Australian Computer Society
Canberra: Cambridge or Thebes?
Emulating Cambridge's High Technology Industry Success in Canberra
by Tom Worthington, President of the Australian Computer Society
For the Strategy for Information Technology Research in Australia
V2.0 20 April 1997
Introduction
The ACS is assisting with funding and expertise for a Government supported
study to formulate a research strategy for Information Technology (IT) in
Australia. This case study on IT
R&D in Cambridge UK, is intended to form part of that work. Rather than a dry general dissertation, this is intended relate the experience of Cambridge to one Australian city which has an uncertain future: Canberra.
While this was being written (April 1997), the Canberra economy was officially in recession, with more
job losses foreshadowed by the Federal Government. Will Canberra sink into
oblivion, as the ancient city of Thebes did when
the ruling classes moved out? [3]
Could Canberra have a future as a center for high technology,
emulating the success of centres such as Cambridge and by conscious design
have it happen in years, rather than decades?
In the keynote address for the 1996 ACS Canberra Branch Conference I
proposed [4] Canberra
could harness the "natural resource" of people trained for the
"information industry" of government and academia for developing small
high technology companies. In November I visited
[2]
the University of Cambridge to give a talk and meet people from
IT research and industry. I was struck by the similarity to Canberra
as a knowledge industry based city and intrigued by the possibility of
duplicating
Cambridge's success.
Segal Quince & Partners produced a report in 1985
[1] into the growth of
advanced technology companies around the university of Cambridge UK.
The report is named after the so called "Cambridge phenomenon"
[5]. This report challenges many of
the assumptions upon which Australian Government's high technology
development policy is based. While this report is now eleven
years old it is of increased relevance because the rise of the Internet
has created the potential for a whole new range of information industries.
In the "Cambridge phenomenon", Segal Quince & Partners argue that Cambridge's hi-technology growth
came from informal contacts, modest locally arranged financing and
organic growth from existing small independent companies. There have been
some moves in this direction in Australia, such as the Tasmanian
Government's recent directions statement [6],
which has been welcomed by the ACS
[7].
Segal Quince & Partners also
argue that an ethos of self-confidence of the University of Cambridge
inspired start-up companies around the University. The ability to retain
intellectual property rights allowed University people to try exploiting
their ideas with new firms. The Cambridge Science Park was established to cater to the demand from
firms, rather than create that demand. It initially provided low cost
short term facilities to already established small companies.
Australian governments of all political persuasions have assumed that
high technology investment and know-how must be attracted from elsewhere,
preferably from another country. This emphasis has been on attracting
branches of large, established, national or international organisations,
using marketing and financial packages targeted at company CEOs. It is
assumed that economic development will come from these companies employing
local staff and in some way from technology transfer to locals.
At the
state government level this is manifested as a "cargo cult" approach to high
technology development. Governments believe that if a high technology/
science park is created, with suitably high-tech buildings,
then high technology firms will be attracted to move in from
somewhere.
This cargo cult approach is not supported by the Cambridge experience and
it can be argued [8] with the growth
of the Internet that Australia is well positioned to develop its own
information industry to compete on the world market. What might be
lacking was self confidence by those in the industry, the business
community and our political leaders to
exploit local talent.
- Identify the "information" industry as an appropriate focus for
industry development. That is software, services and training for on-line
management of large organisations, particularly government and the military.
This would include electronic libraries, electronic publishing and
management decision making using on-line systems.
- Public servants and local company employees being laid off due to
Government cutbacks would provide a source of entrepreneurs and staff
for new companies. Redundancy payments would provide a part source of funding.
- The existing technology parks in Canberra, which are too expensive
for start-up companies, could be supplemented with cheap accommodation
at the light industrial centres and in surplus government offices.
- Informal and formal links could be fostered with the universities and
research organisations in Canberra, by Government and organisations such
as the Australian Computer Society.
- The remaining government agencies in Canberra would provide a source
of product ideas for local firms and initial markets. They would also be
used as reference sites for wider marketing.
- Canberra based and packaged training courses on on-line management by
Canberra universities would complement product and services marketed.
A major challenge for Canberra is that Federal Government policy is to
out-source Government IT to large, established companies. This policy
favours overseas multi-national companies and discriminates against
small local and start-up companies. It should be noted that this is not
just a feature of the current conservative Government and favouring
large overseas IT companies was also the practice (if not the policy) of the
former Labour Government.
This would appear to leave little scope for small local
companies to play a role. However, at the same time the Internet is
changing the nature of the required product for Government IT. Work
for the Australian Government [9]
can be drawn on by small new local companies, to compete with innovation,
inside the development cycle of large rivals.
While using the local government market to develop products and sustain
operations, Canberra companies can market to the world. Canberra has a
similar non-industrial character to Cambridge, with major
cultural institutions. This can be built through deliberate marketing to
create an international reputation as a cultural and innovation centre.
The Internet provides an ideal on-line marketing tool. Canberra
already has Internet sites, such as the Australian National University,
with international reputations. These sites can be exploited to market
Canberra and create a reputation for culture and innovation in months,
rather than centuries.
One example of a potential product is the management of electronic documents.
This problem has been under investigation by Australian Government committees for
public service record keeping for several years
[10]. In the last few months some
promising solutions have become available
[11]
and an international conference held in Canberra
[12]. This work could be quickly turned
into products and services for local agencies and then marketed world
wide, using the reputations of local agencies in the marketing.
Local Universities could provide training in the information profession
skills (librarian, records manager and IT) and in management practices
to use the products.
Because of the difficulty of obtaining the Segal Quince & Partners report in Australia, I have summarised the main points:
Segal Quince & Partners produced a report in 1985 [1] into the growth of
advanced technology companies around the university of Cambridge UK:
the so called "Cambridge phenomenon". Having only discovered this book recently [5] . They looked at four policy issues:
- The role of small new technology based firms.
- Links between industry and higher educational and research institutions
- The contributions and roles of the public and private sectors in stimulating technological change and economic development. What is the impact of the allocation of allocation of public research funds?
- The spatial distribution of high technology industry. Will there be a trend away from established industrial and urban areas to attractive rural areas?
Cambridgeshire, Cambridge's region, is located in the south east of the UK.
Until around 1960 it was a prosperous agricultural region, with a
small dispersed population and poor transport links to the rest of
the UK. Around 1960 people began to move from the congested London
region, with a 28% population increase by 1981.
In the 1960s small factories moved to Cambridgeshire to escape London's
congestion and for the low wages and unionisation of the region.
During the 1970s new enterprises were formed, closest to London transport
links and large towns. Improved transport followed development.
Cambridge Scientific Instruments Company (now Cambridge Instruments)
in 1881 and The Pye Group (1896) were significant in early working
closely with University researchers to produce scientific instruments
for the University and then industrial products for world markets.
Planning controls in mid to late 1960s limited industry development
and a University report in 1969 recommended a "science park" for
science based industry, accessible to the University. In 1979 an
informal "Cambridge Computer Group" promoted the interests of
computing companies in the center of Cambridge and drew the
attention of locals and Barclays' Bank to stimulating hi-tech
companies.
In the 1960s the UK Government funded a CADCenter at Cambridge, managed under contract by ICL.
The government-university-company arrangement didn't work well, with
conflicting objectives of R&D, technology transfer and aims of eventual self
funding. In the 1970s key staff left and set up a successful company.
The center was privatised in 1983 and is successful commercially, being
owned by IT, engineering companies, the University, Trinity and St John's Colleges.
- There is a long history (100 years) of high technology companies in Cambridge, due to the University.
- The University is dominant in the city of Cambridge and is strong in scientific fields.
- The region was already growing before the latest hi-tech developments.
- Planning which limited large industrialisation may have helped small hi-tech firms.
- Problems of preservation v development remain.
Segal Quince & Partners interviewed 261 firms around mid-1984 and
estimated these were 85% of the relevant firms in Cambridge and employing
13,700 people. There was
significant increase of firms in the 1960s followed by an explosion in
the early-mid 1970s, with 60% of firms established after 1978. For the
decade an average of 1.5 firms started up per month and a failure of
only 7% of firms over five years.
Most firms were independent, with only 25% subsidiaries of larger
companies. The companies were small, with 30% having at most five
employees and 75% having at most 30 people. The dominant industry
was electronics, instrument engineering and computing, turning
over 230,000 Pounds per employee. Segal Quince & Partners attribute the
high productivity to deign being done in Cambridge and volume
production elsewhere.
Cambridge had 50% of firms and 80% clustered around near initial start-up
companies and the science park. Segal Quince & Partners provide a complex
"family tree" of companies. They suggest two kinds of company links:
- People forming new start-ups from existing companies, the University, or
research laboratories
- Subsidiaries of existing companies in the area created, but operating
essentially as independent companies
There was significant movement of people between companies, the University
and research laboratories, providing high quality technology transfer.
Only 17% of new companies were by people straight from the University,
more were from later spin-offs.
The major reason for locating the firm in Cambridge was that the principles
already lived there. Local contacts, market opportunities and a prestigious
address were also factors.
Cambridge was found to be a good place to recruit
staff from and attract staff to. One third of staff were graduates in older
firms and 60% in newer.
Two thirds of firms spent 5% or more of turnover on R&D, with one eight
spending more than 50%.
Segal Quince & Partners argue that informal links between companies and the
University/Research Organisations were important and have been understated
by previous studies.
Very small (three person) precision engineering sub-contractors, spin-offs
from University workshops, were
essential to the high technology companies.
New market niches in high technology were continually opening and being
filled by new firms, partly as subcontractors to larger local firms.
Many firms concentrated on exports to the USA and increasingly Asia.
Segal Quince & Partners conclude that the availability of finance was not
a limiting factor for high technology firms. Companies minimised the need
for external finance until better established. The local office of Barclays' Bank
was supportive with overdraft facilities, term loans and business advice.
The bank also provided the secretariat for the Cambridge Computer Group.
At the same time some venture capital became available for second and
later round financing. A central government guarantee scheme on bank
loans was also used by over 50% of firms started after mid 1981.
More complex government innovation schemes were less clearly of
value, due to the short product development periods for high technology.
Availability of suitable premises was not a constraint. The science park
was slow to develop for the first seven years. Later expansion was due to
"nursery units". Differences to later technology parks were:
- The park was developed in response to demand, not to
encourage it,
- Private sector development was dominant,
- The buildings weren't especially high technology in design or
facilities.
Improvements in roads provided better access from Cambridge and made
for a less remote feeling. Air transport remains a problem. Car
parking and congestion in the city center were not a major
problem.
Cambridge contrasts with high technology developments in Scotland,
which attracted electronics plants of large established foreign
companies. Indigenous companies are comparative less significant, as
is the role of universities (apart from providing graduates for
employment).
In comparison to Silicon Valley USA, Cambridge's high technology
industry is several orders of magnitude smaller, expanded more
recently, diversity and more quickly. Cambridge remains focused on
research, design and development, Silicon Valley on high volume
production.
- Large numbers of high technology companies around Cambridge for
computer hardware, software scientific instruments, electronics
and biotechnology.
- Young, small, independent and indigenous companies,
- Decades of high technology company start ups
- Research, design and development activities or small volume
high value production.
- Links between firms, the university and research organisations.
Cambridge University provides a research organisation with record of
academic excellence, good supply of research students, public sector
research funds and an ethos of self-confidence. 49% of teaching
and research staff have no tenure and are on short fixed-term
contracts. These people want to stay in Cambridge, but do not see
long term careers with the University and so start new businesses.
Around 2500 postgraduate students provide skilled part time staff for
businesses.
Academic staff have relative freedom to have links to industry and
retain intellectual property rights to work.
Research bodies around Cambridge University became attractive to large
organisations around the time of Segal Quince & Partners study (1985).
They provided a source of staff, particularly with cutbacks on
publicly funded research. Trends were for overseas firms setting up
marketing/distribution activities [note: marketing to who?],
limited production and R&D. They also monitored developments in
Cambridge laboratories, while contributing to the laboratories.
Public expenditure on research was a factor in development of computing and
biotechnology firms, but there was lead time on a decade.
The science park provided small cheap short term accommodation for already
established firms. It also provided high cost, high quality property
for prestige projects of international firms, with the prestige rubbing
off on smaller tenants.
The Cambridge Technology Association (previously Cambridge Computer Group)
grew out of a meeting in July 1979 to encourage co-operation and
support amongst new computer companies. The group provided moral support
for new small companies, financial and business service firms were able to
identify opportunities from the start-up computer companies and local
authorities could see a new industry to encourage.
1.
Segal Quince & Partners: "The Cambridge phenomenon : the growth of
high technology industry in a university town", Segal Quince & Partners,
Hall Keeper's House, 42 Castle Street, Cambridge CB3 0AJ, England,
1985, ISBN 095102020X (copy in ANU HANCOCK Library)
2.
Hi-tech tourist - Windsor and Cambridge, UK, Tom Worthington, November 1996: http://www.acs.org.au/president/1996/epubs/uk.htm
3.
Analogy of Canberra to Thebes suggested by LTCOL Graham Tippetts, Deputy Director (Systems), HQAST Project, personal communication, April 1997
4.
Canberra 1997: world information capital, Keynote Address, ACS Canberra Branch Conference, 20 April 1996: http://www.tomw.net.au/twadd7.htm
5.
"The Cambridge phenomenon" suggested by Sir Peter Swinnerton-Dyer, Chair of the IT Committee, University of Cambridge, April 1997.
6.
"Information Technology & Telecommunications' Direction",
Department of Premier and Cabinet, Tasmanian Government, Australia, 10 April 1997:
http://www.dpac.tas.gov.au/govt/directions/
7.
"ACS Applauds Tasmanian Government’s Initiatives", ACS Media Release,
Department of Premier and Cabinet, Tasmanian Government, Australia, 13 April 1997,
http://www.acs.org.au/news/tasstate.htm
8.
"Australia's 'Net Futures", National Press Club Address, Canberra, 11 December 1996,
http://www.acs.org.au/president/1996/epubs/npctw.htm
9.
"Implications Of The Internet For Government", 10th National Technology
in Government Conference, Canberra, 18 March 1997,
http://www.adfa.oz.au/DOD/imsc/imscpr.htm
10.
"Improving Electronic Document Management: Guidelines for Australian
Government Agencies", Office of Government Information Technology, 1995
11.
"Architecture For Access To Government Information", Information
Management Steering Committee Technical Group,
Office of Government Information Technology, 1996
http://www.adfa.oz.au/DOD/imsc/edmsc/iedmtc.htm
12.
"Seminar on International Metadata Developments", 6 March 1997,
http://www.acs.org.au/president/1996/epubs/metadata.htm
See also: