INNOVATION CLUSTERS

PROGRAM GUIDE

DRAFT

Version 1.0

NATIONAL INNOVATION COUNCIL

GOVERNMENT OF INDIA
 Table of Contents
I. Overview............................................................................................................................................................. 3
a. Innovation at Clusters................................................................................................................................ 3
b. Innovation needs an enabling ecosystem............................................................................................ 3
c. Innovation Clusters Initiative.................................................................................................................. 4
d. Industry Ownership ................................................................................................................................... 6
e. Role of the Government ............................................................................................................................ 6
f. Role of National Innovation Council ..................................................................................................... 6
II. Purpose of the Program Manual ................................................................................................................. 7
a. How to Use this Manual............................................................................................................................. 7
b. Illustrative Example: Food Processing Cluster, Krishnagiri, Tamilnadu ................................... 8
c. Organization of the Manual...................................................................................................................... 8
III. Innovative Cluster Ecosystems: Case Studies .................................................................................... 8
a. International: Silicon Valley & Cambridge Cluster ........................................................................... 8
b. India: Tirupur Exporters Association (TEA) ...................................................................................... 9
c. Lessons to learn from TEA .................................................................................................................... 11
d. Traits of Innovative Cluster Ecosystems .......................................................................................... 12
IV. Building an Industry Innovation Cluster: Key Elements ............................................................. 12
a. The Connector ........................................................................................................................................... 12
Illustration ...................................................................................................................................................... 13
Support activity: Online collaboration and knowledge sharing .................................................... 14
Sustaining the CIC ......................................................................................................................................... 14
b. The Innovator ............................................................................................................................................ 16
Illustration ...................................................................................................................................................... 16
Support activity: Innovation Enablers ................................................................................................... 16
Support activity: Mentoring ...................................................................................................................... 17
Support activity: Innovation Toolkit ...................................................................................................... 18
c. The Channel ............................................................................................................................................... 19
Establishing channels of cooperation: Innovation Initiatives ........................................................ 19
Illustration ...................................................................................................................................................... 20
V. Building an Industry Innovation Cluster: Procedure ........................................................................ 20
a. Creating an innovation ecosystem for your organization ........................................................... 20
Illustration ...................................................................................................................................................... 21
b. Measuring the readiness of a Cluster ................................................................................................. 21

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 Illustration ...................................................................................................................................................... 22
c. Creating a CIC ............................................................................................................................................ 22
d. Diagnostic of the Cluster ........................................................................................................................ 23
e. Preparing the Cluster Ecosystem Map .............................................................................................. 24
Illustration ...................................................................................................................................................... 25
f. Detailing the Industry Value Chain..................................................................................................... 25
Illustration ...................................................................................................................................................... 26
g. Detailing the Production Value Chain................................................................................................ 26
h. SWOT Analysis .......................................................................................................................................... 27
i. Prioritizing areas for action .................................................................................................................. 28
Illustration ...................................................................................................................................................... 28
j. Creating action plans for selected activities .................................................................................... 29
Illustration ...................................................................................................................................................... 29
k. Monitoring and Evaluation ................................................................................................................... 30

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 I. Overview
One of the most important drivers of sustained growth in productivity and competitiveness of
industry is undoubtedly innovation. Examples from across the globe have shown how and why a
business should innovate to be relevant with changing times. Innovation not only in technology,
but also in products, processes, services, delivery models and organizational models are the
need of the hour.

a. Innovation at Clusters
Today, Micro Small and Medium Enterprises (MSMEs) and start-ups are viewed as major
engines of job creation and inclusive growth, both in developing and developed countries alike.
In 2010-11, MSMEs represented 45% of manufactured output and 40% of exports1.

India is also estimated to have 5,000 regional MSME clusters2 comprising of industrial,
handicraft and handloom clusters such as Gems cluster in Surat, Brassware cluster in
Moradabad and Textiles cluster in Tirupur. Innovation can play a pivotal role in driving growth
in MSME clusters by creating new products, services and business models.

However, innovation in MSME clusters in India suffers from lack of access to technology, R&D,
financing, skills, mentors and effective collaborative ecosystems, which in turn impact their
growth and productivity. In this context, the National Innovation Council (NInC) has set out to
create models for transforming regional MSME clusters into innovation ecosystems with
collaborative partnerships among stakeholders.

b. Innovation needs an enabling ecosystem

Since MSMEs themselves cannot garner the above mentioned capabilities in most cases, the way
to address gaps is by building partnerships with relevant stakeholders. A cluster-based
approach can allow MSMEs to leverage economies of scale. As a result, MSME clusters can
attract the right partnerships to form innovation ecosystems that benefit all. Such partnerships,
inherently present in some clusters, need to be strengthened and cultivated in others.
Partnerships within the innovation ecosystem will provide following benefits to the industry:

Provide R&D capability with access to technology, people, skills and labs
Provide risk capital in the form of grants, venture funding and other forms of credit
Provide access and participation of skilled outside mentors and advisors
Connect industry to sectorial experts, industry bodies and professional organizations
Provide access to programs and schemes of public and private organizations

1 MSME Annual Report, Ministry of MSME, Government of India

2 http://clusterobservatory.in

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The ecosystems will encourage collaboration and cooperation through sharing and networking
forums which enable formal and informal interactions. Further, support for entrepreneurs who
bring in energy, motivation and disruptive ideas will be easily available. Entrepreneurs help
push the limits and challenge the status quo from time to time and will help the cluster sustain
its competitive edge.

Figure I Industry Innovation Ecosystem

In summary, ecosystems will encourage an innovation mind-set of risk taking by providing

support and enhancing acceptance of failure.

c. Innovation Clusters Initiative

Till now interventions by various Government and non-Government agencies have not
addressed industry requirements from the perspective presented above. Also, some innovations
bear fruit in longer timeframes and require sustained focus for their success, which makes
active buy-in of stakeholders extremely important.

Also, most interventions focus on providing either grants-in-aid or one-time capacity building
support. Yet, for the diverse and dynamic needs of
the industry, it becomes important that channels to
For MSMEs leveraging
collective strength for bring in resources on a need-basis be established.
sustained growth is one of the Since MSMEs do not have the means of gathering all
best means
resources required, unlike major corporations,
collaborating with partners becomes crucial.
However, for economies of scale, cluster-level collaboration will prove beneficial to both the
engaging parties.

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The ideal mechanism for cluster-level engagement is through the cluster-level bodies. But most
such organizations have never engaged in collaborative effort before and are not equipped to
manage such programs. We believe it can be made possible by expanding the role of the local
industry body to act as the hub of the innovation ecosystem and become a facilitator and
catalyst for collaboration.

At the same time, the operations of the cluster body have to be self-sustained, with minimal
dependency on outside agencies. Hence evolving a business and sustainability model for these
will also be critical.

The Industry Innovation Cluster initiative aims to address these concerns and provide a model
for seeding innovation in MSME clusters by creating hubs to cultivate and manage vibrant
ecosystems of collaboration.

Figure II CIC as the hub of the innovation ecosystem

To kick-start an innovation ecosystem, NInC proposes the creation of Cluster Innovation

Centres (CIC) at MSME clusters as part of the Innovation Clusters Initiative. This centre is
envisaged as a small group of people who will manage the innovation ecosystem as an arm of
the cluster association or as a virtual group. The CIC will actively seek relationships to address
the needs of the cluster and establish frameworks for knowledge and best practice sharing.

The CIC will also be the focal point for efforts and interventions, effectively managing the
execution of initiatives for the cluster. The CIC will actively seek innovation initiatives, in
consultation with relevant stakeholders and formulate action plans. The innovation initiatives
would match the strategic interests of all collaborators and provide significant benefit to the
cluster members.

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The CIC will play the role of:

The Connector: A networking and sharing hub for members of the cluster and partners
The Innovator: Catalyse and manage innovation initiatives within the cluster
The Channel: Facilitate in-bound and out-bound flow of knowledge and resources

d. Industry Ownership
For long-term impact, sustainability and dynamic responsiveness of interventions and
initiatives they have to be the responsibility and be driven by the industry itself. A successful
example of the same is the Tirupur Knitwear Export Cluster, where the Tirupur Exporters
Association pro-actively sought to improve the status of the industry by launching demand-
driven initiatives. This effort was fully supported by the National/State Government and other
stakeholders, with the cluster achieving tremendous growth in a short time period.

With industry in the drivers seat, the role of the Governments then becomes to play catalysts
and facilitators. Global examples of successful industry clusters also show that industry
leadership and participation in conjunction with Government agencies are a must from
inception for innovation initiatives.

e. Role of the Government

As it becomes the role of a business to innovate, it becomes the responsibility of the
Government to facilitate and provide the right environment for innovation. Government,
traditionally, has been providing impetus to improvement in focused areas via interventions
targeted at a particular aspect of the industry. However, such activity seems to wane in
relevance as the environment in that sector keeps changing ever so constantly, owing to the
global nature of business. Thus, it becomes imperative that Government programs, even when
proposing a framework for support, be flexible to address the changing demand and nature of
the demands of the industry, especially for innovation to prosper.

f. Role of National Innovation Council

Through the Innovation Cluster Initiative, NInC aims to create models to foster innovation in
MSME clusters and work with relevant Government and non-government organizations to
replicate such models across all sectors of the industry. In doing so, NInC also aims to connect
various stakeholders in symbiotic relationships, thus enabling sharing of knowledge and access
to emerging needs and trends. This will help both policy makers, organizations/institutions
having an impact on the growth of the industry and professional organizations stay in-tune with
the industry.

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II. Purpose of the Program Manual
The Pilot Phase of the Innovation Cluster Initiative began in November 2011, with activities in
seven clusters (listed below) across the country. This manual offers a set of guidelines and
showcases observations, lessons from pre and post the launch of the Pilot Phase. The manual is
intended as a workbook for structuring of similar programs and initiatives to seed and foster
innovations in MSME clusters.

Auto Components Cluster, Faridabad, Haryana Ayurveda Cluster, Thrissur, Kerala

Bamboo Cluster, Agartala, Tripura Brassware Cluster, Moradabad, Uttar Pradesh
Food Processing Cluster, Krishnagiri, Tamilnadu Furniture Cluster, Ernakulam, Kerala
Life Sciences Cluster, Ahmedabad, Gujarat
Table 1 Pilot Phase Clusters

Adaption, addition to and omission of activities detailed below might be needed to suit the
mandates of the organizations/agencies intending to use this workbook. Advice for such
scenarios is embedded throughout, where deemed necessary.

a. How to Use this Manual

This manual is not prescriptive but aims to
bring out the salient aspects which should not
be ignored while designing and implementing
programs which aim to foster innovation. The
following table shows how the reader will
need to interpret the contents for his benefit.
Post-it notes, as shown, are also placed at each
relevant section to direct the reader in
interpreting the topics discussed.

If you are As a Then you need to

Defining a program/policy Government body or Consider provisioning for activities
Department detailed and allow flexibility for
adaptation
Executing the program Implementing agency Use the templates for effective
management and be aware of
probable idiosyncrasies
A cluster body Industry association Use the elements for self-analysis
and for deriving activities to take up
Table 2 Guide to use this Manual

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 b. Illustrative Example: Food Processing Cluster, Krishnagiri, Tamilnadu
As an illustration, the example of a Food Processing Cluster at Krishnagiri, Tamilnadu (hereafter
referred to as FPCK) is used throughout this document. A generic profile of the cluster is
presented here for context and background.

The climate in Krishnagiri, semi-arid in nature, makes it one of the largest mango producing
regions in the country. The major variety of mango produced in the region is totapuri. This
variety of mango is best suited for pulp production and hence the concentration of Pulp
Processing units in the region.

The cluster is made of about 200 nurseries that produce saplings, 3000 farmers with land
holdings of various sizes and 80 Pulp Processing Units. The cluster processes about 1,50,000
tonnes of mango annually, with close to 1,000 tonnes fresh fruit being exported as well. Since
mango is a seasonal fruit, some units have also diversified into producing pulp of other fruits
such as guava, amla and vegetables like tomato.

Processed pulp is sold in both domestic and export markets, with almost equal share. A small
percentage of fresh fruit is also sold for house-hold consumption largely in the domestic market.

c. Organization of the Manual

Section III of the manual brings out lessons to be learnt from national and international
examples of clusters and the traits observed.

Section IV gives the vision of the Industry Innovation Cluster initiative and what it aims to
achieve.

Section V details the key elements which enable building innovation ecosystems and the need
for these elements.

Section VI details the procedure followed in executing the program, provides templates that can
be used for capturing data and managing the program.

III. Innovative Cluster Ecosystems: Case Studies

a. International: Silicon Valley & Cambridge Cluster
An oft quoted example of a successful cluster is that of Silicon Valley, U.S.A., a cluster which
emerged organically. The region is famous for being a fertile ground for innovators and is home
to some of the most successful industries in the recent decades. The strength of the Silicon
Valley ecosystem, apart from merit and diversity of human capital available, is the presence of
professional services including lawyers, accountants, venture capitalists and mentors. Along

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with existence of relevant stakeholders in geographic proximity, formal and informal learning
and sharing through various forums of interactions is one of the significant strengths of the
region3.

In some cases, it has been the presence of vibrant Universities which have aided the growth and
emergence of clusters. Stanford University and Cambridge University are recognized as major
contributors in the emergence of Silicon Valley and Cambridge Cluster respectively. Other
examples of successful clusters are the biotech clusters in Sweden and Switzerlan d. Apart from
having a strong history in technology and in life sciences, significant drivers for their success
have been4:

Access to technology (close collaborations between research/academia and industry)

Access to investment
Talented individuals (education system linked to industry)
Government support

Notwithstanding the diversity in their formation,

the common elements for the success of these The growth of some of the
clusters include geographic grouping of industry, most successful clusters is
organic with minimal
professional service providers, education and intervention
research institutions, financial institutions and
Government/non-Government agencies connected
in symbiotic relationships. Such relationships enable the industry to assimilate the needed
resources for their growth and development.

Providing a conducive environment for innovation and thus growth, then becomes effective
creation and management of connected ecosystems. And since the industry knows best what the
needs are, such relationships should be constantly sought and relevant initiatives taken up.

b. India: Tirupur Exporters Association (TEA)

The following is a case study of one such cluster which leveraged its inherent strengths and
understanding its needs sought support and collaborations from multiple stakeholders to grow.

Profile

Tirupur is a small town in Southern India where the Knitwear industry originated in the 30s as
a Cottage Industry. Easy availability of raw material (hosiery yarn), labour and access to market
induced many people to enter the business, thus creating a natural cluster. Leveraging social

3 Lecture by John Roos, Silicon Valley: An Ecosystem; http://academicearth.org/lectures/silicon-valley-an-ecosystem

4 Article by Patrik Frei, Johan Ohlsson, The Key to Successful Biotech Clusters in Switzerland and Sweden;
http://www.siteselection.com/LifeSciences/2010/may/Biotech.cfm

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capital and entrepreneurial spirit in the region, the industry quickly reached SME status and
dominated the domestic market for close to five decades. Having reached saturation on the
domestic front, the members of the clusters sought export markets, but quickly realized there
are multiple areas which need improvement for them to become globally competitive. The
businesses also realized many of the issues are common to all of them yet couldnt be resolved
individually.

Tirupur Exporters Association

In 1990, an exporter Mr Shaktivel, with a few like-minded exporters formed the Tirupur
Exporters Association, now popularly known as TEA. Traditionally industry associations have
been functioning as liaison offices with the focus being on making representations to the
Government and other agencies, in short advocacy. The founders realized that to achieve rapid
growth and address the immediate needs of the industry, TEA should take responsibility for its
own development. With a carefully picked Executive Committee, a think-tank sought to chart
out the vision and mission for the cluster for more than a decade.

Initiatives

Through internal brainstorming and dialogue with relevant stakeholders, TEA identified issues
to be tackled to help the cluster grow steadily and aggressively addressed all of them
systematically and simultaneously. The following is a summary of the initiatives undertaken
over the years for all-round development of the cluster and the region:

Water supply
& Sewage With collective benefit as the main-stay, TEA could emphasise to the
scheme local Government the need for these. Focusing on ownership
Infrastructure
(joint/single) and timely delivery, the resource support provided was
Roads
utilized to the fullest extent.
Electricity

Recognizing need for modernization of manufacturing, TEA created

model industrial complex and constantly supported member
Manufacturing Capacities
industries. The proactive effort by the industry was supported by the
Government with subsidies

Understanding the importance of backward integration, TEA advised

Raw Materials
many industries to start their own rolling mills

Realizing the need for technology upgradation, TEA sought the best
technology, provided machine manufacturers the forum to introduce
Technology
latest technologies to its members, facilitated knowledge sharing
among members. TEA was also instrumental in the introduction of the

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 Technology Upgradation Fund Scheme (TUFS)

TEA persuaded financial institutions to open specialized branches and

services for its members. Frequent interactions with the officials of
Finance
these institutions and impeccable track records of the cluster members
helped in gaining special status more than once

The cluster as a whole employs close to 4,00,000 people and TEA

forged collaborations with institutes like NIFT, regional engineering
Manpower
institutions to provide scholarships, internships and placement for
their graduates

Continuous upgradation and adherence to quality norms was

prioritized. TEA organizes and coordinates activities at member units,
Quality
helps recruit professionals at reduced fee and also operates a
Standards Compliance Cell offering consulting at nominal fee

To ease transport of products for export, TEA formed JVs and

Logistics
partnerships with private and Government agencies (Customs Office)

TEA facilitates liaison with Unions and constantly strives to ensure

Labour Relations
above average benefits to the workforce

With the ambition of making Tirupur a global sourcing hub, TEA

Marketing
organizes periodic Trade Fairs attended by a global audience

Zero Liquid Discharge technology has been introduced to comply with

Environment environment laws. TEA supported creation of Common Effluent
Treatment Plants

Table 3 Initiatives of TEA

The above showcase successful initiatives, yet there are also unsung songs of failures which
taught TEA valuable lessons in both conceptualization and execution of initiatives.

c. Lessons to learn from TEA

The following factors become apparent from the TEA example:

The industry, through a body working for the growth and development of the industry
(hereafter referred to as cluster body), takes ownership of its growth
An industry think-tank prepares a roadmap and prioritizes specific activities that need to
be taken up
Risk-taking ability in the leaders and understanding the value of lessons derived from
failures both by leaders and cluster members
The cluster body owns the delivery of the roadmap and is guided by the think-tank

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 The cluster body seeks collaborations and support from relevant stakeholders, while
ensuring mutual benefit
All-round growth and development needs
TEA shows how with
innovations not only in technology but also in industry-ownership and
strong leadership, the
processes, products/services, business models
necessary elements for
and organizational models growth can be fostered
The role of the various Government agencies is
of support and facilitation

d. Traits of Innovative Cluster Ecosystems

The following are the traits observed nationally and globally

Strong linkages with relevant stakeholders, inherent in some cases and cultivated in others
Strong leaders who envision growth of the cluster
Strong industry/cluster body capable of translating the vision into reality
Existence of common needs, opportunities and/or threats
Access to skilled mentors and advisors
Risk-taking and acceptance of failures
Supported by policy and Government programs (existing or created on-demand)

IV. Building an Industry Innovation Cluster: Key Elements

To build a successful Innovation Cluster, the CIC should play the following roles:

1. The Connector: Become a networking hub which enables knowledge sharing between the
members of the cluster and seeks collaboration with external organizations for demand-
driven innovation within the cluster
2. The Innovator: Be the executive body which will catalyse and manage activities leading to
demand-driven innovation and growth of the cluster
3. The Channel: Facilitate pathways for resource mobilization including technology, R&D,
skills, mentors, finance, outreach and market linkages

a. The Connector
To kick-start innovation ecosystem activity at the cluster, a Cluster Innovation Centre (CIC)
needs to be created. This centre, a lean cell with 3-4 people, will own the building of the
ecosystem, actively seeking relationships with external stakeholders to address the needs of the
cluster and establish frameworks for knowledge and best practice sharing among the members
(units) of the cluster.

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The CIC will be the focal point for efforts and interventions, effectively managing the execution
of initiatives for the cluster. Initiatives selected should match the strategic interests of all
collaborators and provide significant benefit to the cluster members. The CIC will actively seek
such initiatives, in consultation with relevant stakeholders and formulate the detailed plans for
such initiatives.

The deliverables of the CIC will be the following:

Understand the needs of the cluster

Initiate and execute initiatives which will address these needs by collaborating as needed
Document the progress of the initiatives and lessons learnt in the process
Share the knowledge and results

The ideal host for the CIC will be the cluster body which has the mandate of working for the
development of the cluster. Such bodies exist in multiple forms in clusters:

Business Membership Organization

Special Purpose Vehicle with public-private partnership
Government/Private Industry
Development Body/Society

It can also be the case that some clusters may

have multiple such bodies operating. In such
scenarios, close consultations with all the
relevant organizations need to be held to
ensure their buy-in and find a host
organization with everyones agreement or
create the CIC as an independent
organization with all the others as equity
partners.

In cases where there is no such body existing,

in consultation with the cluster members and
other relevant stakeholders one such body might need to be created.

Illustration
Even after being one of the leading mango pulp processing clusters in the country, FPCK did not
have a functional cluster body. With the leadership of one of the senior entreprenurs and
professional service providers in the region, the Krishmaa Cluster Development Society
(hereafter referred to as KCDS) was formed, operating a business membership organization.

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The association has the mandate of working for the benefit of the entire cluster ecosystem and
has found support from all stakeholders. Stakeholders like the regional Tamilnadu Agricultural
University and the State Horticulture Department have actively supported this initiative from
inception.

Support activity: Online collaboration and knowledge sharing

Leveraging the power of information and communication technology (ICT) for connecting with
experts around the globe and for sharing knowledge among both internal and stakeholders is
imperative. The Prime Minister has launched the India Innovation Portal
(www.innovation.gov.in). The portal aims to network people, ideas, experiences and resources
to galvanise the innovation community in India.

The portal also offers collaboration space in form of Communities, to foster cross fertilisation of
ideas and knowledge flows, thus providing a platform for developing multi-stakeholder
partnerships and for facilitating national and global collaborations. Figure III is a snapshot of
one such community.

Figure III Communities on India Innovation Portal

Sustaining the CIC

The CIC should operate as a self-sustaining entity to ensure its relevance in ever-changing
business environments and to reduce the burden on the host organization. The following are
the envisaged activities to help the CIC sustain:

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 Figure IV Products & Services of a CIC

1. IP: IP which the CIC will generate or co-own either in the form of technologies or products,
processes which will be licensed to the members of the cluster on a priority and may be
licensed to any interested third party
2. Reports: Various survey reports which will be made available to the cluster and other
interested parties
3. Training: Providing training of various kinds, relevant to the cluster
4. IT & Shared Facilities: Developing needed IT software in collaboration with professional
agencies and providing the same as a product at nominal cost to cluster members and
housing facilities such as product design studios which are made available to the cluster
members for a nominal fee
5. Library: Act as a library of information and provide access to knowledge networks
(national or global) by subscribing on behalf of
the cluster
6. Knowledge Sessions: Workshops, events and
others
7. Consulting: As a service
8. Technology Commercialization: As a service
9. BD & Marketing: As a service
10. Program Management: As a service
11. Supply-chain Management: As a service
12. Certification & Accreditation: As a service

By ensuring that these activities stay relevant, the CIC should be able to generate revenues to
sustain its operations for a longer period of time. A business model involving one or more of
these elements needs to be created as part of operationalizing the CIC.

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b. The Innovator
If the CIC is the organizational framework to seed collaborative ecosystems to foster innovation,
it has been observed that the CIC should also be adequately competent to deliver the
responsibilities of the role it has been assigned. Typical MSME cluster members and bodies lack
the professional touch to manage collaborations and also effectively manage the process of
innovation as they have never done so before. It thus becomes imperative for the various
members and stakeholders to be aware of the best practices in managing innovation
understand relevant areas which impact innovation and learn best practices of business and
project management in general. This will enable them become innovators in their own right.

Apart from understanding the nature of innovation,

Typical cluster bodies do not the members of the cluster will also need to build
have the expertise and capacity in various areas which might impact
experience to manage
collaborations and innovation innovation and business in general. Design,
technology, finance, IP, quality standards and others
are examples of such areas and the CIC shall be
instrumental in arranging exposure to these on demand.

Apart from building capacity, the CIC will also play the role of a knowledge hub. Collecting
information which might be useful for the various activities of the cluster and consciously
capturing knowledge from the various activities being undertaken is essential, creating a ready
reference.

Illustration
Though members of FPCK acknowledged the need to collaborate, little was done to proactively
seek partnerships with stakeholders. The members of the cluster had to be educated about the
benefits of collaboration and thus have now started seeking partnerships.

Being a community of entrepreneurs, it was also observed that some innovators had tried
challenging the status quo experimenting with new products and processes. Yet, due to lack of
proper guidance and know-how of managing innovation, they failed and thus developed a fear
of failure. By conducting sessions to increase their exposure to innovation management, project
planning and good business practices in general, they are now going ahead with greater
confidence.

Support activity: Innovation Enablers

Exposure and working knowledge of the areas (refer Figure V) is deemed necessary for the CIC
to operate effectively. As can be seen, expertise in these areas is necessary to carry out the kind
of functions of the CIC. Given that continuous learning is the order of the day, even experienced

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cluster development functionaries will also need to keep themselves abreast of the new
methods and practices in these areas. Periodic training and exposure sessions need to be
organized depending on the needs of the cluster and its members. Having said so, the CIC being
a hub of knowledge sharing, can play a powerful role in dissemination of knowledge from
various quarters to itself, the cluster members and the entire ecosystem alike.

Figure V CIC: Basic areas of exposure for CIC and/or Cluster Members

Apart from the CIC, the cluster members and stakeholders also will need to be exposed to the
best in areas of interest. The CIC and the
mentor group will have to assess the gap areas
carefully and seek to plug the gap with focused
capacity building sessions. These sessions will
vary in priority from time-to-time and will also
depend on the needs of the industry sector, the
demography of the cluster and urgency to fill
the gap. In most cases, the CIC may need to
take the help of professionals or educational
institutions to work towards building the
necessary skills and expertise. Being demand-
focused such measures will be welcomed by
the cluster and thus ensure active participation
and full impact.

Support activity: Mentoring

While the CIC is actively pursuing initiatives for the benefit of the cluster, it is imperative that a
think-tank be guiding the CIC in the right direction. A mentor group that takes a macro view of
the cluster, its needs and synergizes the strengths of the stakeholders who are part of the

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cluster ecosystem will help the CIC become effective. Such a mentor group with representation
from the cluster members, stakeholders like R&D institutions, educational institutions, finance
institutions, professional bodies, Government, major customers and well-wishers needs to be
brought together to support the CIC.

Support activity: Innovation Toolkit

As a ready-reference and for streamlining day-to-day operations, the CIC and the cluster
members may need access to:

Best practices, case studies, etc. to help

streamline its operations
Policies, Programs, Schemes: Government
and non-Government
Notifications of events, workshops, news,
etc.
Directories of stakeholder agencies,
professionals, possible partners, others
Documentation templates of proposals, reports, etc.
IT Tools useful to cluster members and to ease CIC operations

This information repository may not be available and hence will need to be built and constantly
updated. But easy access to such information will greatly ease the functioning of the CIC.

National Innovation Council has created one such generic repository and it is available online
through the Clusters tab on the India Innovation Portal. Interested readers please visit the URL
http://innovation.gov.in/innovation/inntoolkit/index.html.

Figure VI Innovation Toolkit Snapshot

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c. The Channel
The impact of collaborations and innovations thereof will be measured in terms of gains seen in
productivity and competitiveness of the cluster and the benefits to the cluster community at-
large. Showcasing the accessibility of channels from which resources can be leveraged and
generating short, medium and longer term returns on the resources invested becomes vital to
ensure continuous support of the cluster for
the CIC.

Most initiatives taken-up can be made

operational in stages where impact is visible
at periodic intervals, thus reassuring every
one of the approach being taken and the
eventual gains to be derived. This approach
also ensures that flexibility is available for
mid-course corrections when the results
dont seem to be visible. It is also difficult to
assume that all actors in the initiative are
convinced of the veracity on day-one. Even in
such cases, the stage-wise approach helps in
winning over the parties and eventually
gathering full support for large-scale implementation and impact.

Exploring synergies with the stakeholders in the cluster ecosystem, demand-driven initiatives
need to be selected and pilot/prototype demonstrations carried out. Thus with smaller resource
investments, benefits of the initiative can be better assessed and full-scale implementation
planned.

Establishing channels of cooperation: Innovation Initiatives

To mitigate risk of failure and to ensure full cooperation of all relevant stakeholders, it is better
to showcase the benefits of an innovative initiative in a small scale pilot. Such pilots also bring
out the hidden need for resources, expertise and help clarify the impact of full-scale
implementations. With a proof-of-concept it also becomes easy to bring in more support and
collaborations to widen the scope of the activity.

As part of the Industry Innovation Cluster initiative, such pilot initiatives have been undertaken
in all the clusters and at the time of preparing this document are heading towards fruitful
results. The proven pilots are expected to be openly embraced and support for such activity
forthcoming for scale-up.

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These initiatives will also engage the CIC in actual implementation and provide hands-on
experience.

Illustration
Energized by the support from the National Innovation Council, Krishmaa Cluster Development
Society (KCDS) started engaging with potential partners to seek resources needed for growth of
the cluster.

KCDS engaged with the Central Food Technology Research Institute (CFTRI) at Mysore and
showcased their needs. CFTRI in-turn came forward with potential applications of their
technologies to suit the needs of the cluster. This interaction has led to multiple pilot prototypes
being executed in the cluster including introduction of better processes for manufacturing of
mango bar, mango flavoured corn flakes and better pre/post-harvest protocols for mango
farming.

Management of liquid waste (in the form of effluents from the processing units) and solid waste
(the skin and kernel of the mango post processing) has been a major concern for the cluster.
With restrictions on dumping and increasing environmental concern, the members were
seeking a solution to this problem. By roping in the expertise of the National Institute of
Interdisciplinary Science and Technology (NIIST) at Trivandrum, KCDS is building a prototype
plant for drying of solid waste and extraction of butter from mango kernels (used in edible
products).

Though everyone in the cluster was aware of the benefits of using IT for business management,
only few of the cluster members had tried the same. By partnering with an entrepreneur
providing ERP (Enterprise Resource Planning) solutions to food processing industries, the
cluster body has also engaged in infusion of IT skills into the cluster. The entrepreneur, seeing
KCDS as an entry point into the entire cluster, has also agreed to provide his product at a
discount while agreeing to train and place an IT resource person at the disposal of KCDS for a
period of one year to begin with.

V. Building an Industry Innovation Cluster: Procedure

As with any program, procedures ensure clarity, effectiveness, management and timely delivery
of objectives of the program. The following sections provide details of the procedures.

a. Creating an innovation ecosystem for your organization

Given the multi-disciplinary and cross-functional nature of innovation, it is important that the
organization focusing on innovation has an ecosystem of collaborators and complementing

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organizations which will enable in making the endeavour a success. This will also help in
addressing the realistic needs of the industry or cluster. Having decided to focus on innovation
it becomes important for the organization to understand its own strengths and weaknesses in
delivering the same and start fostering such
collaborations before moving forward.

Doing so also increases the chances of success as

inputs from different sources will improve the
effectiveness, alignment and ease of functioning
of the program.

Illustration
With forward-looking leadership and with a goal
of development of the entire cluster, KCDS
actively involved relevant stakeholders from
inception. Exploring synergies with region
institutions like CFTRI, Tamilnadu Agricultural University, the lead bank, State Government
Departments and also the close-by mango processing cluster in Andhra Pradesh, KCDS has
created a vibrant platform to launch itself on the path of growth.

b. Measuring the readiness of a Cluster

For success of the program, it is imperative there is a fertile ground for the ecosystem to foster.
The readiness of the cluster to move towards engaging various stakeholders and forming a
conducive ecosystem for collaboration and innovation can be judged by the following key
elements:

Presence of strong leadership in the cluster

to drive the program
Presence of strong cluster body and
executive to host and kick-start CIC
Strong felt-need for change in the growth
trajectory of the cluster
Willingness of the cluster members and
stakeholders to invest in innovation
Alignment of cluster objectives with relevant policy/programs
Strong needs and/or opportunities for innovation

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The above list is by no means complete, yet should provide a good way of increasing the
chances of success of the program.

Even though historical data may suggest that a particular cluster is a perfect candidate, it is
advised that an unbiased analysis of the cluster body and the members be carried out before
proceeding further. Some of the parameters outlined above are soft/human in nature. It is
advised that multiple face-to-face interactions be carried out to judge these. In some cases,
indicators of the above parameters only start emerging after continuous interactions and close
observation of the reality in the cluster.

Illustration
The following is the analysis of the Food Processing Cluster at Krishnagiri:

Presence of strong leadership Yes Mr. Sathyamurthy

Presence of strong cluster body No

Strong felt need for change Yes All members interacted with support the need for change

Willingness to invest Yes Multiple members came forward to invest given proof of
significant benefits

Alignment of cluster objectives Yes Good alignment with objectives of the initiative of the
National Innovation Council

Needs and opportunities Yes Better farming practices, waste management, storage
protocols for mangoes, IT

Table 4 Analysis of Food Processing Cluster, Krishnagiri

c. Creating a CIC
In consultation with the cluster members
and stakeholders, the host institution for the
CIC has to be ascertained. While choosing a
host institution, care has to be taken to
ensure that the objectives of the host are
synchronized with that of the CIC. Though
innovation may not necessarily be the
mandate of the host, wholesome
development of the cluster/industry sector,
which will enable the CIC to seek innovation
leading to not only new products or process
improvements but also innovations in
organizational and business models, should be sought. The host also has to acknowledge

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resource investments that need to be made for establishing the CIC and making it fully
operational.

The staffing of the CIC with the right kind of human resources is also of utmost importance.
Depending on the needs of the cluster it is advised that resources with relevant exposure or
with necessary innovation quotient and understanding of the need for innovation be engaged.
In exceptional circumstances, some of the entrepreneurs from the cluster might also be
engaged but full-time dedication of such a person will be a shortcoming. Enthusiasm for
innovation-driven growth of the cluster and attitude to judge the needs of the cluster members
will play a crucial role in the success of the CIC.

d. Diagnostic of the Cluster

The cluster diagnostic is a document which captures the present environment of the cluster. It
helps present the macro scenario, while also giving brief details of the activities of the members
of the cluster. A typical cluster diagnostic should
capture relevant information among the
following:

1. Profile of the cluster

Details like geographic location, sector,

product portfolio, number of units, number
of people employed, average skillset of
manpower, annual turn-over of the cluster,
other historic and important detail

2. Macro environment of the cluster and sector

Evolution of the cluster, current status of cluster, status of the sector (state, national,
global), projections of the future of the sector

3. Cluster ecosystem map

Detailed separately below

4. Cluster-level institutional framework and details of the same

Industry/cluster bodies, Government (state, national, international) bodies, professional

service providers, voluntary organizations

5. Value chain of the industry/sector

Detailed separately below

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6. Value chain of the product(s) produced by the cluster

Detailed separately below

7. Status of, access and SWOT analysis

With respect to technology/R&D, skilled manpower, finance, market, infrastructure and

Government policy. SWOT analysis detailed separately below

8. Challenges faced by the cluster in any of the above areas and steps being taken if any to
overcome them
9. Opportunities known to the cluster if any beyond the above areas and steps being taken if
any to exploit the same
10. Details of on-going cluster-level interventions if any
11. Activities identified on priority for action
Detailed separately below

e. Preparing the Cluster Ecosystem Map

A cluster ecosystem map gives an overview of the various stakeholders who have an impact on
the growth of the cluster. The ecosystem map will showcase the areas where the cluster can
seek more collaborations for its benefit.

The ecosystem map should be used in conjunction with the production value chain(s) to derive
the areas of interest, where activities need to be taken up to benefit the cluster members. A
simple ecosystem map which lists out all the relevant stakeholders and interacting
organizations helps in highlighting the interactions in the ecosystem. The strength of these
connections/partnerships will also be an informative metric for evaluating the cohesion in the
ecosystem. Figure VII is a template of a simple cluster ecosystem map.

Figure VII Cluster Ecosystem Map Template

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Illustration
Figure VIII is a simple representation of the cluster ecosystem for FPCK.

Figure VIII Cluster map of FPCK

f. Detailing the Industry Value Chain

The industry value chain captures the generic flow of product development and manufacture
from concept to reaching the end-customer at the macro level. This gives an overview of how
expertise from various domains interacts with the cluster and has an impact on the cluster.

Used in unison with the cluster ecosystem map (Figure VII above), the significant stakeholders
who impact the cluster can be identified and collaborations with the same assessed. As needed
these can then be improved upon or further consolidated to benefit the cluster.

This analysis also showcases the external factors which impact the cluster and the industry and
as such will bring out the areas in which collaborations should be sought or the need of the
cluster should be showcased. Figure IX shows a template.

Figure IX Industry Value Chain Template

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Illustration
Figure X is a representative value chain of the primary product of the cluster. It shows how at
various stages the level of know-how or availability of resources in the cluster is known and
gaps identified for action.

Figure X Mango Processing Industry Value Chain

g. Detailing the Production Value Chain

The production value chain in Figure XI depicts:

End-to-end production process for the

product(s) manufactured for the cluster
Key elements like technology, skills, others
which go into each stage of production
Significant stakeholders/partners who
impact the elements

Thus, this is a technical analysis of the entire

production process. Such analysis should be
conducted for the entire product portfolio of the
cluster.

Used in unison with the cluster ecosystem map

(Figure VII above), the significant stakeholders who impact the cluster can be identified and
collaborations with the same assessed. As needed these can then be improved upon or further
consolidated to benefit the cluster.

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 Figure XI Production Value Chain

h. SWOT Analysis
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It is a simple and
structured way of exploring key challenges in a particular area of interest. A SWOT analysis
provides an overview of the key drivers for change from the current status. The analysis can be
used to make strategic decisions for the growth of the cluster like where to invest the available
resources and how does it impact the overall cluster.

Figure XII SWOT Template

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i. Prioritizing areas for action
The analysis as detailed above can throw light on numerous areas where interventions could
lead to a growth in productivity or competitiveness of the product(s). Yet it becomes important
to prioritize and identify the most important factors which will have a significant impact on the
cluster as a whole. The top areas can then be identified and options for the same need to be
explored in detail, in consultation with relevant stakeholders. Post discussions, the
actions/initiatives to be undertaken by the CIC (under the guidance of the mentor group) need
to be identified. Figure XIII is the flow for capturing the priorities and ascertaining initiatives to
take up:

Figure XIII Prioritizing Activities

Illustration
Figure XIV is a representative set of prioritized activities of KCDS.

Figure XIV Prioritized activities of KCDS

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j. Creating action plans for selected activities
An action plan is a summary of:

The tasks involved

Significant milestones/checkpoints
Time period for the tasks to be completed
Resource requirements
Estimated budget
Collaborating partners
Dependencies

As such the action plan provides a

comprehensive picture of the activity/initiative
being undertaken for planning and monitoring.
The action plan needs to be prepared in
consultation with all stakeholders and will act
as a master plan document. Individual action
plans for all collaborating partners can also be
derived in a similar format from this and dependencies highlighted.

Individual action plans need to be prepared for the selected activities for action derived from
the prioritization exercise (activity depicted in Figure XIII). Table 5 is a template of an action
plan:

Start End Resource Requirements

No Tasks Budget Partner Dependency
Date Date HR Materials Others
1
2
Dependant on
3
task 1
Milest
4 Total
one 1
Dependant on
5
milestone 1
Milest
6 Total
one 2
Table 5 Action plan Template

Illustration
Table 6 is a representative action plan for fresh fruit storage pilot and related activity.

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 Resource Requirements
Start End Dependenc
No Tasks Other Budget Partner
Date Date HR Materials y
s
Elite
Procureme
1 May July - - - 2,70,000 Mango -
nt of fruit
Producer
Fungicides,
Pack house
2 May July - Sanitizers, - 9,000 - -
expenses
Bags
Cold Kiran
Dependant
3 storage May Sep - - - 45,000 Storage
on task 2
charges Pvt. Ltd.
Storage
4 3,24,000
Trial
Volume
Packaging Packing dependant
5 May Oct - - 1,45,000 -
for export material on storage
trial
Sea
6 May Oct - - - 25,000 - -
shipment
Trial
7 1,70,000 - -
shipment
Table 6 Storage Trial Action Plan

k. Monitoring and Evaluation

Monitoring and evaluation help you understand how well you are doing a particular task and
whether it has had the intended impact or not. As such these are differently viewed by different
actors or participants in the same activity. The monitoring and evaluation mechanism has to
synchronize with the objectives set forth for the activity being undertaken.

Monitoring

Monitoring is the systematic collection and analysis of information as an activity progresses

and aimed at improving efficiency and effectiveness. Using the action plan as a baseline,
monitoring will involve the following:

Establishing indicators for efficiency, effectiveness and impact

Creating systems to collect information on these indicators
Recording the information
Analysing the information

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 Using the information to take corrective actions as needed, including modifications to the
action plan in exceptional cases
Reporting the same to stakeholders
involved

Monitoring is internal to the

organization performing the activity.

Evaluation

Evaluation is the comparison of actual

project impact against envisaged or
agreed plans. Using the objectives set
out to achieve as the benchmark,
evaluation will compare the results
achieved and how they have been
achieved. Evaluation lets you derive
lessons on the execution strategy/plan
for activity and helps plan future activities to overcome the issues faced in the current activity.
Evaluation will involve the following:

Establishing objectives and scope of impact of the activity

Assessing progress towards the same periodically and end-impact
Evaluate activity implementation strategy chosen, how effective the strategy was and why
were issues faced during the implementation
Looking at how the activity progressed assessing if the utilization of resources was efficient,
opportunity costs associated with strategic decisions taken, applicability of this strategy for
future activities and implications for relevant stakeholders

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 Appendix A Checklist for Government Body or Department for creating
a Program or Policy

Building an Innovation Cluster: Key Elements

Provide for creation of a CIC and a mentoring body
The Connector Make sustainability model mandatory with provision for
support as needed
Provision for enabler or training modules and cite resources
The Innovator
or organization for acquiring such knowledge as appropriate
The Channel Provide for creation of a CIC and a mentoring body
Building an Innovation Cluster: Procedure
Creating an innovation Understand the nuances of complementary programs and
ecosystem seek synergies
Measuring the readiness of a Use the pointers provided as selection criteria for
cluster beneficiaries
May provide descriptions of the ideal candidate profile and
Creation of a CIC provision for CIC operations and cite complementary
programs
Should be mandatory with the proposal received from
Diagnostic of the cluster
candidate beneficiaries
Make this information mandatory in proposals received from
Cluster ecosystem map
candidate beneficiaries
Make this information mandatory in proposals received from
Detail of industry value chain
candidate beneficiaries
Detail of the production value Make this information mandatory in proposals received from
chain candidate beneficiaries
Make this information mandatory in proposals received from
SWOT analysis
candidate beneficiaries
Make this information mandatory in proposals received from
Prioritized areas for action
candidate beneficiaries
Action plans for selected Make this information mandatory in proposals received from
activities candidate beneficiaries
Monitoring and evaluation Create evaluation metrics based on program objectives and
metrics seek periodic evaluation

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 Appendix B Checklist for Implementing Agency

Building an Innovation Cluster: Key Elements

Establish a CIC in consultation with cluster stakeholders and
create a mentoring body comprising of proactive
The Connector stakeholders
Ensure a business model is in created and use it for successful
closure of engagement
Use in-house expertise to handhold and/or showcase gaps
and arrange for training/exposure
The Innovator
Seed Innovation Toolkits as a repository with basic
information and let the CIC own its growth
Identify and prioritize needs and build prototypes; let CIC
The Channel own the delivery and hand-hold. Use successful prototype
delivery for closure of engagement
Building an Innovation Cluster: Procedure
Creating an innovation
Seek support of stakeholders and potential collaborators
ecosystem
Measuring the readiness of a
Use the pointers provided as selection criteria
cluster
Help the cluster in creating the CIC and in identifying the
Creation of a CIC
right human resources for the same
Help the CIC prepare the same with support from cluster
Diagnostic of the cluster
members and stakeholders
Help the CIC prepare the same with input from cluster
Cluster ecosystem map
members and stakeholders
Help the CIC prepare the same with support from cluster
Detail of industry value chain members and stakeholders. Use the information to identify
gaps and areas for intervention
Help the CIC prepare the same with support from cluster
Detail of the production value
members and stakeholders. Use the information to identify
chain
gaps and areas for intervention
Help the CIC prepare the same with support from cluster
SWOT analysis members and stakeholders. Use the information to identify
gaps and areas for intervention
Help the CIC prepare the same with support from cluster
Prioritized areas for action
members and stakeholders
Action plans for selected Hand-hold the CIC in preparing in consultation with
activities collaborators
Monitoring and evaluation Guide CIC to ensure monitoring frameworks are established.
metrics Use evaluation metrics for successful closure of engagement

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 Appendix C Checklist for Cluster Body

Building an Innovation Cluster: Key Elements

Establish a CIC and create a mentoring body comprising of
The Connector proactive stakeholders
Ensure a business model emerges as activities take shape
Assess knowledge gaps, prioritize and arrange for
training/exposure
The Innovator
Advise the CIC on usefulness of the Innovation Toolkit and
oversee its creation
Identify and prioritize needs and build prototypes; let CIC
The Channel
own the delivery
Building an Innovation Cluster: Procedure
Creating an innovation
Seek support of stakeholders and potential collaborators
ecosystem
Measuring the readiness of a
Use the pointers provided for self-assessment
cluster
In consultation with stakeholders, identify right human
Creation of a CIC
resources
Help CIC prepare the same with support from cluster
Diagnostic of the cluster
members and stakeholders
Help CIC prepare the same with support from cluster
Cluster ecosystem map
members and stakeholders
Help CIC prepare the same with support from cluster
Detail of industry value chain members and stakeholders. Use the information to identify
gaps and areas for intervention
Help CIC prepare the same with support from cluster
Detail of the production value
members and stakeholders. Use the information to identify
chain
gaps and areas for intervention
Help CIC prepare the same with support from cluster
SWOT analysis members and stakeholders. Use the information to identify
gaps and areas for intervention
Help CIC prepare the same with support from cluster
Prioritized areas for action
members and stakeholders
Action plans for selected Work with the CIC to prepare action plans for priority
activities activities
Create evaluation metrics based on objectives set forth for
Monitoring and evaluation
CIC; help CIC establish a monitoring framework; report status
metrics
to all collaborators and stakeholders periodically

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 CONTACT US

NATIONAL INNOVATION COUNCIL

Office of Adviser to the Prime Minister

Public Information Infrastructure and Innovations

Planning Commission, Yojana Bhawan

Parliament Street, New Delhi 110001

Telephone: +91 - 11- 2309 6622

Website: http://innovation.gov.in/innovation/clusterInnovation.action

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