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IX Swiss Turkish Economic Forum – Innovation through Clustering. Dr. Patrick Dümmler, Istanbul, Dec. 10.

An Introduction into the Theory of Clusters – The Swiss 2010 Medtech Industry as an Example. Rückblick / Ausblick 2011.

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Agenda 1. In a nutshell – Cluster theory and definition 2. The example of the Swiss medtech industry 3. Growing a cluster or letting a cluster grow


1. Cluster theory and definition

The cluster concept can be traced back to two main authors

Lasuén1)

“A growth pole consists of “a set of highly interrelated activities (sectoral cluster) highly concentrated over the territory (geographical cluster).”

Porter2)

Porter’s diamond of national advantage

1)

LASUÉN, JOSÉ RAMON (1973): Urbanisation and Development – The temporal Interaction between Geographical and Sectoral Clusters

2)

PORTER, MICHAEL E. (1990): The Competitive Advantage of Nations

Source: Adapted from Dümmler (2005), Lasuén picture from congreso.es, Porter picture from visionary.management.com.ua, diamond illustration from docstoc.com.


1. Cluster theory and definition

Knowledge spillovers are an essential ingredient for a successful and dynamic cluster.

Knowledge1)

• “The marginal cost of transmitting knowledge rises with distance” (Audretsch) • “Intellectual breakthroughs must cross hallways and streets more easily than oceans and continents” (Glaeser et al.)

• Knowledge spills over – Knowledge spillovers are regionally limited

Spillovers

• The flow of knowledge is embedded in regional labor networks • Spillovers lead to more competition – higher innovation rate and early adoption of new knowledge

1) Not to be mixed up with information. Information can be transmitted globally at almost no costs via internet Source: Adapted from Dümmler (2005).


1. Cluster theory and definition

The three dimensions of the Cluster Cube form the basis for the cluster definition. Interactions

A cluster is

Low

The Cluster Cube Different value chains

Intense Distance

Source: Adapted from Dümmler (2005).

a spatially concentrated agglomeration of actors like service providers, industrial companies and institutions

that are active in the same value chain,

form a network by the exchange of services, goods or knowledge,

benefit from spatially limited spillovers that have a positive impact on innovation output and regional growth

Spillovers

Same value chain

Close

Far


2. The example of the Swiss medtech industry

A strong Swiss medtech industry – Key facts & figures. Number of companies: 1,600  850 suppliers and manufacturers  750 service providers and traders & distributors

CHF

Turnover and growth: Positive  Total turnover EUR 10.2bn (CHF 12.5bn)  Significant growth, +5.9% (2012) and +6.6% (2013e)

Employees: Growing  Grown from 49,000 (2009) to more than 51,000 (2011)  1.1% of Swiss workforce work in medtech Source: Survey among 321 medtech companies based in Switzerland (SMTI 2012).

Research & Development: High  Manufacturers spend 13% of their turnover on R&D while suppliers spend 8%.  On average half of the product portfolio is less than 5 years old

Exports: Substantial  Manufacturers export EUR 7.2bn (CHF 8.8bn) (5.5% total Swiss exports)  20% to the total of the Swiss trade surplus from medtech


2. The example of the Swiss medtech industry

Switzerland is highly attractive for international medtech companies.1) No.

2)

Headquarters

Employees in Switzerland

Global sales 2011 [CHF m]

USA

4,500

25,570

CH

2,110

9,700

USA

1,200

15,787

CH

1,200

1,620

USA

950

4,370

Company

Sub-section of market

1

J&J Medical

Orthopaedics, neurosurgery, cardiology, surgery

2

Roche Diagnostics

In-vitro diagnostics

3

Medtronic

Implants to treat cardiac rhythm, cardiovascular and neurological 3) diseases and spinal disorder

4

Sonova

Hearing systems

5

Zimmer

Orthopaedics

6

B. Braun

Orthopaedics, hospital aids and devices

DE

940

5,530

7

Straumann

Dental implants

CH

830

694

8

Ypsomed

Injection systems

CH

800

249

9

Stryker

Orthopaedics

USA

650

7,200

1) Approximately, manufacturers only, figures for reporting year 2011/12, exchange rates used: 0.9693 USD/CHF 2) The authors believe that among the 10 biggest medtech employers Hamilton Medical should also be listed. However, Hamilton Medical is not willing to communicate any company data 3) Swiss made devices only Source: Annual company reports and press offices, SMTI 2012.


2. The example of the Swiss medtech industry

Switzerland has a strong medical technology cluster. Greater Zurich Area

Basel Area

Mechanical engineering industry

Berne Capital Area

Watch making industry Total 1,600 medtech companies in Switzerland

BioAlps / Greater Geneva Berne Area Source: Adapted from a survey among 321 medtech companies based in Switzerland (SMTI 2012).

Biopolo Ticino


2. The example of the Swiss medtech industry

Switzerland has a complete value chain in medtech‌

Examples of specialized companies and organizations as part of the value chain

Source: Logos copyright of respective companies/organizations.


2. The example of the Swiss medtech industry

…based on a strong innovation system.

Examples of specialized organizations in the Swiss medtech innovation system

Source: Logos copyright of respective companies/organizations.


2. The example of the Swiss medtech industry

The Swiss medtech industry is embedded in a unique ecosystem. SWISS MEDTECH ECOSYSTEM [illustrative]

COMMENTS The Swiss medtech industry is embedded in a unique ecosystem. Its main success factors are:

UNIVERSITY R&D/EDUCATION Technical & Commercial Talent Pool

FINANCING & INSURANCE

Medical Talent Pool

SUPPORT ORGANIZATIONS

SERVICE PROVIDERS

HEALTHCARE POLICY & REIMBURS EMENT

HEALTHCARE PROVIDERS

 Sharing the same culture, mindset and approach of doing business domestically and across borders

TRADERS & DISTRIBUTORS

 High number of family owned SMEs with a long-term perspective

MANUFACTURERS

SUPPLIERS

 Travelling times are short, high degree of spatial proximity

Adjacent industries Mechanical engineering

Watch making

Core Medtech Industry

Source: SMTI 2012.

Electronics

 Collaboration, long-term relationships and quality dedication

Pharma/ Biotech


2. The example of the Swiss medtech industry

Eight clear assets help to nurture the Swiss medtech cluster. Cutting-edge research1) at hospitals and universities

“Swiss made“ quality

Free and open job market especially for talent and management skills

Highly qualified personnel

Stable political environment

Source: SMTI 2012.

Highly capable suppliers in close proximity

Favorable tax system

Attractive living conditions and infrastructure


2. The example of the Swiss medtech industry

Straumann – Origin of two globally leading companies. 1954 Reinhard Straumann founded the Dr. Ing. R. Straumann Research Institute AG. Until 1970, the company specialized in materials testing and alloys for timing instruments. 1960 The Swiss Association for the Study of Internal Fixation (AO/ASIF) is looking for a company that is capable of providing materials for internal fixation implants. A few years later Straumann begins with the manufacturing of osteosynthesis implants. 1974 The first dental implants are developed at Straumann and undergo successful clinical testing at the University of Berne.

1990 Management buy-out of the osteosynthesis division, creation of Stratec (subsequently DePuy Synthes) as a separate company. Beginning of the Straumann Group focused exclusively on dental implants. Today DePuySynthes: 18’000 employees, USD 10bn turnover Straumann 2’400 employees, EUR 580m turnover Source: Straumann.com, DePuy Synthes, Wikipedia.

Prof. Reinhard Straumann


2. The example of the Swiss medtech industry

Hocoma – Success with innovation and local networks. 1996 Funding of the company by two electrical and biomedical engineers and an economist. Start of the development of a automated treadmill training. 2000 Market maturity of the Lokomat that was developed in cooperation with the Balgrist University Hospital Zurich. 2004 CEO Gery Colombo is awarded by EY with the Entrepreneur of the Year Award. 2005 Enlarging of the product portfolio, focus on robotic rehabilitation therapy for neurological movement disorders. 2012 Hocoma and the ETH Zurich win the most prestigious prize in European robotics, the Technology Transfer Award for the successful technology transfer among science and industry that lead to the launch of the ArmeoPower end of 2011. Today 150 people work for Hocoma, the company has subsidiaries in the U.S., Singapore and Slowenia.

Source: Hocoma.com.

Dr. Peter Hostettler Dr. Gery Colombo Dr. Matthias JĂśrg


3. Growing a cluster or letting a cluster grow

Two main groups of clusters reflect two different approaches to clustering. Wishful thinking clusters • “We want to copy the success of the Silicon Valley” • Top-down implementation

Real clusters

Cluster characteristics

• “This industry has a long heritage here” • Basically bottom-up process

• Often driven by economic policy

• Industry driven

• Attracting companies with tax incentives

• Politics focusing on ensuring an optimal business environment

Clustering process highly depending on public money/ support High risk of failure if top-down approach not also supported by the industry or if public support is too small or is stopped

Source: Own illustration.

Estimation of all “clusters” 90%

10%

Clustering process rooted in the industry, self-reinforcing process of clustering High risk of failure if disruptive technology makes specific industry obsolete


Get additional insights into the Swiss medtech industry, visit our website www.medtech-switzerland.com. Download the Swiss Medtech Report

Download the Swiss Medical Technology Industry Survey

Search our database for products and competencies of Swiss medtech companies and stakeholders


Thank you for your attention.

Your contact •

Dr. Patrick Dümmler, Managing Director

Medtech Switzerland Wankdorffeldstrasse 102 Postfach 261 CH-3000 Bern 22

Tel. +41 76 532 53 16

Mail pduemmler@gmx.ch

www.medtech-switzerland.com

Dr. Patrick Dümmler  

Medtech Switzerland