Oregon's hidden business cluster

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We’ve all been conditioned to think that business clusters are all about industries. That’s conventional wisdom—and it needs to be challenged.

In 2006, in a rousing keynote address at the fourth annual Oregon Leadership Summit, Harvard Business School’s Michael Porter exhorted business professionals and policy-makers assembled at the Oregon Convention Center to focus the state’s economic development efforts on identifiable clusters of industries. Porter defined a cluster as an “agglomeration or collocation of a variety of firms in the same field.”

By late 2007, the Oregon Business Council, which had been working on cluster development for several years, had published a “Cluster Resource Guide.” It listed 20 potential clusters, each with a set of advantages, challenges and action items. Over time, industry-specific clusters have become a source of growth for the state’s economy.

But cluster membership is not always about industries.

Because both Porter and the OBC focused on industries, they missed a rapidly emerging cluster of diverse small and mid-sized companies in Portland. Instead of coming together based on industries, members of this hidden cluster flock together based on shared values around sustainability.

Put it this way: What do Portfolio 21, manager of environmentally screened investments; Yolo Colorhouse, retailer of non-VOC paints; New Seasons Market, purveyor of green groceries; and perhaps 100 other Portland area companies have in common? They certainly don’t all operate in the same industry. Instead, they share a commitment to core values associated with the triple bottom line. They and other “mission-driven” companies seek not only to be profitable, but also to promote two other goals: environmental stewardship and social responsibility.

As a result, how such companies cluster reflects the fact that common values trump industry identification for mission-driven companies. For example, when gDiaper, a maker of flushable, biodegradable diapers, was looking to relocate to America from Australia, it didn’t look for a region where diaper makers concentrated. It came to Portland, where the ethos of sustainability resonated with its own values.

The concept of these “values clusters” has three powerful implications:

• • Portland is a true hotbed of such companies. In my research I found that Portland ranked second, behind only San Francisco, when I divided the number of mission-driven companies by population in each of the nation’s 50 largest urban centers.
• • The conditions for creating a values cluster are at least as challenging as for creating an industry-based cluster, and this protects Portland’s cluster from imitation. It doesn’t matter how much money policy-makers have, changing underlying values of a local population is nearly impossible.
• • A thriving exchange of best practices is flourishing between these companies and their larger counterparts in the Portland area. Smart mainstream firms are paying attention to the cluster of local mission-driven companies. Just as technological innovations have come from the start-ups in Silicon Valley, social and environmental innovations incubate in small and mid-sized mission driven companies.

Being in the neighborhood can mean hearing about ideas even before they hit the Internet. That’s one trait that values clusters share with Porter’s industry clusters — the importance of local knowledge.

How can you tap into this local knowledge? If you’ve accessed this website, that’s a great start. The good news is that there are many networking organizations and events that serve as resources for interested parties. Two local organizations are the Natural Step Network and the Sustainable Business Network of Portland.

A myriad of other sustainability events provide opportunities to learn more. The Portland Business Journal and Sustainable Business Oregon host occasional sustainability-oriented events where leaders of mission-driven companies gather. And Portland’s annual Go Green Conference, coming up on Oct. 5, is emerging as a favorite for locals. Why not mark that date on your calendar now?

Michael V. Russo is the Charles H. Lundquist Professor of Sustainable Management and academic director of the Center for Sustainable Business Practices in the University of Oregon’s Lundquist College of Business. He is the author of "Companies on a Mission: Entrepreneurial Strategies for Growing Sustainably, Responsibly, and Profitably" released this year by Stanford University Press.