Pillar 3: Adaptability
Co-operation and networking between SMEs

There are more than 200 ADAPT projects which list SME co-operation and networking issues as their main priority. Many others refer to networking as one of their activities. There are two main types of networks: business networks and development and learning networks. A third category related to both of these is networks created to deliver training and to transfer technology.

Many ADAPT projects have developed SME business networks directly addressing firms’ need to secure access to new markets, new sources of finance and new technologies or services normally not available to individual small firms. Their focus on increasing competitiveness enables them to reinforce job stability and to create new employment.

SMEs in these networks share technology, collaborate on marketing, act jointly on problems arising from new market conditions and share their experience on modernising management and production. Some networks are composed of SMEs from the same sector, some from sectors involved in related work, and some (for instance those focused on common management problems) from completely different sectors. Some large firms require their subcontractor production chains to set up networks. Some forward-looking groups of firms form networks to search for new business opportunities.

Many other projects are developing learning/development networks that encompass a multi-partner approach: SMEs, public authorities, regional development bodies, training providers, support agencies. These networks are motivated by more than pure business interests. They are focused on regional development and the establishment of learning regions.

The transnationality principle, which is embedded in ADAPT, is in itself an innovative form of  co-operation.

In the framework of the European thematic work on new forms of work organisation, many Member States have attached special importance to the co-operation/networking theme. National level clusters were constituted and meetings between co-operation projects have been carried out in most of these countries (D, F, A and UKgb). 
Key messages 

•	Networking is an important tool for SMEs modernising their work organisation. It allows them to look beyond their own experiences and solutions. It encourages them to form the widest range of relationships with other organisations, firms, social partners and local authorities. Networking is not an objective in itself, but a way of helping firms reinforce their competitiveness, of promoting local development and of maintaining and creating employment.

•	New networks – especially ones between firms and organisations in different Member States – are being made possible for the first time by ICTs. SMEs generally require training to enable them to launch and take part in ICT-based networks, and support to remain effective within them. It is especially difficult to arrive at the right balance between face-to-face contact and the use of electronic networking.

•	Developmental and learning networks, typically involving companies in partnerships with training bodies and development agencies, with local and regional authorities, and with social partners, are proving effective in reconciling public and business interests, and in fostering regional development and employment creation.  

•	ADAPT-supported networks based on previous formal or informal relationships and organised around the specific needs of small firms have proved particularly successful. Their success has been shown to depend on the existence of clear objectives, the availability of internal or external support, the use of confidence-building methods, and the use of evaluation and review procedures carried out in the context of a continuous improvement approach.

•	In these networks the networker becomes an animator, a facilitator and a change agent. A new role. He or she needs soft skills - communication and management. 

•	Network support agencies are increasingly important for setting up, managing and ensuring the long-term future of networks.

POLICY CONTEXT

The 1999 Employment Guidelines, under the Adaptability Pillar, included a new principle: 'In order to promote the modernisation of work organisation and forms of work a strong partnership should be developed at all appropriate levels (European, national, sectoral, local and enterprise levels)'.

In the Member States’ NAPs, references to co-operation are dispersed and sometimes appear under the Entrepreneurship pillar. Examples include Ireland (inter-firm co-operation; a task force on small business), Denmark (co-operation between SMEs and higher education institutions), France and Italy (technology transfer to SMEs), Spain (co-operation between public authorities/private sector).

STRATEGIC LESSONS

Project references indicated in the following sections refer to the European project database.

ADAPT strategic lessons related to networking can be analysed from two complementary perspectives. On the one hand, the reasoning behind and the benefits emerging from networking in terms of competitiveness, employment and development and, on the other hand, the guiding principles applicable to any kind of network that are key success factors throughout its life cycle (set-up, management and sustainability).

Networking adds value

•	Quality, not only in terms of products, but also in terms of production and service processes is becoming a principal focus and stimulus for networking and co-operation between big and small firms. This has major human resource implications. Large companies are not only restructuring their internal capacity to create and add value, but are demanding greater flexibility and efficiency from their subcontractors and suppliers. The 'Learning in Enterprises by Local, Regional & International Networking' project (A-1997-S-517) has initiated a series of learning networks involving SMEs from the manufacturing sector, their staff, a trade union and universities in order to enable them to better adapt to the changes in supply management of the big Swedish enterprises on whom their businesses depend. 

•	SME networks and economy of scale: By networking, SMEs retain the advantages of remaining small (e.g. flexibility and adaptability) whilst overcoming the market barriers usually encountered by small firms. They compensate for their small size by co-operating to make common use of infrastructure, share services, provide combined services, and create common functions in fields like HRD and quality control. The 'Furniture' project (A-1997-ESP-543) set up networks among furniture producers and between them and their suppliers, distributors and retailers. This co-operation between producers led to joint service contracts for purchase of raw materials, a joint plan for wood waste management and a joint plan to market the furniture produced. 

•	Networking is becoming a tool to meet the challenges of global competition and explore new market opportunities. ICTs are enabling SMEs to start to network and co-operate transnationally. The CASCADE project (A-1997-Ukgb-649) brought together a group of SMEs from the automotive supply chain to access information, advice and feedback on entering and competing in EU markets. Professional Engineering (one of the companies involved in the project) had thought about expanding its business outside the UK but was unsure where to start. Through its transnational project partners CASCADE set up dissemination sessions in Italy with a wide range of companies including KPMG and Ferrari. As a result, Ferrari invited Professional Engineering to do some work for them. The company is now pursuing opportunities in Spain and Germany. This would not have happened but for their involvement in the ADAPT project.

Networks support ICT use

•	SMEs’ awareness that ICT applications will become increasingly decisive factors in their competitiveness is motivating them to use networking to help them upgrade their ICT capacity and use. Co-operating with support agents enables firms to make a smoother transition to the Information Society, reducing the ICT gap. Manche Expansion (‘Maillage en reseau et mutualisation des forces des PME’, A-1997-F-556), set out to help companies anticipate the impact of ICTs on organisational development. Using a task force, they placed technical platforms and skills (such as the Internet, Extranet and Intranet servers, export and video-teaching networks) at the disposal of the SMEs in their region. The Greek DELPHI project (A-1997-GR-502) has set up co-operation between ceramics firms and their regional unions to learn how to use e-commerce to support sales.

Beating fears of competition

•	Many SME networks fail to take off for fear of competition. The extent of these fears vary depending on the type of network and whether or not the SMEs are from the same sector. A correctly conceived network with objectives that enable the members to guard their commercial secrets can be an advantage for all of its participants without threatening them in any way. In the VIDEOVI project (A-1995-ESP-051) which concerned 180 family and 80 medium-sized enterprises in the wine sector, competition was not seen as a problem. The co-operation involved creating a database of information relevant to wine producers, and setting up national and international joint marketing activities. The same approach has been taken amongst Greek tourism firms (A-1997-GR-504: XENIOS DIAS) seeking to market their services.

•	Multi-sectoral networks reduce fears of competition. Companies from different sectors feel free to exchange information and to collaborate on common problems, often in the human resource development, safety and information technology fields. The ACCENT project (A-1997-Ukgb-660) set out to create three separate networks for manufacturing, retail, and care services SMEs. They actually established mixed sectoral networks calling in expertise on issues of common concern like health and safety.

Learning networks – learning regions – learning companies

•	The most important innovations in development and learning networks, in which increasing numbers of SMEs, large companies, public bodies and local authorities, training providers, and support agencies are becoming involved, are in the learning region concept. This is widening networking beyond the realm of economic interests and new patterns of inter-organisational co-operation. Company networks are no longer broad enough, and local and regional networks are emerging where a wider range of specialist organisations and agencies look for common solutions to regional problems. The ‘Learning Region Graz’ project (A-1995-A-018) in Austria uses the competence network approach. A competence network is company-based, and regionally integrated, and uses skill development to gain competitive advantage for its participants.  Its strength is its regional partnerships, in this case involving some 30 companies. It began by analysing the regional potential of the industrial plant engineering and constructing sector, and by drafting a scenario for using this potential to achieve regional goals. 

•	Networks set up between companies can become the foundations of regional development as they expand and link with others, and as others – local authorities, regional authorities and social partners – join them. Traditional networks of farmers, created originally to share machinery and materials, are changing into SME rural development networks, responding to market challenges and changing the pattern of the rural economy. Their use of networks of part-time workers and jobsharers is creating a new pattern of rural employment. In response to the threats to the urban environment several ADAPT projects in the UK are addressing town centre regeneration.  Barnet College ('UpBEAT', A-1997-UKgb-579) has set up a strategic partnership of local authorities, further education and business support agencies, working closely with a network of SME retailers threatened by out-of-town shopping developments. SMEs receive help through both on-line networks and outreach centres which provide easy, customised access to training, guidance and business support, as part of a collaborative approach to economic regeneration.

•	Smaller scale networks of SMEs work together with training providers to design tailor-made courses and with universities and research institutes to transfer technology. The objective of the 'Profit' project (A-1997-NL-529) is to improve the transfer of knowledge to SMEs. Entrepreneurs improve their levels of knowledge and introduce innovations with the help of local schools, sectoral bodies and research institutions. The 'Transform' project (A-1995-P-044) brings together a university, higher school institutes, industrial associations and more than 20 enterprises to improve the competitiveness of the firms involved by providing them training, The project 'New network-based vocational education in textiles and clothing' (A-1995-FIN-023) has brought together textile SMEs, a vocational design school and training providers in response to a changing market. They have created training for the sector, delivered it, and introduced electronic data processing. The Dutch project 'Nordkoop to the top' (A-1997-NL-524) supports learning and innovation by creating synergies between SMEs themselves, and between companies and research institutions. The ADAPT partnership FOXTROT has analysed technology transfer practices and concluded that although they are basically the same in different Member States, their use might vary due to economic and cultural differences.

Strategies and tools for setting up, managing and sustaining networks 

There are lessons to be learned from every phase of the life cycle of a network: the set-up, the management and operation and the long-term survival after initial financing has ended. ADAPT projects have demonstrated significant experience in the first two of these phases, and have applied strategies to improve chances of long-term survival. 

•	Network set-up. With a few exceptions, ADAPT networking projects have been initiated by intermediate organisations like universities, training providers, public bodies and other support agencies. ADAPT promoters have stated that these networks should be based on specific SME needs. They should be developed by the participants themselves, and owned by them from the beginning. A defined vision of expected outcomes and a clear working plan are essential, and there must be visible short-term benefits. The ‘Bootstrap’ project (A-1995-S-019) initiated, supported and studied network processes in three networks dealing with manufacturing SMEs, female entrepreneurs and the public sector, respectively. Based on a participative approach, several 'search conferences' where management and employees from different companies could meet were organised. These launched a process of planned change that engaged the collective learning and creativity of those involved, and challenged them to find common ground around new strategies, future directions and joint actions. 

•	Network management. There is a delicate balance to be maintained between external animation and management and the efforts of participating companies to organise themselves. Networks need permanent animation and management. Support needs to be flexible, adaptable and demand-led, and it is vital that it is provided by a neutral institution. The need to establish a culture of trust and confidence should never be underestimated, especially in networks of companies in the same sector, and those where the participants are unused to co-operative principles. ICTs can help, but cannot replace face-to-face meetings. These must be target and problem-oriented. Creating an inner core within a network can successfully provide leadership and management. Network structures must be constantly evaluated, and their objectives reviewed. This enables them to evolve in response to changing needs and circumstances. The 'Learning Region Graz' project (A-1995-A-018) established a dynamic co-operation model, comprising a core-team and a flexible open circle of additional participants who were invited to work in the network as required.

Effective network and co-operation management is vital, and as a result a new role, that of ‘networker’, appears to be emerging. This role is in fact a combination of several: co-ordinator, facilitator, moderator, innovator and change-agent. The ‘Network Learning Region Chemnitz’ project (A-1995-D-087) supported seven inter-linked networks, each of which had a ‘networker’.   They helped develop the networks’ ground rules on information processes, decision-making and legal structures. They imported evidence from other projects and literature, provided feedback, evaluated results and helped stimulate further discussion. These ‘networkers’ were clearly facilitators ,not leaders.

•	Sustaining networks. ADAPT promoters’ experiences have shown networks based on existing business relationships to be particularly successful, when these have clear networking objectives, working plans and a shared approach to animation. The Learning Region Chemnitz project (A-1995-D-087), run by the Technische Universität Chemnitz, encourages networks by supporting pre-existing informal or formal visions of co-operation. These are often the work of two entrepreneurs co-operating to submit a tender or to form a supply chain. If a network vision is worth supporting, the project will then help locate suitable new partners.

•	If networks are to be sustained, their promotion, animation and management must be handed over to self-responsible participants. Some ADAPT projects are setting up holding companies made up of their core members. As public funding is gradually withdrawn, this allows networks to become market services, progressively financed by their members. Other projects are defining ‘anchor institutions’ (public or private training providers, universities, enterprises) motivated to manage, co-ordinate and animate network activities after initial funding has been used up. Calderdale College’s STEP TRAINING project (A-1995-UKgb-065) shows how self-sustaining networks can be created. It has set up a Yorkshire business-to-business Internet network called Yorkshire Busnet. The owner of the lead SME in the network has taken on the management of the site for the life of the ADAPT project, creating a virtual business park with 200 business participants currently paying up to £50 to register on its directories. Networks structures must not simply be sustained for their own sake. They must change as the interests, objectives and motivation of their participants evolve. Flexible networking can involve any degree of change, including the disappearance of the network itself if its objectives have been achieved.

ICT as a network tool 

•	Face-to-face communication and dialogue must be at the origin of SME networks. But it is clear that networks become more efficient and effective when they make good use of ICTs. Internet, tele-centres, telematics and ICT-supported distance learning schemes not only increase the quantity of network communication, they shorten communication times and improve the quality of co-operation by providing constant and easy access to all the information and knowledge held in the network. SMEs involved in ICT-based networking and co-operation generally need training and/or technical support if they are to make full use of ICTs. Technikum Joanneum GmbH (Cluster-Netz, A-1995-A-502) based their networking activities on a Web-based knowledge and training management system, despite the fact that, at the time, none of the participating automotive SMEs used on-line systems.

SELECTED REFERENCES

Business networks

Meister Haus: A-1997-D-754
Option China: A-1995-D-188
Furniture: A-1997-ESP-543
Videovi: A-1995-ESP-051
Polifemo: A-1997-ESP-607/650
PYMES Y gestion medioambiente: A-1997-F-561
Pain: A-1997-F-1013
Texnet: A-1997-F-755 
XENIOS DIAS: A-1997-GR-504 
DELPHI: A-1997-GR-502
Samenwerkingsverbanden MKB: A-1197-NL-551
Cascade: A-1997-UKgb-649
ACCENT: A-1997-UKgb-660 
Reconstruct: A-1997-UKgb-526
Supply Chain Environmental Training Project: A-1997-UKgb-624
Newcastle’s Virtual Incubators for High Growth SMEs project: A-1997-UKgb-572
Creative Networks: A-1997-UKgb-565
UpBEAT: A-1997-UKgb-579
Learning in Enterprises by Local, Regional & International Networking: A-1997-S-517

ICT related

Cluster-Netz: A-1995-A-502
Antiope: A-1997-F-728
Maillage en reseau et mutualisation des forces des PME-PMI manchoises: A-1997-F-556
ADAPT agroalimentaire NTIC: A-1997-F-856
Formation alternée entreprise-université appliquée aux PME-PMI: A-1997-F-763
Wageningen City of Knowledge: A-1997-NL-634
Distance Advice and Information Services: A-1997-NL-517
Building the IS for SMEs: A-1997-UKgb-628 
Astrabis: A-1997-Ukgb-673

Learning networks

Learning Region Graz: A-1995-A-018
Euro-manager: A-1997-DK-539
ELAN - European local network: A-1995-DK-023 
Coopérative d’utilisation du materiel Agricole CUMA: A-1997-F1008
Eden-Ame-Europea-Novi: A-1997-F-781
Proximité et réseaux: A-1997-F-809 
Game: A-1997-F-688
New network-based vocational education in textiles and clothing: A-1995-FIN-023
Multi-actor co-operation in the Agro-food sector: A-1995-FIN-028 
Transform: A-1995-P-044 
Profit: A-1997-NL-529
Noordkop to the top: A-1997-NL-524
Transnational partnership "FOXTROT": A-1997-NL- 524 & 529, GR-550 & 569, UKgb-643

Networks strategies/tools (set-up, management, sustainability)

Network Learning Region Chemnitz: A-1995-D-087
Step training: A-1995-UKgb-065 
Bootstrap: A-1995-S-019