Smart Specialisation (S3) and authentic engagement for positive futures

In the face of the current bushfire crisis of East Gippsland and the complex, messy and emotional pathways to rebuilding and reimagining positive futures, there is much dialogue around 'bottom-up' vs 'top-down' approaches. I have appreciated the many people who have reached out - reinforcing the need for serious and deep engagement that draws on the principles of diversity/inclusion and collaboration, which transforms rather than colonises, and which is empowering rather than controlling and paternalistic.

This has caused me to reflect deeply on the approaches and applicability of ‘Smart Specialisation’ and ‘ways of working’ that can effectively respond to disruption and construct positive futures. I have also recently completed an online course through the école polytechnique fédérale de Lausanne (EPFL) and BAK Economics AG (Basel) to complement my own practical experiences with Smart Specialisation to deepen my understandings and reflections on the dynamic and evolving connections between theory and practice.

Many people have shown interest in the Gippsland approaches and learnings around Smart Specialisation. I strongly believe the principles and processes of Smart Specialisation have a lot to offer in navigating pathways forward in the face of significant disruption and disaster, and I offer these observations and reflections on Smart Specialisation for those who might be keen to learn more.

I make these observations noting that ‘Smart Specialisation’ is not an appropriate and necessary response to the immediate hardship that businesses and communities face in the aftermath of disruption and disaster. It provides a longer-term approach for place-based development that can facilitate communities, in partnership with governments, researchers and industry, working collaboratively and innovatively towards a more resilient and sustainable future.

Smart Specialisation (S3)

Smart specialisation (S3) [https://s3platform.jrc.ec.europa.eu/what-is-smart-specialisation-] was first introduced by the European Union (EU) in 2010 as a policy for regional innovation to help bridge the growing gap between Europe and the United States, Japan and other emerging global competitors.

S3 essentially focusses on three areas-:

·      SMART - Identify the region’s own strengths and comparative assets

·      SPECIALISED - Prioritise research and innovation investment in competitive area/s

·      STRATEGIC – Define a shared vision for regional innovation.

S3 in the European context certainly appears as unique. It is often referred to as one of the most ambitious regional innovation policies ever introduced anywhere in the world – particularly given its scale and corresponding investment, and the general view that its experimental approach sees policy running ahead of theory.

S3 appears as significantly different from other regional economic and regional innovation strategies. It offers a much more comprehensive perspective on innovation than the more typical focus on firms, clusters and linkages with Research and Development (R&D) centres. The process seeks to connect place-based innovation with the evolving pattern of transnational economic activity. It seeks to disrupt traditional siloed approaches to policy and ways of organising. It replaces traditional top-down approaches to policy with an interesting mix of top-down and bottom-up approaches to innovation and place-based development - where considerable power and decision-making is transferred to key actors within the regional innovation ecosystem. At its heart is active involvement across the quadruple helix of industry, researchers, government and community.

Other economic and regional innovation strategies have tended to adopt a more linear process than a whole-systems one. In a linear model of innovation, universities are supposed to provide the research on which industry will build upon to produce commercial goods and services. In an S3 approach universities better align their capabilities and focus areas with a region’s S3 strategy.

In a linear policy approach, governments consult to varying degrees, develop policy and then implement through a very top-down approach. Where funding exists, proponents develop proposals and apply for funding against pre-determined selection criteria. If successful, the proponent delivers and acquits the project – often in complete isolation. Evaluation is usually according to whether the project has delivered in accordance with a funding agreement and may or may not be included in policy reviews down the track.

Applying S3 principles however, it is a collaborative approach where regional actors across the quadruple helix discover/identify and explore opportunities together. The regional actors investigate the potential and develop projects based on a strong and holistic evidence base and identified complimentary factors. The actors have a collective will and capability to make things happen. Regional governance supports the emergence of a smart specialisation strategy on which to recommend priority key projects aligned with the strategy for funding. The projects are delivered with a focus on continuous learning and improvement. This occurs within the framework of a dynamic and flexible regional S3 strategy also focused on continuous learning.

Projects are prioritised according to where publicly funded initiatives are likely to have the greatest impact on regional competitiveness. This recognises the need to invest strategically in regions in accordance with their capabilities and potential, and that no-one size fits all approach can be applied across regions.

Like all policy approaches, S3 relies on funding, governance, information/data and capability.

The S3 way of working however presents challenges which must receive attention if its full potential is to be realised. This includes a strong focus on building capability to support the development and implementation of an S3 strategy. It is not only important to have regional assets and core competencies, it is also vitally important that regions have the key capabilities to leverage and take advantage of these capabilities and ensure that critical process requirements – such as the ‘Entrepreneurial Discovery Process’ (EDP)[1] – are all working effectively.

There are a number of vital areas that require attention. Firstly, attention to governance is key. Consideration to what governance models are best suited to balancing oversight of the expenditure of public funds whilst at the same time creating an enabling/empowering environment that supports the risk taking that innovation demands and ensuring diversity and inclusion of key actors across the quadruple helix, is critical. Also, when working across complex regional innovation ecosystems consideration needs to be given to who is ultimately responsible for implementing the strategy. This requires attention to governance within government, as well as governance beyond government.

Secondly, S3 and its collaborative and innovative approaches, requires different styles of leadership. This includes a focus on collaborative and distributed leadership across all the actors. Distributed leadership – and a move away from top-down, centralised power models – shares leadership functions across multiple actors and again implies an enabling environment rather than a controlling one.

Thirdly, and very importantly, S3 requires a focus on continuous monitoring and evaluation. Given the dynamic and flexible approach of S3, monitoring and evaluation not only needs to consider the impact of S3 strategies and projects, it must give continuous attention to actively learning lessons along the way. This must include a focus on S3 processes as well as the content of the S3 strategies and projects.

S3 therefore emerges as useful in regions where regional authorities see unfulfilled potential in their regional economy, and prospects for intervention to promote innovation in areas as diverse as products, processes, technology, organisations, business models, markets, supply chains, governance or workforce development. Through bringing together stakeholders from diverse sectors, regional authorities can set the foundations for collaborative/distributed leadership that can highlight opportunities and priorities focused on local assets and develop a comprehensive framework for innovation in which a range of initiatives can be mutually reinforcing. Such an approach is a significant advance on previous innovation policy settings.

S3 will however encounter challenges in regions where the enabling conditions of bringing together and genuinely empowering actors are not present. This is because ‘regional elites’ (as described in the literature) will often get in the way of initiatives that challenge their traditional power bases. Having significant entrepreneurial resources within a region, combined with access to data sets on which to base an S3 strategy will also be critical in determining whether S3 presents a promising approach for a region.

Europe provides a good example of how S3 has enlarged and improved the policy toolkit for regional policymakers, and these principles can be adapted for countries outside of the EU. S3 not only provides an alternative and innovative framework/structured process to follow, S3 also provides many tools to support a data driven approach (both “outward looking” and “inward looking”) as well as project mapping processes that allow users to identify regions' domains for future competitiveness. However more work needs to be done. S3 is not a simple policy and a strong focus needs to be sustained on reflective/reflexive practices that support continuous learning by doing. Regions need to build capability to facilitate S3 and other ‘bottom-up’ processes.

I hope our region in Australia (Gippsland) will continue to adopt an S3 approach. I believe we are an example of a region that is applying the smart specialisation concept and principles, and the entrepreneurial discovery process, in a way that demonstrates it can be successfully applied in other parts of the world outside of the EU. It has already uncovered and is supporting new opportunities and new actors – beyond the ‘usual suspects’ - and is achieving increasingly high levels of interest and buy-in. It is very empowering for our region to potentially take better charge of its own destiny; outline its own pathway in accordance with its realities, its potentials and its capacity to imagine its own future - rather than passively bear the brunt of economic structural adjustment and top-down policies. In the face of some of the biggest societal and environmental challenges of our time, this interesting mix of top-down policy with bottom-up approaches also supports transdisciplinary approaches to innovation and place-based development around not only what a region is ‘good at’, but importantly what it can be ‘good for’ (i.e. ‘good for business’, ‘good for community’, ‘good for the environment’, ‘good for the planet’). As such it can support deep transformational change.

One key challenge for us in Australia however is the lack of incentives. In Europe, the development of an S3 Strategy is a condition for receiving structural innovation funds to engage regional authorities, and to support their efforts to build regional coalitions of stakeholders to engage with the entrepreneurial discovery processes. At the moment in Australia we do not have an S3 policy at a state or national level, and there is a requirement to advocate for policy that will continue to support the work we have begun. I am however optimistic we have achieved sufficient momentum to support positive advocacy in order to sustain a positive S3 pathway forward.

[1] The Entrepreneurial Discovery Process (EDP)is a learning process to identify and prioritise opportunities for a region to excel and/or derive competitive advantage. 

Suggested Reading

Cain, K, (2018), “Report on Smart Specialisation and Territorial Development: perspectives from Latrobe Valley Authority” https://regions.regionalstudies.org/ezine/article/report-on-smart-specialisation-and-territorial-development-perspectives-from-latrobe-valley-authority/

Coenen, L., Goedegebuure, L., Schoen, M., Veldhuizen, C., & Wilson, B., (2018) “State of the Art Review of Smart Specialisation in Europe” https://sustainable.unimelb.edu.au/__data/assets/pdf_file/0006/2792319/State-of-the-Art-Review-of-Smart-Specialisation-in-Europe.pdf

Eichler, M., Wagner, A. & Peters, M. (2015), Smart specialisation: diagnosing the potential of regions, Basel, BAK Basel Economics AG. https://www.bakbasel.ch/fileadmin/user_upload/Smart_Specialisation_Diagnosing_the_potential_of_regio ns.pdf  

European Commission (2017), "Strengthening Innovation in Europe's Regions: Towards resilient, inclusive and sustainable growth at territorial level" https://ec.europa.eu/regional_policy/sources/docoffic/2014/com_2017_376_2_en.pdf https://edz.bib.uni-mannheim.de/edz/pdf/swd/2017/swd-2017-0264-en.pdf  

European Commission (2016), “Implementing smart specialisation strategies: a handbook”. https://s3platform.jrc.ec.europa.eu/s3-implementation-handbook, https://s3platform.jrc.ec.europa.eu/implementation-examples 

European Commission (2015), Research and Innovation, Definition Smart Specialisation. https://ec.europa.eu/research/regions/index.cfm?pg=smart_specialisation 

Foray, D. (2016), “On the policy space of smart specialization strategies”, European Planning Studies, 24:8, 1428-1437. https://www.tandfonline.com/doi/full/10.1080/09654313.2016.1176126 

Foray D. (2014), “From smart specialisation to smart specialisation policy”, European Journal of Innovation Management, voL.17, 4, 492-507. https://dx.doi.org/10.1108/EJIM-09-2014-0096 

Foray D., David, P.A. and Hall, B. (2009), “Smart specialisation: the concept”, in Knowledge for Growth: Prospects for Science, Technology and Innovation, Report, EUR 24047, European Union. https://ec.europa.eu/invest-in-research/pdf/download_en/selected_papers_en.pdf  

Latrobe Valley Authority (2020), “Gippsland's Smart Specialisation Strategy Connecting Gippsland — local and global” https://lva.vic.gov.au/business/gippslands-smart-specialisation-strategy

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