Memorandum submitted by the Engineering
Council
1. The Engineering Council has existed by
royal Charter since 1981, but was reformed in 1996 in partnership
with the 40 engineering Institutions to enhance the standing and
contribution of the engineering profession in the national interest
and to the benefit of society. To this end the Council, a registered
charity, acts as a central focus for 290,000 registered UK engineers
in providing both the regulation of the engineering profession
and its promotion through links with Industry, Government and
Academia. It does not attract Government grants although its close
relationship with the Government is enshrined in a Memorandum
of Understanding.
2. The subject of the Inquiry is important
to the Engineering Council because successful innovation is rooted
in well-trained, well-motivated and creative engineers.
3. The main points covered by this submission
are:
(a) An examination of the factors which a
Company Board will address if it is considering adopting new technology.
(b) The problems facing Foresight on transmitting
the messages to SMEs.
(c) The importance of the relationship between
technology, finance and the market place.
4. The Council notes that the subject of
the enquiry is closely related to the recent enquiry into the
Innovation-Exploitation Barrier undertaken by Sub Committee II
of the House of Lords Select Committee on Science and Technology
in 1997. The Council submitted written and verbal evidence to
that enquiry.
5. Turning to the Press Release, the Council
has addressed the question which it raises by considering the
range of issues that a company would table before deciding whether
to introduce a new product or process:
(a) Does it fit into our company strategy?
(b) Have we identified a customer need?
(c) What is the size and location of the
potential market?
(d) Who are the competitors, what are they
doing, what is our likely market share, and how much time do we
have?
(e) What is the state of the technology of
the proposed product or process? Is the design finalised? If not,
can any outstanding problems be solved?
(f) What pre-production development will
be required, who will carry out the work, and at what cost?
(g) What investment will be needed for full-scale
production, what will be the rate of return on the investment;
and what will be the cash flow?
(h) Can we expand our existing operation
to accommodate the proposal? Do we have the necessary staff skills
in-house? Or will we need to sub-contract?
(j) How will the investment required compare
with other internal claims on our available capital? What grants
or other inducements are available?
(k) Can we licence-in the technology from
elsewhere instead of developing it ourselves?
(l) Can we incorporate the proposed development
in our portfolio by purchasing a company which is already in production?
Would this approach be more cost-effective?
(m) What are the disadvantages of not going
forward?
6. A key issue is the extent to which the
Government's support measures (set out illustratively in the Press
Release) can resolve these natural concerns. The availability
of a new and proven technology does not necessarily mean that
it will be taken up, because of the other factors that need to
be satisfied too.
7. The attitudes of company Boards will
be influenced by the nature of their operations. Some manufacturing
sectors of the economy have high productivity and profitability,
high investment, highly skilled staff, and are highly research
intensive. Such companies are more likely to be aware of and adopt
new technology than companies which have low investment, low productivity
and low profitability.
8. In the engineering sector, a worrying
feature shown in the DTI's "UK R&D Scoreboard, 1997"
is the low R&D intensity for engineering compared with certain
other UK industrial sectors and more importantly, with the world
average figure for engineering, albeit that world class UK companies
are comparable with the global average. Although R&D expenditure
does not equate with the ability to innovate, it is nevertheless
an indicating factor. It would be expected that one measure of
the success of Foresight might be a significant increase in the
importance attached by companies to R&D and in due course
to their level of expenditure. Investment in R&D and its applications
is ultimately financed by the purchasers of products and services
provided by the industry. To create and sustain an active research
and innovation culture, companies must be able to command sufficient
profit margin to support it. Recently, downward pressures and
risk aversion in the public procurement of engineering services,
particularly in civil engineering and infrastructure, have severely
reduced the means and opportunity of the industry to invest in
development and application of new technologies. The Committee
needs to address the potential conflict between public procurement
policy, minimising costs and risks and the consequential limitation
of the industry's financial ability to sustain technical excellence
and international competitiveness.
9. We fully support the aims of the Foresight
programme, particularly those aspects of the programme which develop
forward thinking on the relationship between the market and technology
opportunities and we have recently commented to the Office of
Science and Technology on "The Next Foresight Survey".
We note that Foresight is giving increasing attention to expanding
business participation, especially involving smaller companies
or those which have not so far established contacts with the science
and engineering base. But we share a widely-held view that establishing
a technological dialogue with SMEs can be difficult if there is
no member of staff in the company able to participate in discussions
and assess the value of new products and processes on behalf of
the Company Board. In this situation there are agencies which
might take apro-active role with SMEs, and these include the Engineering
Council, the engineering Institutions, the independent research
and technology organisations and Government laboratories. It would
be a valuable task for Foresight to investigate ways in which
such a technology transfer interaction might be promoted.
10. It is also important that Foresight
is not seen as just another exercise in the requirements for R&D
and that the interaction between technology, finance and the market
place is streamlined. It is also necessary to bear in mind that
with the globalisation of markets and technology, companies (particularlymulti-nationals)
will acquire new technology from whatever world-wide source serves
their needs in the mostcost-effective way.
11. We have a high opinion of the EPSRC
and it has been giving increasing attention in recent years to
the exploitation of the results generated by its research programmes.
We strongly support this trend. Whether the present balance of
the budget between research and technology transfer is correct
is difficult to say. There needs to be some evidence of the leverage
on the economy and employment provided currently. We recognise
that evidence of this kind is difficult to establish.
12. Finally, we also support the LINK programme
as an effective way of transferring technology from the science-base
to industry; and the relationship between Foresight and LINK.
Clearly such initiatives will influence company Boards in deciding
the way forward in particular cases. We note that the success
of both Foresight and LINK depends upon the ability of their programmes
to influence UK industry generally, but the ability of LINK to
do this directly is limited because finance for LINK is necessarily
limited. Networking is the key to wider dissemination but the
successful transmission of Foresight messages depends upon the
reception capability at individual company level. This capability
will vary with the nature of the company.
10 March 1998
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