When I started business school at NYU Stern in the fall of 2005 my plan centered on taking every class in Bankruptcy & Reorganization, and Distressed Investing that I could. I took 3 elective classes in that area; Bankruptcy & Reorganization with Prof. Ed Altman, Case Studies in Bankruptcy & Reorganization with Prof. Max Holmes, and Investment Strategies: Distressed Investing with Prof. Allan Brown.

By my logic, if I learned how to assess and invest in dying companies, and then nurse them back to health, analysing, valuing and investing in healthy companies would seem easy by comparison. I was so sure of this that I also tried to turn my Equity Valuation elective into a pseudo Bankruptcy & Reorganization course too, by opting to value a bankrupt company for my final group-project. I do not recommend trying that.

I was still in business school when the economy began to falter. I moved from UBS to Lehman Brothers in late March 2007. A few days later New Century Financial Corp. filed for Bankruptcy. I was let go from Lehman Brothers a year later, on March 12, 2008. Bear Stearns collapsed and was acquired by JP Morgan Chase on March 16, 2008. I graduated from Stern in May, 2008. On September 7, 2008 Fannie Mae and Freddie Mac were taken over by the federal government. Lehman Brothers collapsed on September 15, 2008. On September 16, 2008 the Fed bailed out AIG.

The rest of 2008 was a bloodbath.

It was in that environment that I joined KEC Holdings, KEC Ventures parent company, in December 2008. I was employee #2. I had been hired into a new role that had not existed before at the company. My responsibilities encompassed any direct and indirect investments the company had made, or might make in the future.

Most notably, the company had already made 2 private equity investments; one in a private jet charter company and another in a fine-dining restaurant group – they were struggling to stay afloat given the economic environment. My first order of duty was to “make sure they don’t die” and “help them come out of this mess stronger than they were going into it.” There would be no financial engineering gimmickry. No tried and true business school textbook “indiscriminate” cost-cutting shortcuts. I had to roll up my sleeves and work with each company as intimately as necessary to achieve the objectives.

This post is about how we navigated that period. It is also about what that period between December 2008 and August 2013 has taught me about the challenges startups face, and my role as a venture capitalist.

Every day is a journey, and the journey itself is home.
– Matsuo Basho

Further Background

Both companies were generating top-line revenues in the range of $20,000,000 – $30,000,000 per year.1 Both had fallen short of budgetary expectations in 2008, but the aviation company had a more prolonged string of losses than the fine-dining restaurant, partly because the restaurant was a more recent investment at that point. I functioned as an “external management consultant”; I was not a full-time employee of either company, but I worked with employees across the hierarchy of both companies. The restaurant company employed between 400 and 500 people while the aviation company had between 30 and 40 employees after several previous rounds of downsizing.

Both companies had watched as some of their competitors ran into strong headwinds, and subsequently shut down operations because the economic environment was so bleak.

Lesson #1: Understand The Business

Once a company is in financial distress investors have to decide if it is worth saving, and they also have to answer the accompanying question; can it be saved given current known constraints? The only way to do this is to develop a deep understanding of the business, and the context within which it is operating.

Between 2008 and 2012, confidence in the economy was very low. People simply were not splurging on expensive meals or luxury jets. An economist would say that private jet charter and fine-dining both have a high elasticity of demand.

I had no prior experience working at, let alone helping to run a restaurant or a private jet charter company. So I decided to spend the first six months in learning mode. I studied everything I could about both markets while I helped the executives and managers at both companies deal with day-to-day nuts-and-bolts issues.

This was important if I was going to build personal credibility, and if I wanted to win buy-in for my ideas from the executives and managers later on. I had to be able to influence them into doing things they probably did not believe in at the outset, and I had to do this with little real influence.

How this applies to early-stage startups: Today, I look for founders who embrace their expertise, and demonstrate a knowledge of their business that surpasses mine. However, the founder also has to demonstrate an ability to assist me learn enough about their industry to make a decision, and act as a useful sounding board for decisions that have to be made in the future.

Lesson #2: Understand The People

During those six months, I also tried to understand the protagonists in each situation. I relied on a technique I had learned in my Literature in English classes during secondary school in Ghana; character analyses.

A character analyses involves performing an in-depth study of the key characters in a drama, and trying to figure out each character’s story; What motivates that person? Why is that person who they are? What is the person afraid of? What drives that person? How does that person communicate? How does that person respond to pressure and stress. What does that person gain the most satisfaction from? What’s the state of that person’s family life? How does that person perceive me? How do I perceive that person? Does that person buy into the need for a turnaround? Is that person willing to commit to the turnaround? What biases does the person exhibit that I can identify? How does that affect things?

I had to be honest, and to contend with the pleasant and the unpleasant, especially around the perceptions other people had of me at the outset.

I took copious notes, and added to them until I felt I had a decent understanding of each of the people with decision-making authority that I would be dealing with most often; executives, managers, and front-line employees.

Perhaps an important, but often overlooked insight is that an investor should strive to understand the people within the context of the business. For example, is this person a leader or a manager? The distinction matters because it can spell the difference between beating about the bush with no results to show, or getting to the heart of the matter and fixing the problems that need to be solved at a tactical and granular level. Fred Wilson writes about this problem in: Leaders and Executives.

How this applies to early-stage startups: We make seed stage and series A investments. That early in a startup’s life, the people make all the difference. The market is important, so is the product. However, at this stage the future is still so nebulous and difficult to envision that the team that has decided to embark on that journey matters more than anything else. So, I have learned to focus on questions like; How did this team come together? Do the founders take responsibility for outcomes, or do they have a habit of passing blame? Do they have the intestinal fortitude to withstand the difficulties they are bound to face as individuals, and as a team on this difficult path they have chosen or will they wilt under pressure? What evidence do I have to support my answer to this question. What is their approach to learning, as individuals and as a team? Have they faced crises together? How did they fare when the going got tough? I will not ask most of these questions directly, but I will be processing every interaction, every bit of information I get, to determine answers to questions along this line of reasoning.

Lesson #3: Create A Sense of Urgency, But Provide Hope

Unlike a startup, a company in financial distress already has a product that it has sold successfully in the past, it also has a sense of who its customers are and where to find them. It is easy for the people within the company to succumb to status quo bias. This is identifiable by statements such as;

1. “Everything will be fine, we just need to close this one sale.”
2. “I feel confident it will happen, we have this sale in the bag.”
3. “They are not our competitor, they do not do what we do!”

In the face of incontrovertible evidence that “they are up shit’s creek without a paddle” people will still choose to do what feels comfortable.

It was my responsibility to shake them out of that rut. As John P. Kotter says in Leading Change: Why Transformation Efforts Fail; 75% or more of a company’s management has to buy into the need for change, otherwise the chance that the change effort will fail is unacceptably high.

How did I do this? In both cases I did not shy away from asking questions that I expected to generate conflict. Indeed, on several occasions I had to have unpleasant and difficult conversations with the top managers and executives in both companies. I did this even if it appeared that I was “meddling” in areas where I had no business poking around. Of course, the idea that there was a part of either company’s operations that I “had no business” exploring was a fallacy only someone keen on maintaining the status quo would believe.

The message, delivered by the investors and the board, and reiterated by me during my frequent field trips, was simple; “The status quo is unacceptable, and failure for lack of effort is out of the question.” We had one chance to get it right, and we had to make the most of that chance even if it meant discomfort some of the time. We could get there with or without conflict. It was entirely up to us to make that choice.

How this applies to early-stage startups: The time for the whole team to start thinking about the Series A Round of Financing is the night before the Seed Round closes. Some one on the team should always be thinking about what it will take to raise the next round.

The time to start thinking about revenues is yesterday, even if you do not implement those plans immediately. Always have a plan. Always test your plan.

Lesson #4: Investors Have Ideas, But Management Runs The Business

Investors will always have ideas about how a business should be run. Sometimes investors know more about a certain topic than management. It is okay for investors to make suggestions, and to offer ideas to management. However, responsibility for choosing which ideas to accept and which to reject has to rest on the shoulders of management, and management has to accept accountability for the outcomes.

There are a number of ways this aspect of the relationship between investors and management might unfold;

1. Investors can dictate to management what investors think management should do, or
2. Investors can teach management how and why things should be done a certain way.

I chose the latter. That approach takes more time, but it is also more likely to lead to permanent change in behavior than the former. Also, once the lessons had taken root that approach allowed me to gradually pull back my involvement without jeopardizing the progress that management was making in improving results. It is an approach that builds self-sufficiency.

As part of the process, we cultivated the practice of communicating:

1. Why a certain goal or strategic initiative was important for the company’s near term goals and long term vision.
2. What had to get done in order for that goal or strategic initiative to be successfully executed.
3. Who specifically was primarily responsible for seeing that it got done, and which executive they could go to as often as necessary in order to navigate what ever obstacles they might encounter.
4. How it would get done, not in excruciating detail, but in broad terms. For example; Which teams needed to collaborate with one another in order to make it happen?
5. When the team expected to be able to report back periodically on their progress, and importantly, when the project needed to be complete.

To do this successfully, I had to focus on asking questions and encouraging deeper levels of inquiry than was the custom beforehand. Asking probing questions helped us cut out the “bullshit” of conventional wisdom that is seductively easy to accept.

Each time I heard; “You do not understand, that is not how it is done in our industry.” I would ask; “Why?” That would lead to an examination of the assumptions behind the choices that had been made in the past. Often there was no good reason to refuse to try something different even if it seemed out of step with accepted industry convention.

How this applies to early-stage startups: I am looking for founders at the seed or series A stage whose judgement I can trust enough to feel they do not need me to opine on every decision they ever have to make. That does not mean I am passive. It means I need to trust their decision-making skill and maturity enough to feel confident they will consistently make the right choices for all the startup’s constituents without the need to run everything by investors.

From the investors’ perspective, a policy of “show, don’t tell” goes a long way. To paraphrase the oft quoted saying; “Give a founder a fish and . . . . ” If I feel there’s something a founder ought to learn, I’d rather provide a guide to enable that founder learn the applicable frameworks and how to apply them in day-to-day decision-making situations.

Lesson #5: Create Internal Value By Increasing Organizational Capacity

The way we defined it; Organizational capacity is the harnessing of a company’s human, physical and material, financial, informational, and intellectual property resources in order to enable the company to continually perform above expectations and strengthen its competitive position.

In difficult times especially, it is important that companies do not lose sight of the need to continue to find ways to increase organizational capacity.

One way we did this, in both cases, was to shift both companies off MS Exchange Server and onto Google Docs for Work. This was not easy because of cultural attachments to MS Exchange and fear of having to learn something new. Both companies made the shift, eventually. The immediate benefit they experienced was a dramatic reduction in the costs they incurred for IT assistance. A more important, though less tangible benefit was that both businesses could then afford to give every full-time employee a corporate email address and access to a corporate intranet portal. The benefits were enormous; easier collaboration, easier information transfer and sharing,  and increased security of corporate information and trade secrets. Quicker turnaround on tactical decisions because people could now communicate by chat.

Given the improvements in tools for collaboration, we encouraged the formation of cross-disciplinary teams to tackle some of the problems that each company was dealing with. This allowed people from one area of each business to interact more closely with their colleagues from another area of the business. They developed a better understanding of one another, and of the challenges and constraints that they each faced in trying to execute their day-to-day responsibilities. In turn this fostered a more collaborative relationship across the entire organization. It also enhanced the learning environment for all employees.

How this applies to early-stage startups: It does not take a lot by way of resources to create an environment that is rich in opportunities for cross-functional collaboration and learning. This comes in handy during due diligence because every member of the team will be able to speak knowledgeably about the startup’s immediate and long term plans.

Lesson #6: Direction Must Be Set From The Top, But Engagement Must Begin at The Bottom

We started working on trying to develop a strategic plan for both companies in summer 2009. Before this time, neither company had previously had a coherent strategy.

In consultation with the executives in each company, the board of directors set out the broad areas that the strategic plans ought to cover; Finance, Operations, People, Demand Creation, and Expansion.

Once those had been agreed on, it was my job to meet with front-line employees as well as managers in the field in order to obtain data and insight about how the strategic plan would have to be set up in order to function effectively for them given what each company was trying to accomplish.

That sounds easy. It is not. It took multiple meetings, of several hours each. The restaurant had multiple locations in NYC, one location in NJ and another in CT. I did not visit the location in Chicago, the CFO held discussions with them during his quarterly visits. I had to sift through everything I heard during those meetings, and I had to extract broad themes. Then I had to reconcile that with the strategic framework established by the board. Finally, I had to interpret that information from the perspective of the competitive landscape for each of the two companies. Finally, I had to synthesize it all into digestible chunks for the board, the executives, the managers and rank-and-file employees.

The goal of spending so much time on having these meetings with people across all ranks in each company was to ensure that once the strategy was developed and implemented, there would be complete alignment behind the vision embodied in the strategy, and just as important that every employee would be engaged in and committed to executing the tactical initiatives required to make the strategy succeed.

How this applies to early-stage startups: The founder creates the vision that investors and the startup’s team buys into. The team executes to turn that vision into a living, breathing, growing reality. Investors hopefully act as a positive catalyst to help the process unfold more quickly.

Lesson #7: Do Not Ignore The Soft Issues, Emphasize Both Hard and Soft Issues Simultaneously

My experience might as well be called The Tale of Two Turnarounds. In one company leadership admitted things were awful. They also admitted that they could use whatever help I could offer. They readily admitted their limitations as a team. We had many instances of conflict, but starting from a position of optimism and a willingness to try, the process moved along slowly, but steadily. We created a survey that we administered twice a year to get a sense of how employees were feeling, data that might not be captured in the key performance metrics we monitored weekly, monthly, quarterly, and annually.

We launched the strategic plan in January 2010 after 9 months of work specifically focused on that task. A year later the company made its first ever payments from a new profit-sharing plan that we had created as part of the new strategy. The payments were not huge, but they were evidence that the team’s hard work was paying off. It also created a feedback loop about how actions by employees affect the bottom-line performance of the company.

In the other company the founder, who was also the ceo, was grumpy and relatively uncooperative with investors. To cut a long story short, we launched the strategic plan in April 2010, after about 9 months of work specifically focused on that assignment. Within 6 months 75% of the managers with whom we had worked to develop and launch the strategic plan had left the company or had been fired. It was a classic case in which we would take two steps forward only to take four steps backward.

Morale dipped ever lower. The founders incessant talk about “a vision” and “a mission” became the butt of jokes among rank-and-file employees. It became clear that employees were becoming disillusioned with what the company stood for. While the company fared better than it would have if there had been no attempt at executing a turnaround and developing a strategy, it continued to perform well below its potential.

At a board meeting one day, the founder/ceo went into a vituperous rant about all the areas where the company was falling short. This was in early to mid 2012. I had to burst out in laughter. He might as well have been reciting problems whose solution formed the core of the strategic plan we created in 2010. Implementing that plan would have started the process of solving those problems he was so exercised about that day. We had lost two years for no good reason.

No amount of emphasis on key performance metrics made a difference. Without the founder’s full embrace of the strategic plan, nothing else mattered. I should point out that he had been intimately involved in crafting the strategic plan. This was not a plan that was forced down on him “from on high.” It became clear how badly things had deteriorated when a long time employee quit, this individual was the only employee at the company who had been there as long as the founder.

How this applies to early-stage startups: I am of a firm belief that the team is really important at the seed and series A stage, or at least until uncertainty around product market fit has been largely eliminated. So, I need to develop a sense that a founder is someone I can work with over the long haul . . . Actually, the kind of founder I am happy backing has to be someone I could envision myself working for if circumstances were different. Age, race, gender, religion . . . That is all irrelevant. Early in my process for assessing a startup I focus almost entirely on soft issues.

In one example, I sensed something amiss about the body language between 2 Spanish co-founders pitching a startup to my partner and I in 2013. I decided to tune out what they were saying in order to better observe their body language. There was something about their body language towards one another that did not align with what they wanted us to believe, in my opinion. We passed on their seed round, and decided to watch them till we could get more data about the relationship between the co-founders. That was nearly 3 years ago. I have heard no reports to suggest we made an error in that case.

Let chaos reign, then reign in chaos.1

– Andy Grove, Only The Paranoid Survive

Lesson #8: Be Prepared For Chaos; Harness, Focus And Direct It, Empower People

Once employees understood the strategic plan as well as the tactical initiatives that accompanied it, they began developing ideas related to the various functional areas in each company and making suggestions to managers and excutives.

At first this was overwhelming . . . Managers had to do their own work, manage the work of the groups of people that they managed, and now . . . . They also had all these ideas being thrown at them from “left, right, and center.” The initial knee-jerk reaction was to try to “make it stop.”

That would have been a mistake. Among the deluge of ideas were some real gems.

For example, a maintenance department team member at the aviation company noticed that the company could cut down on its electricity usage by changing all the bulbs in its main hangar . . . No one had thought about that over the years, but our discussion about the strategic initiative around improving the product while reducing costs prompted him to take another look at the company’s hangars in search of opportunities to reduce operating costs. Thanks to improvements in technology over the years this was now a measure that could be implemented relatively easily.

In another instance, the team at our restaurant in CT had observed that on certain days of the week large groups of Chinese tourists visited the casino resort in which they are located. They had been thinking of a way to capture some of that business, but had assumed the corporate office would object to the menu changes they thought they had to make in order to execute that plan. As part of our implementation of the strategic initiative around increasing revenues, I suggested they conduct an experiment, analyze the outcome, and then seek assistance from the corporate office if the results looked promising. They did that, and saw a jump in revenues on two days of the week when business would otherwise have been slow. The corporate office gave its blessing, and assisted in making that practice more entrenched by using corporate resources to give it the polish required for company-supported initiatives.

How this applies to early-stage startups: A startup stops being a startup once its search for a repeatable, scalable, and profitable business model is complete. While that search is in process it is important that every member of the team feels empowered to contribute to the discovery of that business model. It can’t be the job of only some members of the team, it has to be part of everyone’s job. The faster a startup gets through the discovery process the better.

Lesson #9: The Turnaround Should Be Its Own Reward; Incentives Should Reinforce Change Not Drive It

It was nice to be able to make payments from the profit-sharing plan that we instituted. The payments were relatively small, yet they were tangible evidence to the employees, managers, and executives that they were collectively well equipped to make it through the ongoing turbulence and correct the mistakes of the past.

The sense of accomplishment employees felt translated into a number of things, among them;

1. Newfound and increasing pride in being associated with a company that was succeeding where many of its rivals had failed.
2. High levels of morale and optimism about the future of the company, and their place at the company. Less stress about employment security.
3. A greater willingness to take the initiative in situations where the possibility of generating business for the company exists.

Basically, every employee was empowered to function as a salesperson on the company’s behalf. We arranged training sessions to equip every employee with the vocabulary they needed to understand in order to do that effectively. We also developed simple tools that they could use. They did not replace the company’s professional salespeople . . . They became an auxiliary sales force.

How this applies to early-stage startups: As startups grow, founders and early team members need to get better at the art and science of “managerial leverage” . . . What is managerial leverage? It is the process by which a manager creates output that far supersedes that manager’s input by using all the resources at the manager’s disposal to influence the work that is done by the group of people whose on-the-job effectiveness and work-output is affected by interactions with the manager.

What is a manager’s output? According to Andy Grove, co-founder and former CEO of Intel “The output of a manager is a result achieved by a group either under his supervision or under his influence.” Great managers create positive output that far exceeds expectations. Below average managers create output that fails to meet expectations given superior resources. Average managers? The team’s output would not be any different if the manager were absent.

The art of managerial leverage is in determining; how to apportion time, where to pay more attention, where to pay less attention, who to pay more attention to, who to pay less attention . . . . etc etc. The science of managerial leverage is in determining; what to measure, when to measure it, how often to monitor what is being measured, where bottlenecks are most likely to occur and why, and how to eliminate them . . . . etc etc.

Managerial leverage drives output. Output drives results. Results are measured and reflected in the KPI’s that founders and investors measure. Getting that order right is critical to a startup’s success.

Lesson #10: Learn To Listen, And Communicate Effectively

It is amazing how many problems can be solved relatively quickly if people would communicate more effectively internally and externally. Communication involves two actions; first listening actively in order to understand what is driving the actions of other people. Second, responding to what other people have said in a way that gets to the root cause of the problem being discussed.

During one of my field visits, I spent 8 hours on my first day listening to the executives talk about all the problems they each perceived, and how they felt the issues ought to be tackled. I spent that day with the CEO/President, the CFO, the Head of HR, and the Head of Sales. I encouraged open disagreement and debate.

On my second day I spent about the same amount of time speaking with the middle managers; again we discussed the problems they each perceived, and how they each felt the issues ought to be tackled.

On the third day I brought both groups together, and moderated an all day discussion about the problems the company was facing. Once again, I encouraged open disagreement and debate. Also, I put the inter-personal issues and conflicts that I had uncovered on the table. Things often got heated. It was my job to function as a pressure-release valve during those episodes. It was not pretty.

For example, I explained to the entire group how the CFO who was disliked by a large number of people within the company had made payroll on too many occasions by dipping into his personal 401(K) savings for example. The irony, the folks who disliked him routinely failed to provide the finance team with the data they needed in order to collect on accounts receivable from the company’s customers.

The outcome of this exercise was that;

1. Everyone felt they had been given a chance to speak and be heard by the rest of the leadership team, and
2. We discussed expectations in a fair amount of detail, enough so that more work could be done laying them out in adequate specificity rather than vaguely wondering what people could expect from one another, and finally
3. Created an environment in which each member of the leadership team contributed in creating a communication framework against which they agreed to be held accountable

Our goals for the communication framework were that;

1. Every employee should know what is expected of them, as individual team members,
2. Every employee should know what to expect from every other member of the team,
3. Employees should know what to expect from executives and managers, and lastly
4. Accountability should be about improving team and company performance, not punishing individuals.

As Rosabeth Moss Kanter says in Four Tips for Building Accountability; “The tools of accountability — data, details, metrics, measurement, analyses, charts, tests, assessments, performance evaluations — are neutral. What matters is their interpretation, the manner of their use, and the culture that surrounds them. In declining organizations, use of these tools signals that people are watched too closely, not trusted, about to be punished. In successful organizations, they are vital tools that high achievers use to understand and improve performance regularly and rapidly.”

How this applies to early-stage startups: Startups typically have to move quickly, especially if they have taken in capital from institutional venture capitalists. A culture of blame, lack of cohesive teamwork, and a lack of organization-wide accountability is an insidious tumor that will eventually lead to failure. The founders who are most successful in the long run are those who do not shift responsibility when things are difficult, but instead serve as a model that other team members can emulate.

Closing Thoughts

Executing a turnaround and getting a startup through the phase of discovering a business model are really just two sides of the same coin. That experience has led me to the belief that it is when things seem bleak that great early stage investors prove their worth.

Further Reading

Blog Posts, Articles, & White Papers

1. The Psychology of Change Management
2. Motivating People: Getting Beyond Money
3. The Irrational Side of Change Management
4. The CEO’s Role in Leading Transformation
5. The Role of Networks in Organizational Change
6. All I Ever Needed To Know About Change Management I Learned at Engineering School
7. Changing an Organization’s Culture, Without Resistance or Blame

Books

1. High Output Management
2. Only The Paranoid Survive
3. How Did That Happen?
4. HBR’s 10 Must Reads on Change Management
5. HBR on Turnarounds

Developing Vibrant Industrial Clusters in Africa – Pillars and Lessons from Advanced Economies

by Ndubuisi Ekekwe

Executive Summary

Around the world, it has been recognized that industrial clusters are more than a collection of companies since they offer a unique business-sphere for stimulating technological innovation, nurturing new startups, attracting investment and generating socio-economic growth. The popularity and growing significance of cluster in development are underpinning new policy supports in national economic initiatives as nations seek ways to stimulate growth by supporting business environments to improve competitive positions. Silicon Valley remains the global benchmark with its leading hi-tech firms. In Africa, Nairobi in Kenya is an emerging cluster for information and communication technology (ICT) sector. Italy is known as the world’s footwear capital because of clusters in Parma, Montebelluna and other towns that have existed since the time of Michelangelo. In all these places, there are inherent business advantages arising from clustering of firms.

Clusters are effective mechanisms that help to concentrate resources and align trade routes, diagnosing ways to generate and accelerate development processes besides being growth poles in economies. The birth of Silicon Valley stimulated a vibrant venture capital and brought lawyers with specializations in intellectual property as well as professionals in other fields that serve the technology ecosystem. Cluster developments are very strategic for national competitiveness in the global economy.

In Africa, many of the economies are experiencing high economic growth rates. However, those rosy statistics have not translated into better living standards for Africans with close to 49% of sub-Saharan African population surviving on less than $1.25 a day according to the World Bank. The asymmetry between economic growth and job opportunities cannot be decoupled from the structures of most African economies. They remain dependent on minerals, hydrocarbon and overall commodities for their foreign exchange earnings. Besides the obvious challenges which could emerge on post-mineral era, Africa is challenged by the fact that regional integration may not happen effectively without homogeneity in the economic structures. But regional integration is a vital catalyst to drive the competitiveness of the continent and expand its economic system with shared prosperity.

Competitiveness driven by knowledge based economies with industrial capacities in new areas of technology will help Africa overcome the cyclical budgetary turbulence associated with commodities. If that happens, welfare loss associated with budget shortfalls could be minimal across regional economies.  This implies that African governments must invest to drive sustainable competitiveness which will usher higher living standards for the citizens. Though most African economies have broad-based growth strategies which are tailored for the domestic market and anchored by ICT, light manufacturing, agriculture and trade, the progressive innovation process has not been stellar. We note four main factors which have stymied these countries to build prosperous diversified economies that are balanced, sustainable and largely decoupled from trade shocks and welfare loses tied to overdependence on commodities:

• Poor Governance: Despite the human capital, the quality of governance in most African countries must improve for them to be competitive in redesigning their economies for the opportunities of the 21st century.
• Education: At the tertiary education level, Africa has education crises. In the 21^st century where knowledge will define the wealth of nations and competitiveness will be driven more by brainpower than minerals and hydrocarbon, without improving its educational system, its recent achievements may be unsustainable especially in the post-mineral era. The continent must push for higher quality and relevance of tertiary education as the schools have underperformed across many metrics.
• Health: Despite the efforts of many successive governments, life expectancy at birth, infant mortality, child malnutrition and access to improved water source have only improved marginally. It could be opportunistic for the governments to reform the healthcare sector just as they have done in the telecommunication sector through privation of government clinics.
• Infrastructure: Africa must invest in power, roads, waterways and other critical infrastructure that support trade and commerce.

Most clusters in Africa are inventive with minimally scaled organic and homegrown innovations. Yet, the trajectory of advancement is promising especially in some economies as the markets attract foreign investors, better managerial and technical talents. In this paper, we explain how African can approach the development of its industrial clusters and make them vibrant. We observe that United States, Canada and Europe built their hi-tech sectors through specific intervention programs that galvanized the participations of the universities, private sector and government research labs. Exploring those countries and recent efforts in Brazil and China, we propose Five Pillars that will help Africa develop hi-tech industrial clusters across its regions. In a decade of economic growth that has brought optimism about the continent’s future, these pillars will help not just to develop vibrant industrial clusters but also help the continent live up to its promise of creating prosperity for its citizens.

1.      Introduction – The Need of Vibrant Industrial Clusters

Information and communication technology (ICT) is playing major roles in the course of socio-economic development of the Africa economy. It has redesigned major industrial areas by enabling more efficient business processes even at lower costs. In both the public and private sectors, it is driving a new vista of human and organizational capabilities that will equip the continent to compete at international levels (Oshikoya, 1998). As ICT transforms the region into a knowledge-based economic system and a cashless society made of the citizens, companies and the states in electronic-linked mutually dependent relationships, the continent will be expected to benefit in ways that will drive opportunities for the citizens (Islam, 2012). While there are potentials across different technology spheres to improve competitiveness in the continent, lack of deep structures on growing and nurturing industrial clusters are major challenges that continue to stymie developments in the continent.

As the 21st Century enters the mid of its second decade, Africa is confronted with daunting challenges of building a new generation of workforce and critically-needed infrastructure to not just compete globally but also to prepare for its post-mineral era. The continent must foster a climate of innovation and pursue sustainable growth despite evolving economic realities that strain national budgets (Ekekwe, 2010). Harvard Business School Michael E. Porter (Porter, 2003) has through his work on competitiveness explained how economic prosperity can be driven through clustering. The co-existence of firms enables them to collaborate, improve, compete, stimulate demand of supplier industries, develop specialized talents and spur innovation. This jockeying enhances productivity with abilities to venture into new markets for new revenues translating to better local jobs, industrial growth and regional prosperity. In other words, there is a correlation between clusters on other side and business growth, competitiveness and globalization on the other.

Globally, data shows that clusters play major roles in regional job growth, wages and formation of new companies. This virtuous cycle has encouraged many governments to work on ways to support clusters because of their impacts on sustainable economic growth. Since the dawn of the new democratic dispensation across most African economies, the governments have embarked on different reforms geared to retool their economies and make them more competitive (YouWin, 2014). The planning process has elements for growth, preservation, good governance and economic sustainability. Governments have also identified specific industries and consequently advocated for strategic investments to enable these industries thrive. Different initiatives have been structured to support economic and workforce development as governments work to position Africa as the preferred destination for foreign direct investment (FDI) in the emerging world.

In 2014, the African Institution of Technology, with funding from the Tony Elumelu Foundation, spent six months studying the innovation ecosystem in Nigeria by looking at the formation of clusters and how companies located therein prove relatively more competitive with better growth (Ngclustermap, 2014). The goal was to investigate the relationship between some industry clusters and the existing infrastructure to understand how Nigeria’s goals of strategic investment and economic development align. This study has shaped our understanding of some key industrial systems in Africa and what the continent must do for sustainability especially in the post-mineral era. Also, a homogenous African economy, based on knowledge economy, can support regional integration without welfare loss arising out of commodity trade shocks (AUC, 2009).

As Africa works to achieve some economic targets, developing capabilities in the industrial system will help. The continent needs vibrant clusters and companies to drive development. As the continent looks for ways to diversify its economy from hydrocarbon, clusters operating more efficiently can assist companies to develop stronger competitive capabilities that will help them succeed globally. When firms collaborate, their chances of identifying market niches, accessing the export market and influencing policy improve (Porter, 2003).  Efficient clusters with needed infrastructural support give rise to higher productivity, more business opportunity and deeper technical capabilities.  The typical triple helix of state, industry and academia must exist in Africa to improve infrastructure, university system and provide strong legal systems that will help protect and accelerate innovations.

2. Developing Industrial Cluster Infrastructure

Infrastructures perform vital services for states, firms and citizens (Enright, 1998). They improve the quality of life of people and in the process serve as catalysts to attract them to live in some communities. In Africa, it is very evident that infrastructure is an important factor that drives the formation and nurturing of the organic clusters around the continent. Most of these organic clusters are forming in the big and important cities and if these facilities are improved upon, the effectiveness of the clusters will be enhanced. The following infrastructures will impact the development of the regional clusters across Africa:

Table shows infrastructural impacts on cluster development

What Regional African Governments Can Do

Globalization is pushing multinational companies to seek for opportunities in any place they can find them. This trend which has been facilitated by new technologies will continue to determine companies that win and lose. As they seek places to invest, states, regions and nations have to compete for them. In Africa, regional governments must strengthen their comparative advantages to attract these opportunities (Elumelu, 2013). Even within a country, there will be evolving regional competitions on where firms locate their plants and factories. Just as in U.S. where California few years ago to get-ahead in stem-cell research approved a $3B bond in order to attract the best minds in biotech in the area, regions in Africa must look at ways to finance shared infrastructure by pooling resources together (Saskal, 2014). To stimulate vibrancy in the current organic clusters across Africa, the following are programs or initiatives we advocate at regional levels across the continent.

Innovation Hub Initiative: All the regional economic communities in Africa must work to designate certain areas within existing clusters as Innovation Hubs. This will help to bring regional integration at industrial level. The economic strengths of some nations may not optimally execute some serious projects, so, we reason that a regional-level plan will be more successful. The region will leverage its assets including the universities, government labs and linkages to boost competitiveness and drive investment growth (Ekekwe, 2012). They will allow private firms to administer and manage these hubs with agreed KPIs (key performance indicators). For Africa to attract multinational firms like Intel, HP, and Apple, they may need to invest in the foundation structures that may require high capital-intensive projects in semiconductors, only when they pool resources together can they achieve success.

Development Finance Institutions (DFIs): The regions must setup DFIs (development finance institutions) in order to provide capital and other resources towards promoting and developing new technologies, products and enterprises. African Development Bank and such likes are not structured for small firms. These present institutions have legal and administrative requirements that some agile and small firms are not designed to participate in. So, Africa needs to have new models to finance industry. We recommend having crowdfunding platforms managed by NEPAD regional offices that seek new ideas on industry and trade. They can partner with banks or registered investing firms to deploy capital in their regions. A key requirement will be a competitive and rigorous process that is decoupled from political patronage in funding decisions.

Accelerated Growth Hubs: Regions must setup special economic zones that will be geographically confined areas within existing clusters that enjoy tax incentives.  The goal will be to use such incentives to get disparate companies operating in the region to co-locate so that resources can be more appropriately provided to them.

3. African Regional Integration and Industrial Economy

The pursuit of industrialization and development of industrial clusters by stimulating organic clusters or setting up new ones will help in creating more homogenous economies across regions in Africa. Unlike presently where most of the countries depend on minerals, hydrocarbons and commodities to finance their budgets with disparities in their economic structures, industrializations will bring order. The key advantage will be shocks that can result to welfare loses owing to the varying prices of commodities in the international market will be solved.

For regional integration to take place, Africa must look at having ways to ensure the economic structures are largely uniform. Many African nations are still oriented in trade toward former colonizers in Europe than immediate neighbors and across African capitals; there is an understanding that integration could be a key catalyst to transform the continent (AUC, 2009).  The major challenge is how the continent could develop the plan considering the lopsided economic structures among the nations (e.g. Nigerian GDP is big in the ECOWAS region), which can affect response strategy during economic crises. This is fundamental as if major regional economic powers stay out of this integration for fear of being net losers, it could have adverse effects to realizing the continental goal.

Regions must be supported to diversify their industrial structures to enable more homogenous trade shocks, stabilize inflation and interest rates. Africa Union needs to ensure that NEPAD (New Partnership for Africa’s Development) delivers on its peer-review mechanism towards economic growth, good governance and strong fiscal policies across all economic regions. With vibrant industrial clusters across African economic communities which can morph into one African integrated community even in currency union as time grows, regional integration will evolve with strengths and competitive viabilities.

Most African economies have broad-based growth strategies which are tailored for the domestic market and anchored by ICT, light manufacturing, agriculture and trade. Four main factors have stymied these economies to build prosperous diversified economies that are balanced, sustainable and largely decoupled from trade shocks and welfare loses tied to overdependence on commodities. These issues noted below must be properly managed:

• Poor Governance: Despite the human capital, the quality of governance in most African countries must improve for them to be competitive in redesigning their economies for the opportunities of the 21st century.
• Education: At the tertiary education level, Africa has education crises. In the 21^st century where knowledge will define the wealth of nations and competitiveness will be driven more by brainpower than minerals and hydrocarbon, without improving its educational system, its recent achievements may be unsustainable especially in the post-mineral era. The continent must push for higher quality and relevance of tertiary education as the schools have underperformed across many metrics. According to World Bank, most African economies will not meet the Millennium Development Goals (MDGs). This means, they are not effectively preparing their youth for the economic opportunities of the future.
• Health: Despite the efforts of many successive governments, life expectancy at birth, infant mortality, child malnutrition and access to improved water source are still low in the region. It could be opportunistic for the governments to see how more resources can go into its legacy hospitals by privatizing them and open them to market forces.
• Infrastructure: Reforms are underway in the electric power sector with the privatization of most national grid companies (IMF, 2013). It is expected that the private investment will address the chronic issues that have affected service delivery and consequently unlock new opportunities in the region.

Besides these challenges, until Africa retools its industrial capacity, it faces a structural economic threat in near future as the world looks into a future where some of the commodities will be displaced; if automobiles are powered by hydrogen, solar and electricity, the petroleum exporting countries in Africa could suffer consequences. Also, the shale gas revolution that has enabled U.S. to reduce its oil imports will unravel oil producing countries. Across the board, declining oil revenue owing to both lower production output and weaker prices could cause shortfalls in budgetary revenues, disappearing balance of payment surplus and reduction in the foreign reserves possibly triggering macroeconomic problems.

Minerals and commodities will remain the dominant sectors in most African economies owing to their contributions in the foreign exchange earnings. They can turn these capabilities into strengths by investing appropriately in developing catalysts for an industrial economy driven by knowledge. Our state of innovation is low and one of the reasons is the overall lack of competition in the education sector both at the university and faculty levels. Africa can learn from the United States National Science Foundation (NSF) and the National Institute of Health (NIH) on how it can structure its science policy on funding and assessments of outcomes. The NSF has a mission to advance the progress of science and it accomplishes it by funding proposals for research and education made by scientists and engineers. Its medical counterpart is the National Institutes of Health. While Africa may not have the scale of NSF and NIH, it must map funds for S&T research and have a process to use rigorous peer-review system to fund grants. It must be blind to quotas and the need to balance geographical spread. It must focus on talents and the best ideas. Without a visible competitive atmosphere in education that is driven by merit and hardwork, Africa will find it difficult to develop an innovation system. Only an innovation system will bring the necessary structural economic homogeneity to support effective regional integration.

4. Pillars and Lessons from Advanced Economies

African countries need to retool their economies. Building a hi-tech sector will help create jobs in ICT and other sectors. Largely, the technology participation has been driven by consumerism and imports. For the continent to provide social inclusion by providing jobs to its citizens, light manufacturing and a new sector are vital. Here, we propose a five pillar strategy for the continent. This draws from the models that have worked for different countries/regions such as United States, Canada, and Europe through MOSIS, CMC Canada and CMP/Europractice respectively (mosis.com, cmc.ca, and europractice.com). In these programs, the governments centralized and subsidized the production of specialized electronics – key sector for modern industrial societies – to help drive innovation by reducing barrier of entry. These are government intervention programs that have driven innovations and growth in electronics in these regions. The five pillars, focusing mainly in the hardware side over the software, are:

a.       Pillar 1 – Education and Training

The goal will be to recruit top engineering talents across the continent and train them on key areas of hardware development. We identify the following areas

• Microcontroller programming:  Nearly all hardware systems rely on microcontroller as its engine.
• FPGA (field programmable gate arrays): These are microchips that can be reprogrammed based on the requirements of the applications.
• ASIC (application specific integrated circuits): Developing integrated circuits at the level of transistors.
• PCB (printed circuit board): PCB is the board used in electronics. This is very important as the product of electronics is usually packaged in PCB. PCB ensures that ideas are packaged as products.
• Embedded software development: software with emphasis on how to control hardware systems

b.      Pillar 2 – Commercial Hardware Development Training

The goal is to assemble pockets of embedded systems and hardware developers (and hobbyists) in Africa and provide them with modern skills that can help them compete in quality and scale.  The one-man business that programs electronics display boards which depend on hand wiring can be trained on PCB (printed circuit board) design and development. That competence will help drive quality, ramp up volume and reduce cost through automation. This will also mean helping some hardware ICT entrepreneurs to innovate in design and development of the products they currently sell. Brazil followed this strategy when few years ago, they invested in training their citizens not just through university systems. Today, it commands more than 75% of all FDIs into South America in the sector with Apple and Foxconn committing billions of dollars in investment (Mishkin, 2013).

c.       Pillar 3: Local Hardware Business Enablement

The hardware design and development environment in Africa is at infancy though ICT has a lot of vibrancy. The most critical structure is not available. A key structure is where to produce PCB after they have been designed. In this phase, efforts will be made to nurture the industry. One key element is PCB design equipment. We propose for government to setup a PCB production plant, via public private partnership, and offer open and subsidized paid services to companies and schools across Africa. So when companies send their designs, they pay and the company makes the PCB and ships to them. Without a PCB plant, the hardware industry will not develop in the continent. Also, the students will have the platform to move simulations and prototypes to final product concepts which are packaged neatly for demos before investors. Offering services across the whole ecosystem makes this project a sustainable one with lesser cost-factor to the governments.

It is very important to note that Africa has the capacity to develop this industry. What is needed is not any raw material but skilled manpower and the right policy. Taiwan has demonstrated that any nation with a strategic intervention program can grow the electronics industry. Africa is emerging as a region with focused strategy to develop deep technical workforce. This makes it well positioned to lead the region in this area. An electronics industry will bring Intel, HP, Dell and Apple to come to Africa and setup fabrication facilities, design centers and manufacturing bases. The semiconductor industry is the largest in the world and Africa can play a role if a PCB plant that serves to seed that sector is developed.

Expecting the startups to purchase them will slow the penetration of the sector. So, government can help fund the project. Alternatively, government can have a tender for companies to compete and the one that wins will run it and after a period pay back the government the funds. With this, they can make high quality electronics boards. Africa with a PCB plant will become the hub of electronics manufacturing as all the schools and companies in the region will send design files to be manufactured here over U.S. and China. The comparative lower wage in Africa makes it very attractive that markets from U.S. and Europe could be interested.

At this phase, we will expect most students’ projects, undergraduate and postgraduate ones, to transition from prototypes on breadboards for the awards of diplomas to ones that investors will pay attention to commercialize. The impact of PCB plant will be huge as students will have a process to miniaturize their designs. It is very possible that across Africa, engineering students have tried to solve most local problems. But most are yet to be commercialized because without PCB, they cannot improve quality and performance to seek for funds. PCB will help them to improve quality, performance and packaging that will enhance the overall marketability of the ideas.

d.      Pillar 4: Business Proposal and Capital

Build ICT hardware accelerator program to prepare firms towards getting capital. The goal is to enable top performing hardware firms or excellent student projects get venture funds and decouple the need for government to support them. Yet, it does not mean that national governments cannot award competitive grants to 5-10 companies in their respective electronics sectors.  These firms can be startups or expanding firms. The purpose is mainly to provide a process to fund some talented teams to build companies. If the government provides the PCB plant, each of these firms will need $150,000 – $350,000 to develop prototypes and even try first product lots in the market depending on the nature of the product. Usually, investors like to see ideas which are nearly prototyped and that explains why a PCB plant is vital.

Action Plan: Though Africa has many accelerators and hubs, they are largely web and mobile app focused. These existing hubs will be complementary. A private sector driven hardware hub will be required.

The purpose of the Hubs across Africa will be to facilitate the development of the most vital industry of the 21^st century, microelectronics, in Africa and subsequently transform the Hubs into centers of hi-tech entrepreneurship and knowledge creation. Just as U.S., EU and other areas have used specific government programs to stimulate the sector, Nigeria must do same. The capacity to advance ICT cannot be decoupled from the propensity to build an electronics design ecosystem with tools and facilities makers and developers can use.

Both MIC and TCC will educate and train businesses and schools in the exciting field of microelectronics, and its applications to agriculture, energy, manufacturing, telecommunications, information systems and foster opportunities not only for the acquisition of new knowledge, but also the production and application of new knowledge. It will open new vistas of opportunities for small and medium scale enterprise (SMEs) to differentiate their services and create new values in their product offerings. The centers will provide broad-based innovative trainings, which would enhance the quality of their business processes and systems.

e.       Pillar 5: FDI and Attracting MNCs

We estimate 5-9 years for executing the earlier pillars. At the tenth year, some regions in Africa will be ripe to market themselves as a hub of hardware design and development in the region. With deep core of talents, interests can build in the regions.

Unlike ICT, electronics is not usually pursued as a technology policy in Africa. Sure, electronics falls within the engineering policy. Unfortunately, Africa is paying more attention to ICT than engineering – the buzz is so high about ICT that you can be fed with ICT related news daily on the nation’s leading papers.  That imbalance makes it difficult for Africa to develop a sustainable model since ICT cannot advance itself. The engine that drives the ICT economy is electronics and when a nation does not have a plan for electronics it will largely remain a consumer of ICT.  There is a limit to how fast Google Search can perform based on the microprocessors that power Google servers. In other words, microchips must advance before ICT and software can leap forward as the former puts theoretical limits on the performance on the latter. Building a strong electronics program puts a continent on the path of becoming a creator of ICT.

5.      Recommendations and Conclusions

Before specific recommendations for regional and national governments on developing industrial clusters in Africa, the following are some general recommendations:

• All stakeholders must collaborate to improve cluster’s competitiveness. The private sector must advocate for the right policies and government must act. Donors can be given directions on areas where help is needed by entrepreneurs within clusters. By working together through investment, sound policies, our clusters can be made more efficient and competitive.
• Policy should gear towards supporting already existing clusters as cluster development is market-driven and takes years to evolve instead of working to create them from scratch.
• A framework for cooperation among companies, universities, research institutions at local, regional and national levels should be developed with government playing a strong catalytic role. Africa must push synergies in key areas of policy action like competition, innovation, and fiscal growth.
• Though government can use cluster-specific incentives to shape the behavior of cluster participants on investment and innovation, it must try to focus on building core platforms like infrastructures and legal systems. The seasonal grants or handouts to entrepreneur without supportive basic cluster amenities cannot help them compete against Chinese imports into Africa.
• Efforts must be made to develop and offer extended financial instruments such as venture capital funds, private equity funds, credit guarantee schemes, etc to stimulate cluster growth.
• Early stage VC funds will help unlock opportunities not just in ICT but in other technology sectors.
• The private sector should participate more actively in S&T education/training by creating alternative vehicles to close the asymmetry between university programs and immediate needs of the clusters.
• While national cluster plans will be important, regional ones may serve better owing to the disparity in levels of development. Specialized infrastructure like communications, transport and real estate are vital.
• Government could administer its startups financing programs by focusing more on companies within sector-targeted clusters to improve the overall performance of these intervention initiatives.

Regional African Governments

We emphasize the importance, at regional African governments, of:

• Technical Education – The educational system and training programs should gear towards producing workforce in science, technology, engineering, and math as they are vital to S&T clusters
• Technology Transfer from Universities – The governments must continue to push all universities especially the technical ones to establish technology transfer offices to enable the transfer of inventions to businesses and enterprises that can commercialize them. The technology transfer scheme could be incentivize so that universities can commit to building a viable relationship with the industry.
• Legal Education and IP – Africa has a dearth of IP (intellectual property) attorneys with expertise in patents, trademarks and trade secret. The Law Schools must work to remedy this situation.
• Patent & IP Laws – Governments must enforce the IP laws in its books and help transform the nations as places where intellectual properties are respected. A key part of it will be encouraging our entrepreneurs to patent their good ideas.
• Physical Infrastructure – Africa better transportation within and between clusters to ensure efficient movement of goods and services. From airport to roads, availability of these amenities will play major roles in the decision to locate companies. Also, firms and workers look for places with good amenities including housing, hospitals, roads and access to communication facilities.
• Talent Pipeline – The development of technical talent in nations especially in emerging areas of technology must be worked upon. A strong secondary education in the STEM (Science, Technology, Engineering and Mathematics) area must be worked out.
• Foreign Entrepreneurs – Government could look to lure foreigners into the countries which can possibly incubate the local counterparts through special funding and visa programs similar to the strategy adopted in Chile. In Chile, the government provided seed capital to some entrepreneurs and has succeeded in attracting talents from U.S. and Europe.
• Technology Adoption – When government redesigns its processes and adopts modern technology, there will be opportunities for some of these clusters to expand and grow. In most African cities, government dominates the GDP. So, any sector that government moves into will grow as companies will emerge to serve and take opportunities therein. From eGovernment to eTax to new farming techniques, changes in the ways government operates could stimulate cluster growth.
• Cluster Redevelopment – Each of the regional regions must work to revamp at least one cluster and transform it into a globally competitive industrial one within a decade. This means that governments at all levels must partner to unleash the full innovation potential of these clusters. This will begin by having each cluster strengths, weaknesses and opportunities assessments.

The following are guidelines to deepen cluster development in any African government at federal government level:

• Increase investment in the foundations of science, technology and engineering. Also create strong standards and accountability
• Provide more support for targeted and specialized training programs in S&T
• Develop framework to improve effectiveness in federal research and alignment to industry
• Increase research funding in universities and government labs and demand for measureable outcomes
• Strengthen the legal system especially IP rights and anti-trust laws
• Restructure research funding process via peer-reviewed competitive grant process as obtainable in U.S. National Science Foundation and National Institute of Health
• Act as an innovation-backer by providing federal matching funds to local governments that invest in S&T, and innovation
• Invest in recruiting anchor firms into regions and promote cluster awareness
• Build/upgrade vital physical and business infrastructure
• Focus to grow and support old and new innovative cluster companies

Private Sector

Besides what governments can do to improve the efficiencies of clusters in Africa, the private sector can also help. For the private, we show how they can simultaneously support the cluster while benefiting from it. For Africa to become a competitive and dynamic knowledge-based economy with sustainable growth and better social cohesion, it is the private sector that will practically execute any plan including the ones made by the government.

The following are some recommendations:

• Financial Instruments – The private sector should examine how they can offer financial support in start-up projects, networking, research, education and infrastructure without jeopardizing their fiduciary responsibilities. Africa is in dire need of early stage venture capital funds that will help nurture new ideas coming from entrepreneurs and students.
• Integrated Manufacturing Facility (a JVC) – Despite the pockets of activities across universities and the hobbyist community, Africa does not have a PCB (printed circuit board) sector to support the local industry. The transition from simulation to actually having a prototype and then production will get more impetus if a PCB plant exists. The present model of designing boards, fabricating and importing from China will never allow cost to provide a competitive advantage to the local industry. A Joint Venture (JV) similar to MOSIS (USA), EMC Canada and Europractice (Europe) but for PCB will help Nigeria have a future in the hi-tech arena.
• Anchor Companies – The private sector especially the financial and investment sector could look for anchor firms in each region and work to transform them into global players trough investment and improved management with their participations. Despite all policies, the impact of anchor firms cannot be overemphasized. They can help to seed startups and SMEs that come to service them. In the technology arena, Africa has sparks of potential anchor firms that own their technologies through research and innovations. HP anchored Silicon Valley, Nortel anchored Ottawa, and IBM did same for Raleigh-Durham; Africa needs such anchors that will serve as magnets to attract other players. Over time, they will create spin-offs which will help grow the cluster.
• Build Cluster Integration Platform – There is certainly an opportunity to build a platform that will make Africa more collaborative. This is not just in technology but also in finance, law and other areas. A business could help build a system that will bring universities, government labs and firms to share and collaborate more. Universities could be asked to use cloud-based services to share all research outputs including projects done by students. The government labs could use same to share their outputs while the firms can communicate skill needs and funding resources for specific research areas.
• Investment in Education – We think the quality of technical education in Africa will need more concerted efforts from the private sector. Government alone cannot solve the problem. This investment must provide great learning environments including technology parks, lab facilities and international internships that will help Africa produce global technology leaders.

Acknowledgement: The Tony Elumelu Foundation (an African-based, African-funded philanthropic organization founded in 2010 by Lagos businessman Tony Elumelu with mission to support entrepreneurship in Africa by enhancing the competitiveness of the African private sector) provided generous grant to the African Institution of Technology to study innovation clusters in Nigeria. The results of the study have assisted in developing this paper.

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