Memorandum submitted by Coventry University
1. SUMMARY
1.1 Coventry University is a business-facing
university with a strong history of helping companies become more
efficient and effective.
1.2 A vital area for the creation of modern, high
value-added economy is the development of interoperability—ie
the ability of companies to work together to produce flexible
and agile supply chains which meet customer requirements.
1.3 Much good research and innovation has taken place
in this area, particularly using European funds.
1.4 The clear future direction is to move beyond
interoperability for data transfer into interoperability for knowledge
transfer. This provides the key for a higher value-added economy.
1.5 The principles of DTI innovation funding
for networked enterprises has not yet reached this point and lags
behind.
1.6 The R and D tax credit is problematic for
most SMEs and needs to simplify and rationalize the business-related
contributions to research project funding costs and the R and
D tax credit system.
1.7 The Government needs to reassess the aims
and operations of its innovation funding for networked enterprises
in order to encourage the next generation of interoperability.
2. COVENTRY UNIVERSITY—MAKING
RESEARCH WORK
FOR BUSINESS
2.1 The University teaches 17,000 students and
employs over 1500 people, including approximately 750 full time
academic members of staff. It has a turnover of approximately
£130 million.
2.2 Coventry University has a long tradition of undertaking
training, applied research and consultancy to meet the needs of
local, national and international clients in the public and private
sector. Founded as an industrial University it originally focused
on the needs of major multinational manufacturing companies who
were based in the local area. The University has worked with a
diverse range of public and private sector clients on numerous
projects.
2.3 As a business-facing University, we have
expertise and experience in helping SMEs and large multinational
manufacturers and other businesses become more efficient and effective.
This ranges from research and consultancy in design, engineering,
lean manufacture and value chain logistics.
2.4 We are one of the leading universities in
Europe for research in to interoperability for virtual manufacturing
(ie the ability of diverse systems and organizations to work together).
We have been a leading player in European consortiums to develop
the techniques, methods and software to allow virtual supply chains
to design, manufacture and distribute products quickly based on
rapidly changing customer demand.
2.5 These new virtual supply chains are the
future of manufacturing in the UK with independent high value
companies delivering their element of a complex product through
a high degree of interoperability in processes and systems. Our
evidence concentrates on the requirements to develop interoperability
as a key element of creating a high value-added economy.
3. WHAT IS
MEANT BY
A HIGH
VALUE-ADDED
ECONOMY? WHICH
BUSINESS ACTIVITIES
QUALIFY AS
SUCH?
3.1 The last 2 decades show a clear trend in
business. There is a move away from big, comprehensive organisations
which can cover all stages of a value-creation chain. There has
also been a shift from long-standing, well-established, supply
chains, stable over many years. In their place is the establishment
of companies which increasingly focus on their core business and
core competencies and now enter more often, and in a much more
agile manner, into flexible alliances with other companies for
value creation and production. This can be:
— in areas like the automotive industry
which traditionally has strong relations between supplier and
original equipment manufacturer (OEM). A faster clock speed of
markets and technological innovation now demands more flexible
configuration and re-configuration of supply-chains.
— in typical "knowledge businesses"
such as consulting, software engineering or any kind of research
where freelancers, small and specialised companies or outsourced,
offshore and nearshore partners form project-specific new coalitions
for creating a customer-specific knowledge-based product or service.
— in relatively new branches like life-sciences
and biotechnology which exhibit new market and organisation forms
where technological progress is based on many, small, research-based
companies in co-opetition[12]
relationships which require flexible, ad-hoc and temporary
co-operations.
3.2 These are clear examples of areas where
interoperability can create high value-added economic activity.
4. THE EFFECTIVENESS
OF EXISTING
GOVERNMENT ARRANGEMENTS
IN ENCOURAGING
INNOVATION AND
CREATIVITY.
4.1 This growing demand for flexibility with
interacting and efficiently integrated businesses and services
has already led to a huge amount of scientific and technological
work in enterprise interoperability, in particular in the ICT
(Information and Communication Technologies) area. European research
and technology has managed this work so as to be in an excellent
position regarding developments that have helped organisations
to work together more effectively, for instance:
— Web service technology to allow easier
(semi-)automatic (re)-configuration of cross-organisational, computer-based
business processes.
— Grid technology as the basis for flexible
on-demand allocation of resources in distributed, heavily computing-oriented
applications.
— Semantic web technology (an evolving
extension of the World Wide Web) as well as its applications for
smarter versions of the above (Semantic Web Services, Semantic
Grid technology) in order to achieve higher degrees of automation,
better automatic data type and database schema mappings.
4.2 Although such research has already achieved
promising results and has partially led to commercial products
and service offerings as well as operational, deployed applications,
the achievements to date nevertheless remain at the level of data
interoperability and information exchange. They hardly reach the
level of knowledge integration and certainly fall far short of
knowledge-based collaboration.
4.3 Seen from the business-process perspective,
today's approaches to business interoperability mainly address
support processes[13]
(for instance, how to manage ordering and buying a given product)
but they hardly support the company's core processes (eg in the
above example, making a decision about what product to buy). It
is the company's core knowledge assets that are at the centre
of value creation and competitive advantage.
4.4 The EC and a number of European national
research funding bodies have recognised the importance of this
as a research area relevant to business development, and arguably
to economic survival in the face of low-wage economies' competitiveness,
in more conventional manufacturing scenarios. However, UK research
funding drags a long way behind. DTI innovation funding for networked
enterprises recognises this need in the field but it is 5 years
too late and by its very nature fails to recognise how far it
is from being considered near to-market research.[14]
4.5 Given that the rest of Europe appears to
be funding research in this area, it is rather strange that the
UK lags behind in its funding of this area.
5. THE IMPACT
ON BUSINESS
OF GOVERNMENT
EFFORTS TO
PROMOTE RESEARCH
AND DEVELOPMENT,
INCLUDING THE
RESEARCH AND
DEVELOPMENT TAX
CREDIT.
5.1 Many of the current funding options are
not very well understood by business. The R and D tax credit is
problematic for most SMEs who find it difficult to get good advice
from accountants, many of whom are more used to dealing with less
complex issues from general business clients.
5.2 Government efforts to promote research and development
actually have a strong impact in reducing business involvement
in these activities. EU national and EC funding contributes to
the costs of businesses undertaking research; an enterprise collaborating
in research work will receive a significant proportion, if not
all, of the cost of a project from public bodies. The parsimonious
approach adopted by UK government "activity" in the
field requiring collaborating enterprises to contribute to the
costs of a project incurred by the research institutions not only
makes it much less likely that UK businesses will collaborate
in UK research but also means that academics face a long hard
struggle to convince enterprises to become involved even in EU-funded
research.
5.3 We would encourage the government to simplify
and rationalise the business-related contributions to research
project funding costs and the R and D tax credit system. For example,
it is complex enough for a SME to apply for a Knowledge Transfer
Partnership (KTP) without having to go through an equally tortuous
application for R and D tax credits. Trying to explain the scheme
to a SME is not easy. It would be much easier to be able to say
to a business "a two year project will cost you £X per
year" and for the KTP administrators and the tax system to
work out how much is due and credit it automatically to the project.
At present these are completely separate processes this actively
discourages businesses to become involved.
6. RECOMMENDATION
6.1 Creating an agile and flexible economy requires
interoperability between companies and organisations to produce
and distribute goods and services. These alliances are essential
for the creation of a higher value-added economy.
6.2 Whilst strong progress has been made in interoperability
to improve data and information exchange, far more research needs
to be encouraged into the effective exchange of knowledge. We
recommend that the Government re-assess the aims and operations
of its innovation funding for networked enterprises to ensure
that it provides the initiative for greater advances.
October 2007
12 Co-opetition is a business strategy based on a combination
of cooperation and competition derived from an understanding that
business competitors can benefit when they work together. It is
based on the concept of limited cooperation between competitors
and usually arises in rapidly changing industries where companies
are compelled to work together, for instance, in the face of advances
by third parties. It also takes place if commonly created standards
can help develop a common market with benefits for all parties
or cases when products are only valuable if they can be based
on or combined with others' prior work. Back
13
In Business Process Management, most authors differentiate between
core processes which directly affect the company's value creation
in terms of products to be sold (eg product design, product assembly,
etc), and support processes which provide the intra-organizational
environment (eg financial management, real estate management,
human resource management, etc). Back
14
Li, M-S., Cabral, R., Doumeingts, G. and Popplewell, K., "Enterprise
Interoperability: A concerted research roadmap for shaping business
networking in the knowledge-based economy", published
by the Commission for the European Communities, 2006, 45 pp, ISBN
92-79-02437-X. Available also at http://cordis.europa.eu/ist/ict-ent-net/ei-roadmap_en.htm Back
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