Creating new businesses - how to win the "battle for the market" and ensure economic growth

Dolgushev Nikita, Koloshin Anton, Serebrov Sergey

2017, декабрь

One of the main sources of sustainable growth in the regional economy is the ability to respond quickly to changing markets, developing new businesses on region’s territory that are able to provide consumers with new goods and services as quickly as possible, outstripping competitors. The need to shorten the time for entering markets forces the company to concentrate on key competencies, acquiring components and services on the market.

One of the main strategic objectives of the region is to stimulate the development of businesses that significantly increase the economic potential of the entire region. The growth of competitive businesses provides an increase in gross regional product, tax revenues, labor productivity and employment indicators.

Increasing specialization puts companies in a dependent position from suppliers and buyers, requires consistent development logic, pushing for building relationships of trust, forming cooperative chains and territorial clusters.

The limited capacity of the solvent demand at regional markets determines the need to orient new businesses for exports outside the region. The economic policy of the region should be focused on attracting and creating on its territory businesses that significantly increase the export potential of cooperative chains and clusters. The objective of economic policy is to orient the development of the existing technological, personnel and organizational capabilities of the region for successful competition at global markets.

The world practice of solving the problem of designing value creation chains (cooperative chains) aimed at increasing the export potential of the region implies the use of the methodological approach "System design of value chains".

Consider the process of developing a digital model of value creation chains on a specific example - the cluster of IT and electronics in St. Petersburg. The digital model is implemented in the environment "almaGRID - tools of system analysis".

The starting point is to update the "Classifier of technological directions" (hereinafter - the Classifier). As a rule, such Classifiers do not have to be created from scratch, but take as their basis the data already available in the standard classifier library. For practical work, the three-level classifier is usually used, the first level is the industry, the second level is the technology group, and the third level is the direction.

The next stage is to identify the interrelationships of the Technological directions of the Classifier in the context of "Supplier-Consumer". On the basis of the Classifier, a square matrix is created, in which the classifier entries in the row headers correspond to the suppliers, and the classifier in the column headings - to the consumers.

At the intersection of rows and columns, the link strength is set based on the importance of supplier‘s technological direction for the realizability of consumer’s technological direction. The importance is determined by the rarity (uniqueness) of the supplier, the unit value in the chain, etc. The assessment is made on a 10-point scale.

It should be noted that the "Supplier-Consumer" matrix constructed on basis of the Classifier is compiled on basis of all existing technological directions, which it is advisable to analyze with reference to the cluster, and not only those that are present in the region.

Actualization of the classifier and ties of the matrix "Supplier - Consumer" is provided by interviewing representatives of regional businesses, Russian and foreign industry experts. The classifier of the industry "Radioelectronics and IT" consists of 150 positions, for a niche expert it is very difficult to fill a complete matrix of technological ties. The problem is solved by fragmentation of the matrix.

The result of "assembling" fragments of expert opinions is the complete industry matrix "Supplier - Consumer".

Transforming the matrix "Supplier-Consumer" into an oriented graph, we obtain a visual representation of the digital model for region's cooperative relationships.

The matrix is transformed into a graph by expanding each column (the "Consumer") followed by recursion. When the "Supplier" is identified, it is considered as a "Consumer", and so on until the end of the chain.

Each arc of the graph is a directed cooperation relationship, which is oriented from the technological direction the "Supplier" to the technological direction the "Consumer". The thickness of the arrow corresponds to the strength of the connection, the importance of one direction for the other. Each point of the graph is a certain technological direction.

A structured survey (audit) is implemented to determine the market potential of enterprises and identify their competencies in the technological areas. The results of the survey form the database of the digital model.

Enterprises specify the ownership of their products (product ideas) to the technological directions of the classifier (column - code of the Classifier). They identify the markets, the level of abilities and costs. Now we can clearly see the collected information necessary for the quantitative assessment of the enterprises’ competencies in the technological areas of the Classifier.

The filled-in digital model of cooperation between enterprises at each point of the graph contains information about the specific enterprises of the region, their products, markets, capabilities and costs. The digital model clearly demonstrates all the complexity and variety of cooperative relationships existing in the cluster. The next objective is to detail the most export-oriented value chains and to identify points of growth.

To identify the technological areas with the greatest export potential, based on the data of the digital model of the region's cooperative links, a set of criteria is applied that is a quantitative estimate of the following factors:

• export potential of the technological direction (К1 - expert assessment, given by industry experts, representatives of investment funds, government officials);
• project’s impact on the growth of the gross regional product (K2 - calculated criterion. It’s based on the digital model’s data which consists of region's cooperation ties (the matrix "Supplier-Consumer") .The basis of the calculation is the strength of the cooperation ties (the thickness of the arrow) and the number of technological directions (nodes of the graph);
• project’s feasibility (K3 - calculated criterion, the basis of calculation - data on the abilities and costs of enterprises for the application of technology.)

The result of the analysis of priority export directions of the region is five selected technological directions, which are potential drivers of growth.

For further practical work on development of cooperation chains of priority export directions, it is necessary to identify key nodes - a list of crucial technological areas. To this end, only the ones most significant for analysis and further work are selected from the full model of cooperation ties, for each priority area: the supplier's depth to the level of "TIER 4", the total communication strength of the entire cooperative chain is at least 5.

The result of work is a detailed value chain for each priority export direction:

Example of working with the model (video)

The result of designing value chains was obtained as:

• a digital model of the region's cooperative relationships, which contains:
  • information on companies with competencies in this technology area;
  • information about existing and developing products at the region, including information about the life cycle of the product and target markets;
  • information about companies' capabilities and costs for product manufacture.
• the most important export-oriented directions.

The information accumulated in the digital model on the specialization and capabilities of companies, their cooperation links, allows one to quickly and reasonably form a plan of creating regional products for global markets. Creation and implementation of the plan should be supported by the process of collective management with active participation from local authorities, business community and investors.

The region’s integrated development plan, closely connected with the plans of enterprises for the creation of new products and services, affords as a basis for communication and therefore reaching an agreement through an agreed "routing" of development both at the regional and individual companies’ level. The updated model of cooperation of enterprises facilitates the choice of development priorities, both for business and for regional authorities.

Consensus in the adoption and implementation of an integrated plan is achieved as a result of the joint formation of a common vision of cooperation and its value for each participant. Due to a number of restrictions (market, financial, legal, etc.), many regional companies are not able to enter markets with a new value proposition alone - for them the integrated plan becomes the most essential development tool.

Identification of the most promising directions for the development of the product and service offers of the companies in the region, using the technology of the system design of value chains, allows one to quickly develop an activity plan for the output of products to external markets. Among these activities may be the creation of a new enterprise, a new service or product, and the creation of an industrial park. As a result, focused acceleration of businesses with export potential is obtained. This acceleration determines the growth of the regional economy.