exercise 9.3.2 from mmds book I am reading this book http://infolab.stanford.edu/~ullman/mmds/ch9.pdf
there is an exercise 9.3.2 a) it says


  Exercise 9.3.2 : In this exercise, we cluster items in the matrix of
  Fig. 9.8. Do the following steps. (a) Cluster the eight items
  hierarchically into four clusters. The following method should be used
  to cluster. Replace all 3’s, 4’s, and 5’s by 1 and replace 1’s, 2’s,
  and blanks by 0. use the Jaccard distance to measure the distance
  between the resulting column vectors. For clusters of more than one
  element, take the distance between clusters to be the minimum distance
  between pairs of elements, one from each cluster.


I am not able to understand how clustering is done?If I replace all 3,4,5 with 1 and 1,2, with 0 I am left with a matrix 

  a b c d e f g h
A 1 1   1 0   1 0
B   1 1 1 0 0 0
C 0   0 1   1 1 1


What is meant by cluster formation here? How do I solve this exercise or any solution available online please give a link.
Replacing the non-zero values is meant to simplify the matrix, i.e. we only care whether the value is zero or not.

Then you're supposed to calculate the Jaccard distance between pairs of columns. For instance between the first two columns you have $|a\cap b|=1$, $|a\cup b|=2$ so the distance is 1/2.

After that you're supposed to apply hierarchical clustering using the distance. This means progressively grouping elements (here columns) which are close to each other according to the distance.