Putting Science and Engineering at the Heart of Government Policy - Innovation, Universities, Science and Skills Committee Contents


Memorandum 79

Supplementary submission from the Royal Academy of Engineering

  1.1  The Royal Academy of Engineering, along with six of the major engineering institutions, submitted a memorandum to the main call for evidence from the Committee. This response to the Committee's supplementary call for evidence is based on work that we have subsequently carried out in partnership with the Royal Society and the British Academy, precipitated by Lord Drayson's speech to the Foundation for Science and Technology on 4 February and has been prepared by the Royal Academy of Engineering with the endorsement of the same engineering institutions and organisations, a full list of which is included on the title page.

1.2  A speech by Rt Hon John Denham, MP, Secretary of State (DIUS), at the Royal Academy of Engineering on 19 February built on Lord Drayson's speech by catalysing a debate about the balance of investment in science and innovation to favour those areas in which the UK has a clear competitive advantage. The Secretary of State also defined the nature of the debate as not whether a balance should be sought but how it should be achieved.

  1.3  Ministers appear to wish to take advantage of a decade of investment in the science base by encouraging the commercialisation of the scientific ideas and concepts produced by it. All political speeches to date on the subject have stressed that this vision is about reaping the benefits of research already funded and that the commitment to curiosity-driven research funding remains unaffected.

  1.4  We believe that there will always be serendipitous economic benefit from some blue sky research conducted primarily for the purpose of the pursuit of knowledge. However, the scale of the challenges we face as a society and economy calls for much closer alignment of research with clear objectives and better processes for creating products and services from ideas. In general, there is a funding gap from the point where research ideas move out of universities through to their becoming commercially-ready technologies that industry sees as sufficiently risk-free to take on. Translational research bridges the gap between pure research and applied research and much has been achieved to improve this transition, particularly in the biomedical fields. However, the bridge between applied research and commercially exploitable products and services remains weak.

  1.5  One of the biggest obstacles to getting innovation moving "up the chain" is the way the stock exchange and investment community behave with small and medium size technology companies in the UK. In the USA, where small companies grow into big companies, this happens because of a more tolerant and supportive investment philosophy (coupled with easier flow of funds and Government support through schemes such as SBRI). This has never been the case in the UK and even the better Vice Chancellors are focused on relatively short-term investments with IPO or trade-sale. Similarly, investors—especially the institutional investors who effectively determine the fate of listed companies—have very little tolerance of market conditions or irrespective of whether a company is managing itself well and will put pressure on management very quickly or even push towards a trade-sale (and the disappearance of the growing technology company). This is very different to the USA experience for technology companies. These factors are probably a bigger issue than the university technology transfer gap which, in recent years, has improved greatly with the help of funds such as HEIF and the TSB schemes.

  1.6  While our comments make generic points it is also important to note that innovation models can differ between engineering sectors. If Government's overarching goal is to improve UK economic performance as part of an active industrial strategy, policy needs to be flexible enough to reflect these differences.

2.  What form should the debate or consultation about the question take and who should lead it?

  2.1  In the area of pre-commercial technologies, there are two forces at work. Researchers in universities are keen to push their technologies out of the lab and into the commercial world where they can become or contribute to commercial products. At the same time, commercial companies are looking for emergent technologies to fulfil particular needs. It is an area where solutions looking for problems and problems looking for solutions could be better managed to converge productively.

2.2  Government policy needs to be made with a much broader understanding of how industry makes its investment decisions. There would be significant value in the establishment of an office of technology assessment, drawing on the expertise in Government departments, the TSB and other bodies and industry to promote understanding of and provide advice and support for the productivity of UK based research and development activity. It would be important that this function were at the core of the responsible department so that its expertise is fully embedded in the policy-making process.

  2.3  Industry, by and large, is well focused on the technologies it needs and wants to pull through. Universities, however, are less focused on the potential commercial uses of their discoveries. It therefore follows that the debate should be led and fully informed by the industries and business sectors which seek to make use of and commercialise the fruits of academic research.

3.  Whether such a policy is desirable or necessary

  3.1  The UK has often been justifiably characterised as being good at creating scientific ideas and concepts from pure scientific research, but poor at converting those ideas into commercially valuable products and services. This view is often illustrated by reference to MRI scanners where the initial "discovery" was British, but development of the product was done in the USA. There are many such examples.

3.2  Historically, these fruits of academic research were developed into products by large corporate labs such as those that were owned and operated by companies such as IBM, Xerox and General Electric. In the UK, these large corporate labs are now very few and far between and the mechanism for de-risking development has shifted towards many high-tech university spin-out companies funded by venture capital to the point where they become an attractive acquisition target for large corporations.

  3.3  In the absence of large corporate labs, support for this stage of the innovation process—taking ideas from the pre-commercial research stage through to fully demonstrated products and services—is essential to reaping the benefits of already-funded research. It therefore follows that such a policy is both desirable and necessary if the UK is to improve innovation performance.

4.  What are the potential implications of such a policy for UK science and engineering, higher education, industry and the economy as a whole?

  4.1  Any improvement in the rate at which ideas created by UK publicly-funded research can be converted into wealth-creating products and services will directly benefit industry and the economy, and indirectly benefit the UK Exchequer in terms of additional tax receipts.

4.2  Engineering research is usually at the more applied end of the research spectrum, closer to the development of commercial products and services than is fundamental science research. Interaction between industry and engineering researchers as part of the process of developing scientific ideas is likely to increase the stream of industrial sponsorship for directed research.

  4.3  Curiosity-led research has been, and continues to be, the engine behind the creation of ideas suitable for development into wealth-creating products and services. Research Council spending on fundamental scientific research must be preserved if any policy to improve the conversion of scientific curiosity into wealth creation is to be sustainable.

  4.4  There will always be serendipitous economic benefit from some blue sky research conducted primarily for the purpose of the pursuit of knowledge. However, the scale of the challenges we face as a society and economy call for much closer alignment of research with clear objectives and better processes for creating products and services from ideas. While curiosity-led research is undoubtedly the engine behind the creation of scientific ideas, unless the whole pipeline from fundamental research to commercial products and services is considered, the benefits of any policy to direct academic research for the economic benefit of UK plc will likely be lost.

  4.5  In general, there is a funding gap from the point where research ideas move out of universities through to their becoming commercially ready technologies that industry sees as sufficiently risk free to take on. Translational research bridges the gap between pure research and applied research and much has been achieved, particularly in the biomedical fields, to improve this transition. However, the bridge between applied research and commercially exploitable products and services is still weak.

  4.6  Additional funding for development in this area, between academic inquiry and commercial readiness, is likely to produce economic benefit more quickly than at any other stage in addition to ensuring that some ideas make it through this funding "valley of death" that might otherwise falter.

  4.7  This is an area where the Technology Strategy Board is active but is limited by the funding available to it. The spread of technology areas that the TSB works across potentially leads to its funding being spread too thinly to have real impact in certain key areas. In order to protect or even build on the value of investment by the Research Councils, the TSB's budget should arguably be of the same order of magnitude as the Research Councils' as a whole.

5.  Conclusions

  5.1  The speed and effectiveness with which scientific advances can be transformed into wealth creating products and services can and must be radically improved. The raw material for this innovation process, the scientific research, is available and ripe for commercialisation. Only the current limitation of the innovation process and risk that companies need to overcome stand in the way of UK plc reaping the full benefit of a decade of investment in the science base. Government action to help and encourage this faster and more efficient transfer of knowledge and innovation should now be prioritised to give the UK the technological base to engineer its way out of recession.

April 2009






 
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