Can we make smart specialization a smart move?

Smart specialization is one of the concepts that is applied throughout the European Union. Preparation of smart specialization (I shall use abbreviation S3, although it is now developing into S4) strategic documents in Bosnia and Herzegovina is ongoing, so, I wanted to explore more about the topic, and while doing that, I was thinking about this concept in current context, linking this concept to some other concepts I am learning more about lately.

One of key methodological documents for S3 in EU, the Guide to Research and Innovation Strategies for Smart Specialisations (RIS 3) says that the underlying rational behind the Smart Specialisation concept is that by concentrating knowledge resources and linking them to a limited number of priority economic activities, countries and regions can become — and remain — competitive in the global economy (19fa7820-9522-3a52-fb81-6cb9115b6b9f ( The Guide gives a detailed description of steps in preparing the S3. Although the concept suggests taking into account the international perspective and engaging in foresighting, impression is that it is primarily focused on characteristics of a respective geographic area, which are taken as a starting point in strategy building process. It may be seen as rational, but it can also be limiting, especially for less developed areas, where it may turn out that they remain focused on areas that do not have a promising future, such as industries with low technology. Suggestion to avoid duplication may also be seen as limiting, and in the long term even harmful for the free market, with this suggestion being closer to centrally planned economy than to market economy, which should include free choice of market stakeholders.

Comparing the S3 strategies to other strategic documents, such as SME development strategy and similar, it seems that the key difference between S3 and other strategic planning approaches is that S3 should be more focused. That sounds like a rational approach, since better focus can result in better utilization of resources and thus achieving better results. But it also brings new challenges, the ones that other approaches do not have or at least they are not so emphasized. Analytical methods included in the methodology are primarily focused on the geographic area for which the S3 is being prepared. This brings up several questions.

First, is it possible to define S3 focusing only on data and information about the geographic area the strategy is being prepared for? Doesn’t look like that. Data on the area speak about the characteristics of the area, of course. And some of these characteristics, such as some of natural resources or set of specific skills is usually identified as an important resource. But these resources are often true resources only if observed in wider context. Natural resources of underdeveloped countries can hardly be considered as resources if observed only within the boundaries of the respective state, since their industry is often not strong enough to utilize these resources and to achieve the benefits. On the other hand, when observed in wider geographical area, in wider industrial surrounding, these natural resources can indeed be very important, because there are more developed countries that need and can use these resources. In fair cooperation between the developed and the underdeveloped country that owns natural resources, all can achieve full potential. If sustainable development is really a goal and intention, the cooperation should be such that both sides benefit, it should be on sound and fair basis, enabling the underdeveloped country to develop. Of course, developed country will benefit, too. For instance, lithium is now in demand because pressure on production of batteries is huge. But underdeveloped countries neither have the technology nor the market for big battery production, and if used only within the boundaries of the state, this resource would be underutilized. Underdeveloped countries could focus on their own resources and capacities, but then they would miss a number of potentially lucrative opportunities for economic development, coming from potential of cooperation with other countries. So, an internal resource often needs an external opportunity to achieve its full potential.

When talking about capacities in specific industry sector, consisting of infrastructure and knowledge needed for production of specific product, surrounding should also be considered, because capacities of the country can be significant inside the country, for instance a leading processing industry sector, but in international arena it can prove to be quite weak. For example, a textile industry can provide significant number of jobs in one country, but there may be other countries that are much stronger in this industry in terms of number of factories and potential of labor force, so that focusing on this industry sector in the long run can prove to be wrong for the country. The term “competitive” already indicates the concept is based on comparison with others, so S3 cannot be defined without considering the country’s environment.

Even if the team working on S3 takes into account the surrounding, i.e., other relevant areas and countries, it is far from easy to define well what should be a key focus of development processes in the forthcoming period. It is questionable if strategy preparation approaches that are primarily based on data about past events, such as statistical data, lead to desired results, i.e., if these data are good basis to define what is the best move for certain area to focus on in economic development. Taking into account more and more frequent and unexpected changes, it is hardly the case. There are several limitations in using statistical data as a basis for planning. First, it usually takes time to collect and process data, so once they are starting to be used in planning, they are already quite obsolete. Also, they reflect the change, not a cause of change, while to make a change, to influence the events, it is necessary to know the causes.

It is clearly very difficult to predict what would be the situation like several years from now, which should be done in preparing a strategy such as S3, because we need to define desired goals and path to achieving them. Is shortening the period for which the strategy is prepared a solution? Looks like it might be, but preparing strategy for shorter periods brings new challenges. Namely, it takes time to build capacities and infrastructure to achieve goals, and shorter periods do not offer enough time to do all that. Even if this is feasible, the built capacities and infrastructure may or may not be needed for the next strategic period, which may have new focuses. This means that new capacities and infrastructure would likely be needed for the next strategic period, which then requires new efforts and investments.

Is there an answer to all this?

Hard to say, but there are ideas, concepts, approaches, methods, and tools being developed, that look like they can help to overcome this situation. Complexity sensitive approaches look like they have some answers, since they point out that not in every situation causes and effects are known and provide concepts for acting in such situations. I am not saying that the approaches to strategic planning and project management that have been used so far do not work. They do, as proven in numerous interventions. But they also have limitations, especially in the rapidly changing environment as is the case in modern societies and in the modern world, with a high level of uncertainty. There are a number of cases when we are not sure what would be the result of our intervention, because the environment is rapidly changing, and it is not nearly under our control.

Also, focusing more on methods and tools that provide insights into peoples’ expectations and desires, rather than on data on past events, could be part of improvement. Such concepts are scenario methods, foresighting, and research with focus on expectations, such as some of IFO (ifo Institute) research, etc. This may be a much better basis for defining strategies, indicating future events probably better than data about the past. Of course, it brings new challenges in application, such as how to detect what people want, what they expect, what they shall do.

Even with improved methodology, it is hard to say that it will ever be possible to predict the future. Since future events cannot be foreseen, it seems better to try to create flexible structures with capacities to adapt to different circumstances that may occur in future, while achieving broadly defined targets. There are ideas on that line.

One of such approaches is presented in the paper Vector Theory of Change (VTOC paper 2022 (, where Linda Doyle says that traditional theory of change will not be useful when operating within a complex system and says that the Cynefin Company offers a different approach, developed by Dave Snowden, called vector theory of change. The author says that in order to manage complex environments, the focus needs to shift from lofty long-term goals to a cyclical process with four steps: start from where you are, setting direction & finding steppingstones, designing interventions, and continuous feedback.

In Bramble Bushes in a Thicket, Narrative and the intangibles of learning networks, ((PDF) Bramble bushes in a thicket | David Snowden –, Cynthia F. Kurtz and David J. Snowden emphasize the difference between the idealistic approach, where the leaders of an organization set out an ideal future state that they wish to achieve, identify the gap between the ideal and their perception of the present, and seek to close in, and naturalistic approaches, where by contrast, they seek to understand a sufficiency of the present in order to act to stimulate evolution of the system. It can be said that most of the strategic approaches applied now are in the area of idealistic approaches. In conditions of rapid changes, it is obviously a huge challenge. Therefore, it seems like a good idea to explore more about and develop tools for applying naturalistic approaches, which should provide needed flexibility. Is applying such an approach, with a less detailed strategic plan, but with more readiness to face the unexpected, a way to sustainability and resilience? Time will tell.

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