Building business communities

Last night the NSW Government launched Digital Sydney, an initiative to bring together the various groups that make up the digital media and IT industries while raising the city’s profile as a global digital centre.

This project was something close to me as I’d been involved in developing the concept through 2009 when working with the then NSW department of Industry and Investment.

Originally the idea had been to create a digital hub around the Australian Technology Park to the south of the city. Over the decade of its operation, the ATP had attracted some high profile tenants and various high tech business start-ups, but there was a feeling it could be a more dynamic centre of the Sydney tech sector.

The setting up of “digital hubs” around the world has not been a great success – in Ireland an attempt to set one up in central Dublin’s disused Guinness brewery cost the European Union well over 100 million euro and subsequently collapsed amid acrimony between the various governments and businesses involved.

Even if there was a track record of success it’s unlikely any Australian government, state or Federal, would be prepared to spend money on the European scale. So the idea of building a “hub” had to be kept within industry, particularly the IT and digital media sectors.

In talking to the industry, it became apparent that Sydney was already a digital hub spreading across the suburbs immediately to the south and west of the city centre and centred around Surry Hills with an vibrant community of developers, designers and entrepreneurs occupying the old factories and warehouses being vacated by the city’s rag trade.

The proximity of competitors, clients and suppliers was why the hub had developed; exactly the reason why the fashion industry had previously concentrated around that district.

This is consistent with history; the great industrial hubs such as the English midlands of the 18th Century, the US mid west of the 19th Century along with today’s Chinese coastal manufacturing centres and event Silicon Valley happened with little government forethought.

Like-minded businesses clustered together because they could find the essential resources for their industry such as raw materials, labour, transport, markets and capital.

The access to capital is a problem for all smaller and innovative businesses in Australia, not just those trying to build digital businesses or hubs. Start-up enterprises have been starved for capital and a few late stage Venture Capital investments like the recent ones in Atlassian or 99Designs are not on their own enough to build vibrant businesses of the future.

In Australia, it’s difficult to see any government in the near future changing the tax and legal regimes which favour property and stock market speculation over investment in new businesses and technology so the best hope is initiatives like Digital Sydney, along with the profiles of similar industry hubs in Brisbane and Melbourne, can encourage investors to look at the start-up and innovation sectors.

The real question though is why is this just the major cities? Why can’t we have hubs in Renmark, Esperance or Hobart?

Access to skills and talent are the driving forces behind the local hubs and in that respect some smaller towns and regions do have the skilled workforces and businesses capable of building industrial centres and we’ve seen some regional hubs develop like the wine industry in various places.

So it’s worthwhile considering where your business is located; maybe it would be better to set up next door to your competitor? For many organisations, being part of a vibrant industry hub is part of their success.

Paul Wallbank is one of Australia’s leading experts on how industries and societies are changing in this connected, globalised era. When he isn’t explaining technology issues, he helps businesses and community organisations find opportunities in the new economy.