When Yarra Ranges Council successfully secured this LDS grant, they weren ' t just accessing government funding, they were embarking on an experiment that would challenge everything we think we know about regional economic development.
THE METHODOLOGY: WHY SMART SPECIALISATION WORKS The secret to the Upper Yarra ' s transformation has been Smart Specialisation Strategy( S3), a methodology that originated in postindustrial Europe where entire regions faced the collapse of traditional industries. Professor Bruce Wilson from RMIT University, who led the academic partnership, points to compelling evidence: European Union regions using S3 recovered from economic shocks faster than those relying on traditional approaches.
The origins of S3 trace back to the closure of heavy industries in northern Germany, where communities faced similar challenges to those being confronted in the Upper Yarra today. Rather than accepting managed decline, these European regions pioneered an approach that built on existing strengths while fostering adaptable innovation ecosystems.
S3 has been tested across Victoria, from the closure of brown coal power stations in the La Trobe Valley to a timber transition pilot in Orbost. Each application has refined the approach, contributing to a growing body of practice that informed the Upper Yarra implementation.
What makes S3 fundamentally different? There are four key principles:
Community-driven within a supportive framework: The LDS grants enable communities to identify their own strengths and develop locally relevant responses within government support structures.
Innovation-focused, not industryreplacement: Rather than seeking the next ' big employer ', S3 builds innovation ecosystems with multiple smaller innovations that collectively provide economic resilience.
Asset-based, not deficit-focused: S3 identifies what exists and builds upon it, shifting conversation from lamenting the past to imagining possible futures.
Entrepreneurial discovery process: S3 employs systematic workshops to test ideas and identify opportunities through structured methodology rather than simple brainstorming.
THE PROJECT JOURNEY: FOUR STAGES OF TRANSFORMATION The Upper Yarra LDS project followed a structured four-stage approach:
Stage 1: Regional Context Analysis This foundational stage combined comprehensive socio-economic data with nearly 100 interviews across the Quadruple Helix. These interviews revealed nuances that no database could capture, including informal business networks that sustained local economies during downturns, seasonal employment patterns that provided flexibility, valued environmental assets that weren ' t monetised, and unrecognised entrepreneurial aspirations among residents who had never seen themselves as potential business owners. The RMIT academic team synthesised this analysis to propose Innovation Opportunities, i. e., potential directions aligned with community assets and market possibilities.
Stage 2: Entrepreneurial Discovery Process This workshop series employed structured activities to surface local knowledge and test Innovation Opportunity viability. Participants examined strengths and assets, envisioned future states, and worked through implementation scenarios. Crucially, workshops determined whether sufficient community energy existed to sustain Innovation Working Groups( IWGs).
Stage 3: Innovation Working Groups Five IWGs emerged as proto( or early stage) enterprises, developing business cases and formulating proposals for Community Development Fund( Stream 2) funding. Unlike traditional committees, these groups function operationally, conducting feasibility studies and developing pilot projects while building project management and collaborative problem-solving capabilities.
Stage 4: Finalisation and Leadership Group Formation The completion of the LDS development in April 2025 established a regional Leadership Group for governance of the implementation phase, providing institutional memory and strategic guidance for the ongoing innovation ecosystem.
THE QUADRUPLE HELIX: FOUR PILLARS OF INNOVATION At the heart of the Upper Yarra approach lies the ' Quadruple Helix '( Q4) engagement model, where four strands intertwine throughout every project aspect:
Community representatives bring local knowledge, passion and a deep understanding of place that databases cannot capture. These volunteers provide much of the enthusiasm driving IWGs forward, though the project team remains mindful of their time limitations and need for support structures.
Business owners and operators provide commercial reality-testing and entrepreneurial drive, ensuring ideas can survive market contact. They offer practical insights into market conditions and regulatory requirements while identifying potential commercial applications for innovations.
Government agency representatives from Melbourne Water, Parks Victoria, DEECA, and Yarra Ranges Council contribute regulatory knowledge and implementation pathways. Engaging agencies in innovation presents challenges, especially for those with regulatory roles, but their participation proves crucial for navigating requirements and identifying potential solutions.
Academic and research representatives inject innovative thinking and evidencebased approaches. Proximity to Melbourne enables engagement with metropolitan universities, with RMIT helping broker initial conversations. Academics bring diverse thinking that transforms community-led initiatives, though connecting academic interests with community needs requires establishing mutual benefit.
Each helix is essential- remove any strand and the collaborative capacity collapses. Academics prevent parochialism; businesses ensure viability; agencies provide regulatory navigation; and community provides passion and local knowledge making innovations meaningful and sustainable.
FIVE INNOVATION WORKING GROUPS: FROM CONCEPT TO REALITY The Q4 engagement process identified five innovation themes, resulted in five community led Innovation Working Groups( IWGs) developing real projects with real budgets:
ECONOMIC DEVELOPMENT JOURNAL VOL 18 NO 2 2025 17