Examination of Witnesses (Questions 1 - 19)
WEDNESDAY 18 MARCH 1998
DR ALAN
RUDGE and PROFESSOR
RICHARD BROOK
Chairman
1. Dr Rudge, Professor Brook, may I thank you very much indeed
for coming along to the Committee this afternoon. We are starting
a new inquiry this afternoon which can be sub-headed "why
are we so good at research and yet not so good at turning our
research into commercial products." We thought it would be
very helpful if we saw you first of all to get off to a cracking
good start. I wonder, Dr Rudge, if you could just introduce yourself
and tell us a bit about yourself and then perhaps you would invite
Professor Brook to introduce himself to us as well?
(Dr Rudge) My name is Alan Rudge and, as you are aware,
I am the Chairman of the EPSRC. Until a few months ago I was Deputy
Chief Executive of BT and for the past decade I was responsible
for BT's research and development and also for other activities
in BT throughout the 10 years I was in control of the company's
technology. I also have other activities, being on the boards
of a number of companies, GEC and Lucas Verity and Great Universal
Stores and a few others and currently I am Chairman of W S Atkins,
again a company with quite a strong technology base. So I have
an interest both from the industrial side, the user side, but
also as an ex-academic myself and Chairman of the EPSRC I am interested,
too, in the science base.
2. Thank you very much. Professor Brook?
(Professor Brook) My record is predominantly academic.
I did part of my training and research in the United States where
I was for seven years. Then I came back to the Atomic Energy Authority
in the UK and then moved to the Chair of Ceramic Materials at
the University of Leeds where I was for 14 years. Then I became
the director of a Max Planck Institute in Germany. I came back
from there three years later to a Chair at the University of Oxford
where I was peaceably occupied when the call came to be the Chief
Executive at the Engineering and Physical Sciences Research Council
in March 1994 and I began in April 1994.
3. Thank you very much indeed. What we shall do, Dr Rudge,
is direct all of our questions to you and, if you think it is
appropriate to invite Professor Brook to make a comment or take
the whole question, then that will be your decision. We have heard
from many witnesses and from what we have observed ourselves that
there does seem to be a gap that prevents British inventions being
turned into commercial products. Do you think we are right to
be concerned about that? Have we seen something that really exists
or is it a figment of the imagination?
(Dr Rudge) I do not think it is a figment of the imagination,
but I do believe the focus has been wrong, wrong in the sense
that if one considers that the Government spends something of
the order of £1.3 billion a year on the Science Vote through
the research councils then that money is not spent for inventions
or prizes. The inventions and prizes that happen to come out of
that work are spin-offs and they are desirable but they are not
the main product. To some extent the focus on inventions and patents
and IPR, I believe, is misguided in that it is not looking at
the main flow of benefit which this money is actually producing.
Why does the Government spend money on research?
4. May I interrupt you there to make sure I have fully understood?
Are you saying that, when the Government spends £1.3 billion
supporting research, the success of that money is measured in
terms of inventions, not in terms of commercial products that
might come out further down the line?
(Dr Rudge) No, I am saying that it is not measured
in inventions and you have to look at why the money is spent at
all. It is not measured in inventions because that would be an
incorrect measure, but unfortunately there is a lot of focus on
inventions and technology which is slightly misguided in that
it misses what the principal objective of spending the money is.
The Government spends the money, I believe, primarily to generate
within the nation the knowledge, expertise and competence that
is going to enable the nation to handle the next generation of
change. In the EPSRC we take as input government policy and money.
We turn it into a portfolio of activity over a range of activities
which is designed to generate that knowledge and expertise. Out
of which comes some inventions, some instantly and some later,
but the inventions are not a measure of the output. The key thing
we have to concern ourselves with is—because we have used
money to develop expertise, knowledge and know-how and if you
imagined it as pools of knowledge—the flow from where we
generate it out into the community at large. So we are interested
in both the generation of the portfolio of activity, training
and research, and how it flows into the community. If you try
to measure that flow based only on inventions and IPR you see
only a tiny part of the flow and to some extent there has been
too much focus on inventions rather than the quality of the flow.
If you are an industrialist looking at it from the other direction,
the product that you are looking for primarily is the trained
individual, the knowledge and expertise, not an invention. By
and large industry does not look to universities for inventions.
It gets some occasionally but that is not the prime output. I
sometimes fear that the focus being totally on inventions distracts
us from the underlying real product which is the flow of knowledge
and expertise.
5. You say it is the underlying real product, and it probably
is the underlying real product as defined, but I could easily
argue with you that it is academic to create a base that does
not come up with inventions or developments and it may be fulfilling
the objective in the remit that the Government has set with its
money, but unless there are inventions and developments coming
from it the whole thing is an academic exercise rather than a
practical scientific exercise.
(Dr Rudge) Can I take you up on that because this
is the point that I am trying to make? The outflow from the exercise
is not the inventions per se. The primary output is the
trained individual who moves from an academic environment out
into industry or commerce. The second level of flow is probably
the colouring of the undergraduate training which this research
achieves and therefore there is another very big flow of knowledge
and expertise out into the community. The third most important
flow is the interactive effect of people from industry doing projects
with, consulting with, and interacting with, academics. The fact
that in this whole system there are some inventions which pop
up here and there is desirable, but it is not the total flow and
we are looking at the wrong thing if we only measure the inventions.
6. I accept all that you say. I do not have any difficulty
understanding it. I just wonder if we are very quickly putting
our finger on one of the difficulties, ie the fact that there
is not a feeling that inventions in themselves need to come out
of this process because they are not the measure of how successful
the formula has been. If there was greater emphasis on looking
at how many inventions or developments come out of it we might
get more.
(Dr Rudge) I would say the reverse has been true.
There has been almost total focus on the invention as being the
output and not enough focus on looking at the flow and how it
can be improved and why in the past it was not as good as it should
have been and how we can make it better. Certainly over the last
four years we have been concentrating on looking at that and trying
to provide some feedback to say are we mining knowledge in the
right areas, are we training people in the right way, is the problem
one of communication with industry? There are a variety of questions
you can ask. It is done on the basis of getting this solid flow
of knowledge into industry. Why do I make the point about inventions?
It is because by and large there is this huge focus on inventions
which are a spin-off of the process and are desirable. I am not
doing down inventions, in certain areas they are very valuable,
in other areas there are less of them and one would not expect
to have them. Although they are desirable, they are not the principal
output and the attention must be put on the main part of the principal
output in particular to ensure that we are doing everything we
can to optimise that flow of knowledge, expertise and trained
people into industry.
Chairman: I am still a little bit puzzled. I can understand
what you are saying, but I still would have thought that you and
your colleagues would have wanted the process to do all that it
does already but also come up with more inventions; but I think
we will end up spending too much time on that if we pursue it.
Dr Gibson
7. Would you know an invention if you saw one?
(Dr Rudge) That is a good question in itself because
if you take a research project that a Council like ours might
fund, on the day when that piece of work is finished there are
some outputs which can be classified as inventions in the sense
that one can see they have got immediate application and there
are others for which the application will only emerge maybe five
years later, and there are some for which the knowledge which
is generated will only find application at a later stage. Therefore,
if you took the measure at the end of each project and said is
there an invention or not you could be very wrong in terms of
the value in that piece of research. I am not doing down the value
of the invention. In areas like pharmaceuticals it is often a
very valuable thing because once you have defined the molecule
you have got a product, or very nearly. That is a slight over-statement
but in principle it is true. If we looked back at a successful
product in BT, and we did this at intervals, and traced back where
it came from, it did not come from one source, it came from ten
or 15 good sources in terms of the contributory elements that
were brought together by bright people to make an outstanding
product or service. The added-value of it was all of those knowledge
generations that took place in those various areas. When we looked
back at our research programme we said: "That is good, we
are doing the right things because these things are coming through
and contributing in various ways. It is the knowledge matrix into
various products and services which is valuable." That is
my point about looking only for the singular invention. Sometimes
it occurs right at the end of the project and often it does not,
but that does not mean the project was not valuable.
Chairman
8. Let us go back to development gaps. Some people say that
the development gap in engineering and the physical sciences is
greater than the development gap in biomedical or biological sciences.
Do you think that is so and, if so, why? You have partly answered
it. Is that unique to this country or is it a phenomenon that
exists in other countries too?
(Dr Rudge) Let me ask Richard Brook to answer.
(Professor Brook) May I also pick up the premise you
gave at the outset about the UK being very strong in its scientific
production—I think that has been shown by some things such
as the bibliometric analysis—but it is weaker on the application
of that science. I would say that is a sentiment which has been
echoed in every science culture in which I have worked. The Americans
say precisely the same thing, they are very good at science but
they have difficulties in the application of science. Certainly
the Germans within the Max Planck Society said that they do wonderful
science but it is the application which is very difficult. Therefore,
I think there may be a generic problem there in that you can do
the science following patterns which are well-established, but,
as the Chairman has said, as you bring together many different
things to make the innovation, then that is an extremely difficult
process. Therefore, I do not think we should feel too guilty in
the UK that this is a national problem which everybody else has
satisfactorily solved. It is a worldwide problem and we have a
great interest to try and solve it, I agree, but I do not feel
defeatist about the outcome at this stage.
9. You do not think we are any worse than any other major
scientific industrial country?
(Professor Brook) These comparisons are odious at
this stage. I think the United States have a strong record. As
again my Chairman has said, I think the different subject areas
show very different characters. You can find some topics where
the research yields something which is then readily marketable
so that the innovation contribution is already partly covered,
whereas in the engineering and physical sciences for which the
EPSRC is responsible within the Government portfolio in sponsoring
research I think that the distance between the research which
has been completed and its eventual place within innovation can
be a long, tortuous and difficult one. Therefore, we find ourselves
trying to find the correct balance between emphasis on the knowledge
creation and recognition that inventions can in themselves be
valuable, but we have the feeling that so much concentration has
been given to invention as the product that it has distorted the
correct picture and it is for that reason that the Council has
given great weight to the creation of knowledge and the assurance
that that knowledge then flows correctly out into the system.
The inventions may happen later because of the knowledge flow
and therefore the correct thing to measure is the knowledge flow.
Mr Beard
10. As I understand it, Professor, you are saying that it
is a fertile ground we are creating in whatever the subject is
and then the problems arise in the application. If that is the
case, why have we had so much better a record on the biological
side and so much poorer a record, for instance, on the electronics
side?
(Professor Brook) I would need to look at your data.
If I take something as crude as The Sunday Times list of those
hundred companies which have made the most rapid advance over
the last few years and if you look at those, they lie in such
sectors as IT, in telecommunications and so on. The biological
companies are very much represented in the columnist's statements
as being exciting, but if you look at the record, is it really
so persuasive?
11. Are you suggesting that we have got as good a record
in electronic applications as Japan, for instance?
(Dr Rudge) The trouble is the subject is an extremely
broad one and if you look at the success of industry in one nation
or another then there are many more factors other than the flow
of knowledge. The flow of knowledge is one of the elements and
we are working all the time to try to improve it. If you look
at the success of one industry against another then there are
many factors that one has to take into account and just looking
at the flow of science or the performance of science within that
is only one element.
Dr Williams
12. I am very puzzled and feel quite uncomfortable with the
answers that you have given us so far in that you seem to be challenging
completely the premises of our inquiry. On the one hand you say
invention is not part of HE, it is something that flows directly
from HE and Professor Brook seemed to be telling us that Britain's
record is no worse than anybody else's anyway. I have always thought
that we are particularly good at publications and professorships
abroad with our reputation overseas in conferences and so on,
but when it comes to marketing industrially successful products,
especially in physical sciences and compared to Japan and what
were the southern Asian economies, we do seem to be failing in
the application of original discovery.
(Dr Rudge) But the reason for that is not necessarily
a science reason, it is more to do with the whole environment
within which industry operates. It is more to do with the industrial
end of the problem.
Chairman
13. If it is, please explain because we are not saying it
is a science reason, we are trying to find out what the reason
is across the whole spectrum.
(Dr Rudge) Let me go back to my original premise to
say how that also points up difficulties. Even if we were the
best in the world at knowledge flow, we would still need to work
at it because the world is changing all the time and people are
getting better at it. If you look at the flow principle and say:
"Why didn't it work so well in the past?", one of the
reasons was that the university system was not driven by customers
in industry, it was self-funded or government-funded independently
and the relationship with industry was not anything like it should
have been so that the people that were flowing out, and the kind
of knowledge that was flowing out, of our system was not well-tuned
at the time, as industry saw it, to its needs. For that reason
there was some rejection by industry and probably the pendulum
swung far too far; there was too much rejection, but they did
not find the product that was coming out ideal for their needs.
If one assumes one can achieve better feedback of what it is one's
customer in industry is looking for in terms of the product, there
is no doubt that the university systems can do a number of things
to improve the flow. They can ensure that they are mining the
right areas of knowledge, the ones that are going to be downstream
of interest to industry. You can have a look at what it is industry
does not like about the product you are producing and say how
can we train them differently to make them more attractive; and
you can do a communications job with industry to educate them
on what they should be looking for anyway because it is a two-sided
problem, not just an academic problem. All of those things can
be contained within a system and with feedback you can work on
trying to improve it. That is certainly the attitude we have taken
over the last four years, to try to understand what are the right
broad areas to mine for knowledge so that they will be of interest
to industry at the end of the day and, therefore, to start the
process of trying to encourage training in the right subjects
and the right problem areas.
Dr Williams
14. Is a problem in industry the insufficient emphasis on
research and development in that the percentage spent on R&D
by other top engineering companies, motor vehicles and so on,
is substantially less than competitive countries?
(Dr Rudge) First of all, the relationship with the
academic sector is usually much better with the larger companies
partly because they have people within the companies that can
naturally match with the academic world and therefore the communication
is much better. You asked the question are they spending enough
on R&D. It would not be for me to answer for every company.
I suspect that some of them are not spending enough on their R&D,
and I think that is quite a serious issue and many of them are
wakening to this and trying to do something about it. There are
two aspects to spend on R&D. One is how much you spend, the
other is how effectively you spend it. Also, you must remember
that when one binds together research and development the amount
spent on development totally masks the amount spent on research.
You do not get at the research by looking at the R&D figure
because development is very much more expensive than research
in most industries and therefore the R&D spend is quite likely
to be 80 or 90 per cent development and 10 or 20 per cent research.
Mr Beard
15. Let us go back to what you were saying earlier about
the fact that it was not really the flow of science that is coming
out, it was other factors in industry later on in the process
that are probably causing the differences between the biological
and bio-technological side and the physical sciences side. What
would you say those differences are? Maybe they are not related
to science. What are they?
(Dr Rudge) If you take the principle of flow and say
there is not a good enough flow between A and B, you have to look
at both A and B to decide why the flow is not right. In other
words, it may be that the wrong products are emerging from the
university and therefore are being rejected. It may be that industry
is not awake to the importance of taking on board the flow. I
think there has been some of both. Also, I think the financial
environment that industry has operated in the UK has been different
from other nations, certainly different from the Japanese and
that has had big effects in industry. The Japanese for many years
had access to very cheap money and that tends to make one willing
to take on bigger risks and to make bigger investments because
money is cheap. In the UK money has been relatively expensive
and that makes one naturally more conservative in what you do.
All these factors come into it.
16. Why would that not have affected the pharmaceuticals
industry whose record is very good worldwide compared with the
electronics industry?
(Dr Rudge) Perhaps I could ask Richard to comment
on the pharmaceutical industry.
(Professor Brook) I do not claim to be an expert in
the pharmaceutical industry, but I think the following can be
said. If you look at those sectors where universities make a profit
out of the research which they have done through their own royalty
income, then these are predominantly researches in pharmaceuticals.
They have a drug which has been developed. The British Technology
Group, for example, ran its budget for many years and so far as
I know Cephalosporin was the drug in question. As I understand
it, the research itself may lead precisely to that molecule; again
my Chairman has used the example, which is later marketed. I think
the University of Strathclyde has a drug within its portfolio
of IPR and therefore makes a decent income from it. If you look
across the entire university sector in the UK, across all disciplines,
the royalty income is 0.3 per cent of general recurrant income.
I think this represents a genuine difference of the role which
the research plays. In one way drug development is almost the
linear model, ie you do the research, you develop it, there is
the product and you sell it, but in other areas the linear model
does not work. It is this vast array of intertwining influences.
Dr Jones
17. Would you say for pharmaceuticals also that you will
know that you are bound to have a market by and large?
(Professor Brook) There is a risk that I say things
way beyond my expertise here. I think an analysis of those universities
which have managed through royalty income to bring some return
on their research will show that the income arises in pharmaceutical
cases. It is very much less persuasive when you look at other
sectors like the engineering and physical sciences.
Dr Gibson
18. Why have you set up the big centres between different
departments and universities? For example, in Oxford you take
three departments and say: "work together" and you encourage
them in forming a centre. It is the centre idea that you had a
few years ago. Why was that done? Was this to increase the knowledge
stream or was it to produce some new stage in the process of development
of some new process?
(Professor Brook) I think there are many reasons why
you would encourage universities to work in perhaps regional collaboration.
One of the main ones is as a consequence of the extremely high
cost of research, particularly if it is to be done with state
of the art equipment. As you will know, there is this infrastructure
problem which exists and which some universities seek a solution
to by looking to regional affiliations. The EPSRC has worked with
inter-university research centres. For example, polymer research
is one where the Universities of Durham, Bradford and Leeds worked
together and that has been very successful. Much more recently
we have launched the Faraday Partnerships where the hope is to
involve small to medium enterprises as beneficiaries of the research
which is done and there the Universities of York, Sheffield and
Leeds have come together in one relating to the packaging industry.
19. Was the DTI involved in any of this collaboration and,
if not, why not?
(Dr Rudge) That is a long story. The Faraday concept,
which is one that we have pursued long and hard, was based on
the flow concept. With large companies that have significant R&D
capability then the flow is much less of a problem. By and large
they have good relationships with academic institutions and you
can get a good flow. There is a bigger problem between the small-
and medium-sized companies and universities. There are good examples
but they are singular examples and it is not good generally. Our
concept was that if we could mobilise the intermediate organisations,
the AIRTO kind of organisation, who already have relationships
with many tens of thousands of companies and if we could close
the loop between them and the academic institution then we could
get a greater flow by building the relationship between the two.
We had a concept which we talked to the DTI about and they were
enthusiastic about it. Unfortunately, when it came to the crunch
point they did not have the funds to put in their part of the
funding and what we decided to do in EPSRC was that we would not
wait, we would go ahead and do it anyway, but we had to do it
on a smaller scale than we would have hoped to do with the DTI.
We have launched a number of pilots. The DTI remain interested
and we are optimistic that they may yet find funds to join us
because they liked the concept, but at the time they did not have
the funds available to join us.
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