNCTC) members sharing insight, ideas and risk, which thereby boosts competitiveness and an enhanced ability to compete internationally.
A friend or a foe?
The cynics quite rightly point to the potential for exploitation of this "sharing is caring" model, with an effective cluster reliant on mutual trust and information sharing to achieve synergies.
In the interim, do not let the urbanites and their fedoras fool you, because there is more to Bree Street than merely figs and flat whites.