Water & Economy
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Water Clusters: Research Opens Up New Perspectives

The recent close-down of ADWC shows that pure industry clusters are “out”. Remaining and new water clusters (also) opt for F & D and seek to boost third-party competence

The year-turn saw another close-down as the Austrian Danube Water Corporation (ADWC) officially stopped its activities, thus entering the growing ranks of dissolving Austrian industry clusters. And yet, the idea to form clusters is basically a very convincing one: businesses operating within the same sector and selling different yet complementary products and services form a cooperative which allows them to cover all requirements in a contract, develop joint projects and perform lobbying activities.

A unique brand that is perfectly attuned to the range of offers is created and promoted through PR campaigning, from which all stakeholders draw a benefit. In the case of ADWC, which was founded in 2000 and directed its business to the markets in Southeast Europe, the big industry players included Hawle, BWT, Pipelife or Kontinentale as well as some smaller companies such as EWT or hammerer system messtechnik, an enterprise run by the long-standing cluster manager Max Hammerer. Right from the start, the plan was to get domestic banks into the boat via soft loans and thereby also cover the important aspect of project financing.

Even though the plan didn’t work out and the financing component in Austria has only recently gained more strength through the foundation of Oesterreichische Exportkreditbank, Max Hammerer blames mostly other causes for the eventual breakdown of ADWC. One aspect was the different size and structure of members in the cluster, which had caused common interests to drift apart within only short time. Another is the relatively new phenomenon of increasingly shorter planning cycles which, according to Hammerer, largely results from the ever more rapidly spinning human resource carousel in the businesses.

The growing number of company takeovers also shifts the authority to decide up to the executive suites of rapidly expanding multinational groups; and such companies, apart from their wide product range that leaves no wishes unfulfilled, are also known to possess huge project development, lobbying and PR capacities that make a membership in an industry cluster seemingly futile. Besides, the market reorientation within these groups changes constantly, which is definitely contrary to grown business and market structures. Says Hammerer: “Last but not least, there is a clear trend that companies only get together temporarily for specific projects or tenders, but the rest of the time they prefer to keep their own corporate identity.”

Self-help groups promote SME

Like ADWC, austrian water, an industry cluster founded in 1998 (www.austrianwater.at), is an offshoot of the eastward enlargement. “Our aim was to move out there as a group to gather experiences and win contracts at a lower risk for the individual enterprise”, says Peter Klein, Vice President of austrian water. Even though the members of the cluster, which receives basic funding from the Austrian Economic Chamber (WKO), complemented each other in a much better way than in ADWC, some of the big players soon also began to cause trouble and in 2002 eventually led to a reorientation of the cluster.

austrian water, which views itself as a “selfhelp group promoting SME” (quoting Peter Klein), has since then been well on track to become a treasured brand in foreign markets (the cluster’s activity focus so far). Small engineering firms, equipment suppliers and consultants like IUP, Neuhold, gwt, or GWCC, get the opportunity of a market entry they would have been denied as lonely fighters.

“Each member takes over a specific market where it consequently represents the cluster”, explains Peter Klein, whose planning office IUP services the Polish market. Klein and his colleagues view the cluster – which is operated with much volunteer support – as the very “spearhead” of Austrian businesses in the foreign markets. The initial steps are usually taken by the consulting firms, which break the ice and often establish fruitful contacts with the local mayors.

This may result in large contracts or follow-up projects, from which other domestic players and industry sectors will also draw a benefit. “These achievements deserve some recognition”, says IUP chief executive Klein and urges the Economic Chamber and the Ministry of Finance to step up direct funding at least for the initial phases of a project, instead of leaving the entire risk with the SME as usual.

“In these markets we have to compete against powerful competitors from France, Germany and Great Britain, who are in a financial position to (initially) offer many preliminary services free of charge,” warns Peter Klein. He also reprimands some of the large domestic companies to “spoil” various foreign markets by using Austrian taxpayers’ money.

From company cluster to RTO

This situation has spurred austrian water to further develop the know-how transfer already completed in the foreign markets and successfully offer their new products and services also on the domestic market. “Through this second reorientation step we aim to develop our cluster into a Research Technology Organisation (RTO)”, says Peter Klein.

“The added value is not derived from basic research, but from the development of applied, practice-oriented approaches that draw benefit from the experience of plant manufacturers and their technical competence.” austrian water is currently undertaking its second research project, this time on the Lafnitz river where cluster members are devising a comprehensive watercourse management concept.

While austrian water seeks to develop from a classical industry cluster into a R & D pool, Kompetenznetzwerk Wasserressourcen GmbH (in short Knet Wasser) and Wasserkluster Lunz were already founded as research institutions proper with the intention to offer their knowhow on the market. As spin-offs from public and semi-public educational and research institutions they receive financial backing (at least for a certain period).

Knet Wasser (www.water pool.org) was founded four years ago, Wasserkluster Lunz (www.wasserkluster-lunz.ac.at) is slightly younger; aqua press has already reported on the two clusters in its previous issues. Below is a short summary and the latest news:

Boosting competence of network partners

Knet Wasser was founded in the framework of a technology promotion campaign launched by the Austrian government and is funded by the Federal Ministry of Economics & Labour, the provincial governments of Styria, Carinthia and Tyrol, the Italian province of Pordenone, and Croatia and Slovenia.

Knet is owned by the Graz-based Joanneum Research ForschungsgesmbH and managed by the Austrian water expert Hans Zojer. Even though Knet Wasser comprises many research institutions, Zojer claims that it is not a network of “ivory tower” scientists but was designed as a service undertaking for industry stakeholders. It takes advantage of the fact that (not least in Austria) still far too few companies of all sizes engage in research and development (R & D) and thus miss out on their domestic and foreign market opportunities.

“Unlike many university departments doing contract research, Knet Wasser offers its partners much more; it helps them build competence”, says Zojer. The expert assumes that apart from helping contracting entities to become more competitive or optimise their internal organisation, the continuous process of competence building also serves to prevent short-term thinking and acting, as is commonly practised by businesses.

The revenues received from contracting help the network to develop and refine its methodology, so that it is able to take on increasingly sophisticated contracts. Zojer is convinced that this creates a classical win-win situation. Knet undertakes both basic and applied research, which is distributed among six different theme groups, the so-called Network Nodes (NK): NK1 deals with water management in valleys and basins; NK2 with sustainable water management in mountain areas; NK3 with water and health; NK4 with water in underground and hydropower installations; NK5 with the value added chain in water resource management; and NK6 is dedicated to groundwater utilisation in agriculture and industry and horizontal research. The 45 Work Packages (WP) which are positioned on a level below the Network Nodes serve the thirty research institutions to enter into contact with its fifty business partners.

The research budget is calculated for individual four-year periods. 40 % of Knet’s total funding volume – four million € – comes from the business partners. A fine example to illustrate how collaboration boosts competence is an artificial groundwater recharge project carried out in conjunction with the public utilities of Graz (Grazer Stadtwerke). Helmut Nickl, head of Grazer Stadtwerke, explains that the project goal not only is to optimise plant operation in the Greater Graz are, but also to elaborate the methodology in such a way that his enterprise (a public company limited by shares) can also successfully compete in the foreign market.

Says Hans Zojer: “Our cooperation was not simply over after project completion. This is illustrated by the fact that Grazer Stadtwerke and Knet, drawing on the know-how they have developed together, are now players that compete about two similar projects in Libya. While Knet Wasser is still 100-percent owned by Joanneum Research (with a strong Styrian bias), Hans Zojer assumes that its business structure will soon change to embrace a stronger industry involvement. The governments of Styria, Carinthia and Tyrol are very likely to remain loyal to Knet. Zojer also hopes to get the governments of Upper Austria and Burgenland into the boat.

According to the EU Commission’s definition of the term “stakeholder”, even the Vienna City Council should in theory be able to participate. Vienna also holds a significant share in the youngest of all water clusters (with Lower Austria and the federal government functioning as cosponsors). Mathias Jungwirth, Scientific Director of Wasserkluster Lunz, says his cluster is more closely related to the private-sector concept of bundling complementary assets by linking the know-how of three universities.

Three universities complement each other

The University of Vienna (Department of Biology) and the University of Natural Resources and Applied Life Sciences (BOKU) launched this initiative in response to the decision of the Austrian Academy of Sciences to close down its long-standing Biological Station Lunz in Lower Austria.

The intention to preserve this haven of limnological science and research was eventually shared by the governments of Lower Austria and Vienna and by the Ministry of Education. At the same time, the new institution was to become a “university of the future”, an education and research institution that avails of a basic budget and seeks extra funding from the private sector. The basic budget comes from Lower Austria (two thirds) and Vienna (one third), whereas the Danube University Krems (DUK) contributes a great deal of experience in industry-sector cooperation.

Austria’s youngest state university is heavily engaged in post-graduate education and will also add a technological perspective to the water cluster and get involved in the promotion of well-selling research projects. Wasserkluster Lunz is highly active in basic and applied research. The former youth hostel that once belonged to the biological station was generously adapted, the laboratories were revamped with basic equipment and the existing staff (11 employees) was offered financial security.

There is always the option to employ additional staff when the contract volume increases. Peter Strizik, former Vice-Chancellor of DUK and Commercial Director of Wasserkluster Lunz, is happy about the success. “I remember how the 2005 issue of aqua press was sceptical about the cluster’s ability to obtain sufficient contracts; now that the full financial year figures are available, one can say that we have truly achieved this goal,” he says.

Lunz currently derives 40 % of its funding out of projects; the medium-term goal is to achieve a rate of 50 %. Strizik has no doubts that this rate can be achieved. After all, the cluster boasts a prominent and highly esteemed leadership – Mathias Jungwirth, Scientific Advisory Board Chair Fritz Schiemer and also Thomas Hein and Tom Battin from Luxembourg have joined the team; this ensures that the cluster is being offered more and more research contracts.

Additional market opportunities may present themselves through DUK’s medical knowhow. The German expert Dieter Falkenhagen, for example, dedicates his research activities in Krems to extracorporal blood purification in liver diseases. Technologies developed in this context could perhaps also be put to good use in water treatment. Falkenhagen, who heads the Department for Clinical Medicine and Biotechnology as well as the Center for Biomedical Technology at DUK, is currently involved in establishing a new centre for water technology in Lunz. It is not unlikely that this has cooperations for marketing the newly developed technologies in its wake.

Nevertheless, continuing effort must also be put into public relation activities. Says Peter Strizik: “Wasserkluster Lunz is a non-profit GmbH and therefore not allowed to gain profits from a tax office viewpoint; but it should not incur any losses either. This is undoubtedly something the Austrian taxpayers would find hard to put up with!”

Former ADWC manager Max Hammerer views the development of domestic clusters into Research Technology Organisations with some scepticism, especially so when they are seeking to enter the water markets in Southeast Europe. Financing still plays a prime role in this respect, he says, and not even the European Research Area (ERA) propagated by the EU will change this in the near future. Time will tell which of them is right.
(Source: aqua press Int. 2/2008, Mag. Christof Hahn)

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