Examination of Witnesses (Questions 1-40)
DR DAVID BEMBO, DR TIM BRADSHAW, PROFESSOR RIC PARKER
AND PATRICK REEVE
15 DECEMBER 2010
Chair: Welcome, gentlemen.
Thank you for agreeing to come this morning. Just for the record,
I would be grateful if the four of you would introduce yourselves.
Dr Bembo: I am
Dr David Bembo. By day I am research development manager at Cardiff
University. I am here representing the Association for University
Research and Industry Links and Universities UK.
Dr Bradshaw: I
am Tim Bradshaw from the CBI. I am the head of the Enterprise
and Innovation Policy Group at the CBI, which covers science and
technology, manufacturing and small businesses.
Professor Parker:
Good morning. I am Ric Parker. I am Director of Research and Technology
for the Rolls-Royce Group. Part of my accountability is the university
research centres and advanced manufacturing centres that Rolls-Royce
runs around the patch.
Patrick Reeve:
Good morning. My name is Patrick Reeve. I am a managing partner
of Albion Ventures, and I am also Chair of the British Venture
Capital Association public policy venture committee.
Q1 Chair:
Thank you very much, gentlemen. As you know, following the work
of Dr Hermann Hauser, James Dyson and the Government's announcements
recently in relation to Technology Innovation Centres, we are
looking at the proposition. We have looked at how the German model
works. A group of us were in Berlin recently, where we met your
colleagues in Rolls-Royce, Professor Parker. We also met people
with some financial expertise as well as expertise in the sector.
So we are now looking at this from a UK perspective. Perhaps I
can ask you all this question. What principles should be followed
in identifying technology areas or industry sectors in which we
ought to be investing via proposed Technology Innovation Centres?
Who would like to start with that?
Professor Parker:
I think one of the imperatives for these new centres has to be
to stimulate growth, so we should focus on those areas where that
is likely to be most rapid. They should be areas where there
is a world market that is large and accessible to the UK, where
the UK has the leading research strengths already in its universities—we
don't have time to grow these new centres from scratch—and
where UK industry is well positioned to pull through that technological
capability. So those are the criteria that I would apply. Given
the need to stimulate economic growth, things with a strong focus
on pull through to manufacturing, as opposed to doing research
that's interesting, has to be a major theme. High value added
manufacturing, in particular, is an area where the UK has the
capability to develop these areas and an area where the TICs would
be very useful.
Q2 Chair:
Just before we go on the others, aside from your obvious passion
for aerospace, what other sectors would you want included?
Professor Parker:
As we look at the resurgence of nuclear energy in the UK, we have
to decide whether the UK is simply going to buy all that from
abroad or whether we can stimulate an industrial base to generate
that internally. I believe we have the basis to do that. The whole
area of renewable energy, again, is ripe for the picking. If we
are going to meet the Government's targets, then, again, we have
to have not just some bright ideas but an industrial base to deliver
that by the end of the next decade.
Patrick Reeve:
Could I add to that? I think growth is the key. In a pretty fast-changing
world, there are certain areas broadly globally that are changing
and developing. I would say that the environmental area is quite
important. It is areas such as food sustainability as well as
water sustainability. Such areas have long-term growth prospects
across the globe, not just in the UK, but equally where the UK
can make a difference. Another area, clearly, is regenerative
medicine.
Dr Bradshaw: If
I could follow on from that, I thoroughly agree. We must focus
on business demand and building industrial capability within the
UK, so that we can compete internationally. Just to go back a
little and think about the situation we have at the moment, we
have some centres already existing doing things like advanced
manufacturing. Many of them are supported by RDA money at the
moment. So when you are talking about establishing criteria for
selecting new centres, I urge you to look at the transition from
where we are now to a future situation as well because I think,
particularly at the moment, there is a danger, with the RDA money
disappearing, that some of the excellent centres that we've got
working at the moment will find themselves with the best staff
wanting to leave, there is uncertainty and they don't know what
their future is. So before we start getting down the road and
looking for long-term future new centres, let's look at the existing
ones and let's look at how we can support those through that transition
phase.
Q3 Chair:
Have you any evidence that backs that up, Dr Bradshaw?
Dr Bradshaw: Their
funding is likely to run out in March. If you have some very high
calibre people working in those organisations who are thinking,
"Well, my job's uncertain after March. I should be thinking
about what else I could do," once you start to get that climate
of uncertainty within those organisations, you start to have problems.
I urge the Government to look at this and think about how we can
make sure that those centres remain stable in the short term.
Dr Bembo: In terms
of potential candidate areas, defence, safety and security issues
are clearly a major market for the UK and are growing markets
globally. Somebody has already mentioned water and food sustainability,
and I would include security of supply of food chains and utility
supplies, which is a growing concern. Another area which has strong
possibilities is ICT in general, so utility of high performance
computing capabilities, grid and cloud computing and some of these
emerging technologies. Also there is the digital economy more
broadly, not ignoring some of the strong capabilities in the UK
university sector in areas such as digital media, for example,
where there are enormous and growing markets. For example, there
have already been three major investments by UK research councils
in digital economy hubs across three parts of the UK. We should
lever from those original investments.
Dr Bradshaw: Chairman,
can I just come in on the types of centres that you might support?
I purposely did not say that in my piece, because we have heard
many examples. I could add another, probably, half a dozen—regenerative
medicine, renewables, composites, advanced manufacturing and process
industries. They are all potential candidate areas. I suppose
our concern is that there is only a finite sum of money available,
and one has to take some very hard decisions to make sure that
centres that are supported are done so at a critical mass, so
that they are effective. I didn't want to put in a long, long
list, because I know there is a long list. We all have our own
favourites. The key thing is to work with industry and to look
at the ones which really will have the potential rather than us
trying to give you a list over the table now.
Q4 Chair:
You are absolutely right. There is a relatively small sum of money
that we are dealing with at the present time. Therefore, there
are going to be winners and losers in this process. It, therefore,
follows that it is critically important that the TSB conducts
itself in an open and transparent way to demonstrate that the
benefit to UK plc is at the top of the list rather than somebody's
personal favourite. How would you do it if you were here as the
TSB?
Dr Bradshaw: Again,
I am a little further back from the process, but you need to start
in terms of mapping what we have already, because I don't think
anybody really knows what we've actually got in the UK—where
the potential centres are and what areas they are in. Then you
need to talk to business and work out what their needs are. There
are various ways of doing that, directly with business, through
the old innovation and growth team-type model and through some
of the councils and groups that were set up as a result of innovation
and growth team work, such as the Automotive Council, for example.
They all then have to take some judgments on priorities themselves
within an internal process about how they decide which will have
the most economic impact. The focus needs to be not the "Nice
to have research" but "Will it actually make a difference
to business on the ground?"
Then there are some other challenging issues
because there are already existing centres in the commercial space,
operating commercially, which we do not need to replicate or tread
on the toes of. We need to think where something new needs to
be added or where we've got a nascent centre that needs to be
developed a bit further. So there are a number of steps we need
to go through.
The last phase is that, if you have mapped the
centres and what business needs and you can't map those two things
together and develop something you have already got, then go down
the route of developing something entirely new. The problem with
that is that it takes a lot of time to get these new centres established.
If we are trying to get an impact on growth and commercial return
quickly, then it probably is better to start, by and large, with
things we have already and build from those.
Professor Parker:
I think the TSB already has a very good track record, I might
say. It has been distributing over £300 million of funds.
It has a very good feel from the competitions that it has already
run, where those competitions are heavily over-subscribed and,
therefore, in which areas there is strong industrial demand for
industrial research. It has also inherited some schemes from the
past that were less than successful. If you look at the £50
million the UK invested in nanotechnology centres, we tried to
create 32 centres with £50 million. Frankly, it was a bit
of a disaster, because you are not going to create any critical
mass of activity if you spread it that thinly. So I think there
are some good lessons to be learned.
I agree with Tim that, if we are going to hit
the floor running, then, first, look at existing models and existing
centres, and, secondly, build outwards from our strong universities,
those with a good science base and with a good track record of
working with industry. We can't afford greenfield sites if we
are going to make any real impact on this. There are some very
good examples where I think our university system has filled the
vacuum left by gradually dismantling our base of national research
centres over the past 25 years. We have a very good university
system that's used to dealing with industry and can work with
industry.
Patrick Reeve:
I add, though, that you also need to work back from global demand
and global competition as well. With a small amount of money,
there is not a huge amount of point in putting it into areas where
Britain is never going to be able to compete. So I think you need
to work backwards as well.
Dr Bembo: I would
like to add one point to that. In carrying out a mapping exercise
I think it might be helpful to identify some of the existing centres,
the existing investments, which do and can work with industry
from a university base very successfully, which may not need to
be augmented or have their funding added to through this process,
but which could be catalogued and their presence and willingness
to work with industry could be better advertised to the private
sector.
Q5 Chair:
None of you have described a particular type of centre. You are
saying centres that could exist as part of universities and independent
of universities.
Professor Parker:
I can give you a couple of specific examples. The Advanced Manufacturing
Research Centre at Sheffield is something we have been heavily
involved with, with Boeing, since its inception. It is an extremely
successful model. I think there are many industrial partners involved
there. All the IPR issues have been sorted out. I am not saying
that that should become a Fraunhofer, a Faraday or whatever we
are going to call them overnight, but certainly that model is
a good and well tried model. There are others. The Energy Technologies
Institute is a different model. It is a club of people sponsoring
research and putting in Government money and industrial money
side by side. There is the Dalton Nuclear Institute at Manchester.
Again, I think that is a good building block to build outwards
for a future TIC.
Patrick Reeve:
Could I give an example, which I don't think is formally a TIC?
It is the Rutherford Appleton Laboratories at Harwell with a
synchrotron, clean room facilities and, really, a huge amount
of capital investment. They are facilities that, for instance,
the nearby universities and, indeed, the nearby commercial businesses
could not afford by themselves. So it becomes a nexus both of
facilities and of expertise which is used by the universities
and commerce. To me that is an interesting model. We certainly
have one or two companies that are based there, that are using
their facilities, where we have put in venture capital finance.
Q6 Chair:
The success of Rutherford Appleton isn't on a single site. It
is two sites working in partnership.
Patrick Reeve:
Correct. It is part of a broader partnership. It is Rutherford
Appleton, yes.
Q7 Chair:
In that particular example, you have a lab which operates on two
substantially separate sites.
Patrick Reeve:
Absolutely.
Q8 Chair:
But you would see it as fitting the model?
Patrick Reeve:
I would. Both of those units, north and south, work very well
and have good input from universities.
Dr Bradshaw: I
have just two points on whatever model you operate. One would
be that we ought to learn from best practice and not try and re-invent
the wheel if we have some good things that work, and they may
well be different for different sectors. The second is to run
it on commercial lines so that they are focused on engaging with
business and pulling things through to commercialisation.
Q9 Stephen Metcalfe:
Touching on what sort of model should be adopted, there has been
some discussion on whether it should be a technology push or an
industry pull model for the various TICs. What are your individual
views on that, and do you think that that should vary depending
on which particular sector the TIC is focusing on, for example,
regenerative medicine or manufacturing improvement? Should those
sort of things vary depending on sector?
Dr Bembo: The science
base is obviously a very important element of this. Jim Dyson
made a plea for sustained funding of the basic science infrastructure
in his report. I quite like the notion that comes out of the Fraunhofers
that their basic science funding is to support science which is
informed by industry. Therefore, it is not blue skies in the classical
university sense. In terms of a model for investment, that seems
to be the basis of the university technology push, if you like.
Dr Bradshaw: I
think we would expect these centres to operate closer to market
than the TSB with higher Technology Readiness Levels, working
with business demand and trying to do our best work to meet their
needs. When you go down that route, you have to think more of
the pull side of this rather than the push side. Maybe in some
sectors there will be more of the new science coming through,
but I think the majority ought to be on the pull, working with
business to try and bring as much as possible out of the science
base that meets their needs.
Professor Parker:
I think there has to be strong industrial engagement from the
start with these centres. It won't work if you set them up and
then expect companies to come along and use them later. You have
to get a core group of companies around each individual technology
that are willing to invest themselves and willing to pull, and
it does have to be a strong pull. Having said that, I think the
universities have to do a bit more to advertise their wares. They
are being encouraged at the moment, and I welcome that, to think
through the impact of what they do and be able to express that
more coherently. It is not saying that every single piece of research
has to be in Woolworths by Christmas—Woolworths is a bad
example these days—or has to be in the shops by Christmas.
Certainly people should think through what the impact and the
applicability is, and then be able to express that in ways that
industry can understand.
Patrick Reeve:
In a spirit of compromise, I am keen on both push and pull. Coming
back to the idea of TICs being a nexus, from the universities
they use it as a tool for increasing commercialisation of their
early-stage proof-of-concept research, and from commerce as a
testing ground and a source ground as well of new ideas for business
areas.
Q10 Stephen Metcalfe:
The Government has told us that the TICs will have quite a wide
variety of services that they will be providing from conducting
their own R and D, access to schools and equipment to help scale
up manufacturing. Do you think that is too broad an expectation
from the TICs? Do you think we are asking too much of them based
on a relatively limited budget?
Dr Bradshaw: I
think the focus ought to be on development, demonstration, pull
through to commercialisation and all the things that are required
around that space. From our point of view, the critical thing
they shouldn't do is to be involved in teaching, basic research,
policy development and things like that. There is a danger that
they might drift into that space. We need to be very clear that
that's not their role. They are closer to market. They are pulling
through technologies and developing technologies with business.
Professor Parker:
I think they will create some of the portable skills as they do
their jobs, so if these centres are working properly you won't
get academics or students going there and living there all their
lives. They will actually develop something and want to take it
through into industry themselves. Technology transfer tends to
work best when it goes on two feet and somebody's brain goes with
it. I think if the centres are working well they will generate
the skills by default, but I agree that they shouldn't be set
up as teaching and skills centres. They are there to develop research
and demonstrate its industrial relevance in a way that industry
can pull on it and take it out into the world.
Q11 Chair:
Should they engage with PhD students?
Professor Parker:
Definitely, yes. I think that's a vital role. Again, the EngD
programmes that we have around us already encourage PhD students
to work with and in industry as part of doing their PhD. You would
see a lot of the people in those centres working for and getting
a PhD with it.
Patrick Reeve:
I think you could go further than that and have secondees from
the academics and the universities as well as part of the role
in increasing commercialisation.
Q12 Stephen Metcalfe:
As you have heard, we have already looked at the German system
quite closely, and particularly the Fraunhofers. Do you think
that our Technology Innovation Centres should be based along the
same lines? Should they have the same scope as those or should
we develop our own particular model?
Dr Bembo: The funding
model for the Fraunhofers is interesting. I have already referred
to this one-third budget that they have for basic research, which
is industrially focused. A level of basic funding is very helpful
in this instance for these sorts of industry-focused centres and
institutes. One of the reasons for that is that, if you tried
to establish these kinds of undertakings and make them financially
sustainable from the word go or within a fairly short time window,
then you would find that they may concentrate on the types of
activities that are going to generate income to keep the wolf
from the door rather than concentrate on the targets and the areas
on which you would like them to work with industry. We have certainly
had direct experience of that from setting up similar centres
in the UK, which had, maybe, biased their activities in the wrong
way just to achieve financial sustainability.
Patrick Reeve:
I think the core difference between Britain and Germany is that
the British universities have strong technology transfer organisations
within their universities which manages their research and focuses
their research. Going back to your previous question, it is the
research that needs to be done by the universities and it is the
commercialisation in the TICs. That is the key difference, I think.
Professor Parker:
You have to see the German system as a whole system, as you are
probably well aware from your visit. You have the Max Planck Institutes,
you have the Helmholtz Institutes, which are at the industrial
sector level, and then the Fraunhofer Institutes. Those three
bits of the network work well together and ensure the whole thing
works.
You have also got the financial scale. We have
got to be realistic about this. We are talking about £200
million over four years. The Fraunhofer network today costs €1.6
billion a year to run, and the Helmholtz is an even bigger sum
on top of that. So we are not going to replicate the German system
overnight. Can we see best practice there? Yes. I think there
are elements of how they work and engage that are good. I think,
equally, we've got some good models in the UK. As I've said before,
I think our UK university system, and certainly some of the key
universities, has a very good track record already of working
with industry, so we do not want to put extra barriers in the
way of that.
Dr Bradshaw: I
absolutely agree with you. The German and UK innovation systems
are very different. The Fraunhofers have evolved to suit that
system. You don't need to just put that straight into the UK.
I don't think it would work. I don't think we could afford it.
As Ric has said, the scale is entirely different. As to the three
best practice points, they are focused, they have long-term funding
and they have a central core funding from Government, which acts
as a catalyst to bring in additional funding and helps to de-risk
some of the investments that others make.
Patrick Reeve:
Can I add in one other key difference that I would suggest, which
is that the TICs should be sustainable over the long-term, whereas,
clearly, the Fraunhofers aren't? They are reliant on a continued
stream of funding. I think sustainability creates a certain discipline
and focus on what you do. It's not going to happen at once and
it may take 10 years to achieve, but as a goal the TICs should
be sustainable.
Professor Parker:
I think we have learned that lesson already with the IMRCs and
other things. We've set them up with a five-year budget and expected
them to stand on their own two feet at the end of it, and they
fall over and disappear. How many of the Faraday Institutes that
we set up in the '90s still exist? There is only one in the guise
of Begbroke Science Park at the Materials Centre there. You have
to recognise that we are in this for the long term. If we are
going to set up these centres, we need a 10-year contract to start
with. We should recognise that Government money will always be
necessary to drive them forward, or they should cease to exist
if they are not performing. I think it is unrealistic to expect
everything to stand on its own two feet. The German system certainly
doesn't.
Dr Bembo: I would
agree with that. I think the centres need to be the subject of
performance review, and certainly the Fraunhofers drop areas of
activity if they are not performing or if they are no longer industry-valid.
I think that is important, too.
Q13 Stephen Mosley:
In your responses to previous questions you have mentioned the
existing centres of applied science and research in the UK. I
want to explore that more fully to see if there is anything that
we can learn from those in order to enable the Technology Innovation
Centres to deliver what is required out there. Dr Bradshaw, I
have seen in some CBI written evidence that you talk about the
National Composites Centre and you highlight that as a particularly
good model. Could you just explain why?
Dr Bradshaw: I
think because it is engaging broadly with a wide range of businesses.
It is obviously something for which the UK has a capability need
for the future, and it is not just one sector. We have aerospace,
renewable energies and vehicle manufacturers all wanting to be
involved. I think that is a good model. It is taking that capability
and R and D and taking it out broadly into the UK industrial base.
It is rather an open model. That is one thing I would like to
stress. I don't think we want to see the Technology Innovation
Centres set up as a club where only one or two companies can get
involved. We do need to be able to open them up so that a wide
range of businesses can tap into it.
Q14 Stephen Mosley:
That is quite interesting. I know in your evidence you also say
that advanced manufacturing research is not seen by all companies
as fully open as an open Innovation Centre.
Dr Bradshaw: I
think that is more a case of it being early days where there are
a couple of companies that have a very good link into the centre
and one could see how you might build on that for the future and
bring other companies in as well. So some of the things will evolve
with time. You might end up with five or six companies that always
end up being the ones making the most use of a centre. That doesn't
mean that there shouldn't be others who can tap into it, help
to work in partnership and do things with them.
Q15 Stephen Mosley:
One of the important things we have heard is about the sustainability
of the TICs. Are the current centres sustainable?
Dr Bradshaw: We
haven't looked into that in any great detail.
Professor Parker:
The longest running one is the AMRC in Sheffield. Of the manufacturing
type research centres, the Advanced Forming Research Centre at
Strathclyde has only just opened and the National Composites Centre
won't open until next year. So the best model we have is that
centre at Sheffield. It is on its third building now. It's outgrown
two of them, but it has only achieved that with significant investment
from Yorkshire Forward, and, as was said earlier, there is a concern
where that support comes from in the world going forward and with
large TSB and the EPSRC contracts. So it is sustainable in that
sense, but it is not sustainable as a wholly industrially funded
centre.
Patrick Reeve:
Could I give an example of one which I think is sustainable or
getting towards it? Correct me if I am wrong, but I think the
Medical Research Council comes under the TIC category. They have
managed to get a considerable amount of licence income through
their research activities. Creating that independent income stream,
independent of Government grants over the long term, is where
TICs should aim. I understand your concerns that this may not
be possible, but I think it is an aim that they really should
have. Because they interact with commerce and they are not universities,
they need to be focused on commerce, income and, ultimately, over
the very long-term, profit or sustainability from that point of
view.
Q16 Stephen Mosley:
Has the Government consulted any of you on the current proposals
for TICs or are you aware if the Government has gone out and consulted
industry, academia or venture capital at the moment?
Professor Parker:
The TSB has been talking to many people. I chair the UK's Aerospace
Technology Strategy Group. They sit on that group and they have
certainly brought their preliminary thoughts on TICs to us, shared
those and got our feedback. So, yes, through TSB, we have been
talking to Government. I don't think we have been approached directly,
but again we have talked with members in BIS about what shape
and form these might take.
Dr Bradshaw: Ditto.
TSB has been to a couple of CBI committees where we have had members
saying, "Look, these are the sort of things we want you to
focus on, so make sure they are business led; there's critical
mass; they do map into research excellence in universities but
they are commercially focused".
Q17 Stephen Mosley:
In Rolls-Royce, we have a company which is currently investing
in the UTCs—the University Technology Centres. How do you
as a company measure the success or lack of success of those centres?
Professor Parker:
There are four very simple metrics for our centres. First, what
did you deliver to the company in the last year? We ask our own
people on the staff, recognising that there is a time frame in
all of this, of the ideas and technology that that centre has
delivered in the past, what have we actually put into a product
this year? That might be a four or five-year lapse in itself.
We ask them how many patents we've got between us on the work
done, and we ask how many people have actually been recruited
from those centres into the company. They are the four basic metrics
on which we run our 28 centres.
Q18 David Morris:
How can we encourage Technology Innovation Centres to work and
co-operate with industry and universities? How should intellectual
property rights be managed between industry and University Technology
Centres? Industry could be sceptical of their technology being
transferred to another company. How can their property rights
be managed between the various centres of university and industry?
Professor Parker:
Again, there are plenty of good models around us. We shouldn't
re-invent the wheel. The Lambert Report laid out a number of model
contracts for university-company interaction and many people use
those today. I think it has stood the test of time. Again, the
Manufacturing Research Centres have an IPR structure where the
full level subscribers, as those companies that put in a significant
amount of money each year to the centre, share all the IPR done
from the core work, but it's possible for an individual company,
whether a member or a non-member, to come in and pay for a specific
contract where they will own the IPR and have some control of
it.
I think that ownership of IPR is not the starting
point. Usually with a university it works best if you sit down
and say, "What do you want to do with IPR and what do we
want to do with it?" If you have that debate in a grown-up
way you come to the right answer. The critical thing that most
companies want is competitive advantage. That is why they are
in the world. What they don't want is to work with a centre to
develop a piece of IPR that the next day is on sale to their competitors.
That is the only protection that they are looking for. If the
centre wants to use the same IPR in a totally different domain
with a different company and in a different sector, fine. With
our centres, we already work with them to help them do that.
Q19 David Morris: Do
you think that Technology Innovation Centres should be aligned
with partner universities to specialise in one particular area
to address this problem?
Professor Parker:
I think that they should have a very strong link to and ideally
grow from a university with a strong research base in the technology
area concerned and with a good track record of working with industry.
I think if you can tick those two boxes then it will get off to
a very good start.
Patrick Reeve:
A sector that has quite a good model for IPR sharing is the pharmaceutical
industry where drug licences are often shared between more than
one of the large pharmaceutical companies and, indeed, also with
the universities as well. It is simply a question as to who reduces
the risk at what point gets what ultimate share of the IPR. I
think people can work together on these for mutual benefit.
Dr Bembo: Horror
stories over IPR negotiations between universities and industry
on a protracted basis tend to be fairly few and far between but
they tend to be the ones that are highlighted. In general, for
these large scale undertakings, such as those which we are contemplating
here, you would negotiate a robust framework for management ownership
of IPRs at the outset. In general, you don't tend to see problems
working downstream. What university and industry want to do with
IPRs in terms of publishing for universities potentially, and
exploitation protection for companies, are often very compatible
and the time lines can be agreed. So I don't anticipate that there
should be anything of a sticking point in terms of the TIC structure.
Q20 David Morris:
If the UK does adopt a Fraunhofer Institute-type model, you think
that if we have a robust framework to begin with to protect industry—to
hold on to its secrets, for want of better terminology—that
will enable the new model to move forward and not fail like the
Faraday model did?
Dr Bembo: I think
so. The negotiations over intellectual property often fall down
in part on issues of costing and pricing of work. There is a whole
raft of issues here which relate to financial sustainability of
the TICs in terms of how they would price their work for industry
and the extent to which the universities would be involved with
them. I think we can distinguish a TIC model from a company working
one-on-one with a university where there may be an individual
negotiation over publication, over intellectual property rights,
etcetera. So I would anticipate a rather different model more
geared to the needs of industry. For example, if a company works
with a university on a consultancy or a contract research proposal,
then it is very rare that there is an issue over things like publication,
because if industry is paying the full economic cost for work
then there is not an issue with the rights to the results sitting
with the industry partner.
Dr Bradshaw: I
absolutely agree. Establishing a framework early on is critical.
We do have a very good starting point with the Lambert model agreements,
one of which is around contract research. There are others around
consortium research, which the TSB already uses.
Since we are moving closer to the commercial side
of things, I wouldn't rule out also looking at some of the models
used by some of the RTOs and commercial operations to see if we
can learn some best practice from them. So the MIRAs, TWIs and
BREs of the world, C-Tech Innovation and a few others have good
models on how they deal with business on a regular basis. Let's
get the framework right, let's open them up, look at the models
and get that set early on. That will give the businesses confidence
to engage.
Q21 Chair:
That is the whole of the independent research organisations?
Dr Bradshaw: They
have got some interesting models about how they do it; they are
very commercially orientated and obviously much closer to business.
If there are some extra things we can learn from that, then we
should do at this early stage.
Q22 Gregg McClymont:
Can I ask about the Faraday partnerships and why they failed?
Can you elaborate on why they may not have worked so well in England?
Professor Parker:
They were not set up to be sustainable and yet they were supposed
to be sustainable, so they had engagement but they didn't have
strong enough engagement with industry, so industry were observers
rather than being committed to the centres in a true financial
sense. As I say, the only one that has really flourished is what
has become the Materials Centre at the Begbroke Science Park in
Oxford. I think that has made the transition to a successful centre.
It is probably not quite in the original Faraday model, but you
can trace the roots of the Faraday in what is there today. Many
of the others didn't have that commitment from industry from the
outset. They did not engage with industry in the right way, so
there was this belief that you could lay out the market stall,
put all your technology on it, people would come in, buy things
and go away again. I think it really has to be a true partnership
if it is going to work, and that's what we must ensure with these
TICs.
Dr Bradshaw: I
think part of that comes back to the governance structure. If
you have a management structure which is led by business, then
that is going to help.
Q23 Gregg McClymont:
That brings me to the question of how the TICs are to be governed.
What kind of structure do you envisage? Obviously, there is a
tension between, say, Fraunhofer, which has strong corporate governance,
but also maintaining autonomy for independent individual institutes.
How do we manage that tension, if it is a tension?
Dr Bradshaw: I
think certainly autonomy. Organisations need to operate at arm's
length from Government and get on with the job of commercialising
research and technology with business. I think an element of co-ordination
is still needed so that we don't have TICs which end up, as they
evolve, duplicating work that is going on elsewhere, when they
could instead bring in new ideas and new technology from other
parts of the system. So they are co-ordinating with other TICs,
they are co-ordinating with TSB activities (and perhaps their
innovation platforms) and are co-ordinating with the Research
Councils. You need a governance structure which also allows for
co-ordination and that they are not just set up as completely
independent commercial operations. They have got to link in with
other parts of the innovation system. So I think the management
board needs to be able to have those links with the university
research side as well. But I would urge that the governance structure
includes business as a very strong part of that and helping to
lead the organisation.
Patrick Reeve:
If I could add to that, if you set a TIC a task of addressing
a certain sector, that is fine, but sectors do develop and change
dramatically over time. I think that the TIC needs to have the
autonomy to go and develop its own path for success in any individual
sector, and maybe even partially lead it as well, if necessary.
Dr Bembo: We have
seen an increasing flexibility in the basic research funders in
the UK, primarily the UK Research Councils, in supporting work
which crosses their remits. There is "discipline hopping",
as it is often called. I think that is important in terms of
the way that the TICs are set up so that there is scope for them
to carry out projects which cross two or more TICs and they don't
end up as silos of technology.
Q24 Gregg McClymont:
Would the management board then be the appropriate level to make
the decision about what sectors to focus on, because clearly that
is going to be key but it is always tricky? I guess the logic
of what you are saying is that business is in the best place,
probably, to make the decisions about what the growth areas are
likely to be.
Professor Parker:
Certainly, if we are going to follow this one third, one third,
one third model, so that one third of the money is coming directly
from business, then business, clearly, has to have a strong say
in how that money is spent and whether it is spent well. So setting
these boards up from the outset with a good business presence
is important, but I think also some slightly more remote level
of oversight from TSB itself to just keep an eye on the centres
and make sure that you don't get too much scope creep and they
don't go off into areas that those centres weren't supposed to
go off into and start overlapping or duplicating what is done
elsewhere. It is always useful. It has got to be, probably, a
dual level of oversight. I think the TSB itself can bring some
insurance that the centres stay within their remit but also that
they are encouraged to work together where it is appropriate.
Q25 Gregg McClymont:
Finally, Chair, the make-up of the board in terms of the representatives
would be very important in that, presumably, people are likely
to favour their own industry as one that has scope for growth.
Would that be a fair point? Does somebody have to hold the ring?
Professor Parker:
As with any board, as a shareholder you're interested in the interests
of your sponsoring company. As a board member your interests are
in the well-being of the company you are asked to manage. I am
often in both of those positions in some of the joint ventures
we have. People from industry do understand those tensions but
I think we have to ensure a broad enough spread to start with.
As I say, if you are expecting industry to put in a lot of money
and other sectors of industry are not willing to invest, then
to direct a centre to do more work for those centres of industry
that are not investing is a little unreasonable. So it will gravitate
towards those people who would get the most benefit from the centre
and are willing to invest most, I would suggest.
Patrick Reeve:
I would urge you to have strong executive management who can make
decent commercial decisions in a fast-changing market and not
be overly stifled by the supervisory boards.
Q26 Chair:
One of the important groups of customers in such centres will
be the small and medium size enterprises. There does appear to
be evidence that the existence of the institutional support in
Germany is one of the reasons why there is slightly longer-term
finance for developing companies in Germany. One sees more organic
growth of businesses there than here. The SMEs have a hugely important
role, yet we have tended to talk about companies the size of Rolls-Royce.
How do you see SMEs fitting into the structure and being part
of that governance as well?
Dr Bembo: The nature
of the support that university-linked activities can provide to
SMEs is very different from the type of support that we can give
to large businesses and multinationals when we work with them.
What you might find is that there is a differentiation in the
types of services that would be offered to SMEs as opposed to
take-up from larger businesses. For example, we see a lot of consultancy
take-up from the SMEs that we work with as universities. We see
SMEs wanting to access university facilities, so large scale equipment,
for example, and other infrastructures that they couldn't invest
in as individual companies, as opposed to getting involved with
larger scale demonstrator projects and development on a larger
scale. There will be different offerings that appeal to the different
sizes of company.
Professor Parker:
I think the other thing to recognise is that many of our successful
SMEs don't have a route to market in their own right. They don't
just go out on the street and sell their wares. They rely on larger
integrators to take their products, their ideas and build it into
a system or product that eventually does go to the market. That
is true in most sectors—the motor industry and our industry.
I think there is a good record of larger companies being able
to take their SMEs from the supply chain with them into these
activities, recognising that most SMEs tend to have a much shorter
timescale focus. If you say, "Oh, look, there's this European
programme we really ought to do. It'll start in two years time
and last five years", then most SMEs glaze over and say,
"Come back in six years' time and we'll have a look at it."
I think you have to be willing to take the SMEs with you and also
create a flexible structure so that they can engage later in the
day, perhaps. The big companies might be willing to sign up for
something on day one that is a 10-year programme. We've done it
with the Energy Technologies Institute. We have committed our
money for the next 10 years. But most SMEs wouldn't do that. You've
got to create a structure that is not closed at the outset but
that can bring SMEs in and can find novel ways for the SMEs to
engage.
Patrick Reeve:
Our experience is that the number of SMEs that we come across
have a long-term need for capital intensive facilities that they
have no access to otherwise. That comes back to my idea of a nexus,
whereby it is a facilities as well as an advice and services-led
opportunity which SMEs can plug into for quite a long period of
years and maybe even be co-located with.
Q27 Chair:
This is where your Rutherford-Appleton example comes in.
Patrick Reeve:
This is the example we have heard, yes.
Dr Bradshaw: I
agree with all of those points. I have ticked them all off my
list. The one other issue, I suppose, that SMEs have time problems
with is knowing where to go to start off with. Even some large
companies find that is a bit of a problem, but SMEs, in particular,
often do not know where the best facilities are that they could
go and tap into, where there is research going on from which they
can benefit and where there is best practice from which they could
learn. Part of setting up the TIC model ought to be to try to
work out a better model of getting that information out to the
community that might actually want to use this.
Q28 Gavin Barwell:
Can I bring you back to the issue of funding which a couple of
you have touched on during the course of the evidence that you
have given? In terms of annual core funding from the Government,
what's your view about the level that a typical Technology Innovation
Centre will require?
Professor Parker:
My own view is that the starting point is about £10 million
per centre per year in terms of the core funding. I think that
the one third, one third, one third model is a reasonable one
to aim for. You have to recognise that if one third of it has
to come from winning grants and one third of it has to come from
attracting industrial members, they are not all going to be there
on day one, so the Government may have to face up to the fact
that the pump priming needs considerably more than one third of
the money in the first place and it then settles down to that
model with time.
Patrick Reeve:
It also depends on what is there already. So if it is an existing
facility with, maybe, an existing commercialisation income stream
on top of that, maybe it will be less, but I think you do need
to have a 10-year horizon. I know that Ric may not agree, but
I do think that after 10 years, if you can see your way towards
doing without Government funding, then so much the better.
Dr Bradshaw: I
think the £10 million figure is probably a sensible starting
point, but some centres may well be more capital intensive and
they may require more than that. Others may be able to operate
with less than that. Over time I think you would see them evolve
to a level of funding that makes them more sustainable. I thoroughly
agree that it does need to have long-term core funding. The sort
of balance of about one third business or a bit more, maybe one
third to a half, and one third also Government and maybe contracts
from Government delivery bodies, Agencies, Departments and things
like that, might also be useful. I don't want to specify exactly
what it should look like, but that seems broadly about right.
Dr Bembo: Again,
working from the figure of £10 million per annum, I think
it highlights that we need to work from existing capital investments;
so, where there are infrastructures have been put in place in
TIC-like installations already and/or in universities, then we
need to capture those. It may be that some of the TIC investments
may be based around distributive facilities so that there may
be capabilities in a number of universities in a region, for example,
which could be brought together.
Q29 Gavin Barwell:
There are two issues that come out of that. The Government have
given a budget of £200 million over four years, so it is
about £50 million a year. So, clearly, you have all made
the point that we may not be talking about all new centres. Some
of it may be based around existing infrastructure. What number
of centres do you think that we are going to get for that £200
million based on what you have said about what you think the core
Government funding required is?
Professor Parker:
I would have thought five to eight. Eight is certainly the maximum
you should try and deal with with that sort of funding. We are
more likely to get a bang for our buck if we stick closer to the
five end.
Dr Bradshaw: I
am not going to pick a number. I said at the very beginning that
critical mass is absolutely important. Don't try and spread the
money too thinly. It's going to mean that there will be some hard
decisions to be taken. That may well then mean that with a limited
budget you can only fund five centres properly or maybe eight
or 10 at the most. You need to start with the actual business
need first and work upwards, rather than thinking, "I've
got £50 million. Let's try and spread it thinly over as many
centres as possible."
Q30 Chair:
That's a drop in the ocean compared with 59 Fraunhofers in Germany
plus all of the other institutes.
Dr Bradshaw: Yes.
Professor Parker:
It's a start.
Q31 Gavin Barwell: The
other issue I wanted to pick up on was this issue of length of
funding, certainty, as it were, and providing sustainability.
The TSB has told us that the effectiveness of some of the existing
centres has been hampered, in part, because the RDAs have only
been able to commit to three years' funding. In terms of the Government's
current position, you've got a four-year spending window that
the Chancellor has set out. How do you think Government can balance
this issue? Clearly, on the one hand, Professor Parker, you
said that a 10-year contract would be the ideal from your point
of view. Clearly, on the other hand, if the previous Government
had been making public spending commitments 10 years ago, given
what's happened in the world economy, it is difficult for Government
to make commitments on that length and scale. How do you think
we strike a balance between those two tensions?
Professor Parker:
I think a good example is that the Energy Technologies Institute
was set up by the previous Government to run for 10 years, and
industry and Government signed up for that at the time. Clearly,
you must have success criteria. There has to be, probably, a mid-term
review point at which you say, "If this isn't working, we
are not going to just all fund it for another five years,"
so I think a five plus five model is quite viable. With anything
less than that, if you are really talking about these things getting
a head of steam up and delivering something, then with a three-year
horizon you are just about getting something working by the time
somebody says, "Well, is it working? Shall we stop it? Shall
we start it?" To get good quality staff to sign up to go
to a new centre for a reasonable period of time, then to be able
to offer them at least a five-year contract is valuable.
Q32 Graham Stringer:
Can I just go back to what I think lay behind some of David Morris's
questions? There are some excellent examples of the exploitation
of academic ideas both commercially and technologically. Is there
a real cultural problem in taking ideas out of academia in that
the academics' interest is in getting papers published as quickly
as possible, whereas commercially you want to keep things secret,
patent them and develop them? Is that a problem, and if it is
a problem how can TICs help to address that issue?
Professor Parker:
I think there are two issues. There is what is usually called
"The Valley of Death" where an academic has got bored
with something because he has been working on it for three years
and thinks he understands it, but it is still a sticky black mess
in a test tube and somebody in industry can't see it being a product.
The TICs have a vital role in bridging that gap, in taking something
out of academe that is past the academic curiosity point but not
yet applicable as a product.
The other point on publication versus patenting is
that one of the benefits of the, at times, difficult debate on
IP ownership with the universities over the past five or 10 years
has been that they do recognise the value of IP now. We may not
all agree on ownership but certainly universities are switched
on to the fact that you shouldn't just put the idea out into the
public domain and then say, "Oh, gosh, I wish I'd patented
that." So we work very closely with the universities with
which we have contacts. We help them patent. We often pay for
the patenting. We reward the individuals through our own inventors'
reward scheme for the patents they generate. I think that encourages
them. It does not proscribe publishing. It doesn't actually stop
publishing. It just says that you need to have a mature discussion
on what's going to be published and when, and just lay out that
map in time. Once you have filed the patent, then they can go
ahead and publish because, effectively, it's in the public domain
anyway.
Q33 Graham Stringer: But
it is still a problem, is it?
Professor Parker:
We very rarely have problems with the academics we work with in
terms of any tension between them wanting to publish and our trying
to stop them publishing. I can only think of a couple of instances
where we have absolutely embargoed something and they were both
for national security reasons and not for commercial reasons.
Dr Bembo: If I
could make a point, in around 15 years of working in this area,
I have been through some quite protracted negotiations on what
goes into an agreement between a company and a university on publication,
on IP ownership and exploitation. In reality, in all but less
than a handful of cases, actually, the agreement goes into a drawer
somewhere and there is an effective working relationship between
the academics in question and the company or companies. There
is no barrier to publication and to exploitation of the science.
I think this is a slightly overblown issue and it comes back to
the point we were talking about earlier on about having effective
frameworks in place for the TICs so that everyone knows the ground
rules when they start a particular piece of work.
Q34 Graham Stringer:
If we can go back to finance, I think the CBI has said that the
Fraunhofers give Germany a bigger impact for funding with European
Union funding streams. Can TICs help business get into those European
funding streams?
Dr Bradshaw: There
is certainly a role for them to do that. We find that universities
in the UK are actually very good at tapping into the EU framework
programmes, but business rather less so. As Ric very neatly pointed
out, it's very much the SMEs that get turned off because of the
bureaucracy involved and the wait—the length of time of
process—before being able to get any money out of the system.
If we have TICs set up as national recognised research centres
that can bid into EU funding and help to co-ordinate and organise
some of that, I think that would be a very good role as part of
their function.
Professor Parker:
If I could just add to that, one of the biggest single programmes
at the moment in Europe is the Clean Sky Joint Technology Initiative.
There is €1.6 billion of funding. A lot of that goes to the
national research centres in Germany and in France—DLR and
ONERA. What have we got? Well, we've done away with our National
Aerospace Research Centre. It's now QinetiQ, which is a private
company, which can only go into these things if it brings its
own money along or if industry pays for it as a sub-contractor.
So we are losing out today. I think the TICs can only help by
not just helping industry get that money but actually winning
that money themselves to fund the research and the pull through
that they need to do them.
Patrick Reeve:
The other source of finance for the TICs and their activities
is clearly venture capital, where there is and continues to be
a growing use of venture capital by the university TTOs, and you
have seen the new fund raising by Innovations earlier this week
or last week. I think that is potentially an area that could increase
quite sharply over the years.
Q35 Graham Stringer:
You have just answered my next question. Basically, how should
the overall capital investment in TICs be funded? You have mentioned
venture capital as an important source. Where should all of the
capital funding come from? How should it be funded?
Patrick Reeve:
The capital for the facilities?
Graham Stringer: Yes.
Patrick Reeve:
My view is that the £200 million should be geared towards
setting these things up. The running costs should, over time,
start to be more self-funding.
Dr Bembo: I noticed
that the Fraunhofers have tapped into European Regional Development
Funds for those areas which can access ERDF. Certainly last year
they drew down tens of millions of Euros to establish new capital
facilities. That is certainly something we should explore in the
UK.
Dr Bradshaw: Again,
the existing centres did do quite well out of the RDAs for their
capital support, so whatever this new structure is, it needs,
at the very least, to provide a similar mechanism. One of the
things that has been quite successful in the Advanced Manufacturing
Centres is that the equipment suppliers themselves see these centres
as a showcase for their equipment, so they often give the equipment
free of charge. They say, "You use it in this centre, and
if everybody comes here and figures out that this is the best
tool to do their job on then they'll want to buy it from us."
So it doesn't have to be all funded from the centre.
Q36 Stephen Metcalfe:
By what criteria do you think Technology Innovation Centres should
be judged to be successful?
Dr Bradshaw: Professor
Parker had a very good list of things that they already use for
their University Technology Centre, which sounds like a useful
mechanism. I think a few other things that you could add into
that are commercial income—obviously the amount of commercial
income they are bringing in, and are they bringing in repeat business,
because that will show that there is a mark of quality in that
centre that others want to come back and use them again. I think
those would be two central ones. I would look at things like
patenting and other output measures—how much of their work
has gone through into commercialisation. I wouldn't look at things
like academic publications. That is something I am trying to rule
out from this exercise so that the people involved do not feel
they need to produce something for an RAE equivalent. It is focused
on that commercial side.
Professor Parker:
I would agree with Tim. The critical thing and the lesson from
the past is to make sure that these are output focused metrics,
not just activity metrics. Too many of the RDAs' innovation activities
were measured by advice to industry. They ticked the box, 500
instances. Was it good advice or bad advice? Did the industries
get better as a result or worse? We need to ensure that there
is an output measure but also recognise that cause and effect
in the research arena have a long time span, so expecting to put
money in on day one and at the end of that year be able to measure
what that particular slug of money has done isn't going to happen.
It's got to be over a three or four-year period that you are making
these assessments.
Q37 Stephen Metcalfe:
Do you, therefore, envisage the TICs having a life expectancy
so that they would, perhaps, peak having looked at a particular
area and then decline again as things change?
Professor Parker:
It depends on whether the technology itself is long standing or
whether it is a transient, emerging technology that will become
established and embedded. We have set up centres around advanced
casting. Casting has been around since the Babylonians, so it
is not a new technology, yet we are still learning about it today.
I think there will always be a need to progress the basic methods,
the basic computational tools that industry needs and the basic
manufacturing tools, but individual technology areas will become
transient, well-established and move on.
Dr Bradshaw: I've
got a very good example of that. If you wanted to look at things
like mobile phones, you might want to set up a mobile phone technology
and innovation centre—well, fine. It will probably become
an expert at producing mobile phone technology. But as we all
know, the world has moved on rapidly and, instead of phones per
se, effectively we now all use mobile computers operating with
a content rich environment and tapping into things that you used
to do on a desktop. They just now happen to have a mobile phone
chip in these devices. So you wouldn't want a centre which just
sits there and does its one thing ad infinitum without realising
that technology has changed and that the commercial realities
have changed. These centres have to evolve. They will have a time
stamp, but some may well be long term. They may be 20 or 30 years.
Some may well come in and do a peak of activity and then go out
again. So long as you have a review system that identifies that
and you have a business-led board which is saying, "No. Things
have moved on. The commercial opportunities are now very different.
We have got to build capability in a different area", then
that should be part of your process.
Q38 Stephen Metcalfe:
It is not inconceivable that centres will come and go depending
on whether they meet their assessment criteria, they are judged
as being successful and that they are performing a need, but,
as long as there is a system in place to judge that, then that
will continue to work?
Patrick Reeve:
They will change over time, as indeed markets change.
Q39 Stephen Metcalfe:
Yes. And if they don't?
Patrick Reeve:
Then it's curtains.
Q40 Stephen Metcalfe:
Finally, do you think that calling them TICs is the right name?
Can you come up with an alternative?
Dr Bradshaw: I
think the naming is a detail, a second order point, at this stage.
A name is just a name. The important thing is having a brand,
and you only get brand with reputation. I think you will have
that established over time. So whatever you call them, if they
actually do a good job and they are recognised by business as
being the place you have to go to if you want to commercialise,
then you build a brand, and that's what's important.
Dr Bembo: I actually
think whatever you call them is very important because there are
a number of offerings out there at the moment. We have already
highlighted a number of examples of existing centres and institutes
around the UK. So, giving these a strong brand, a strong label,
is going to be important. I think the Rolls-Royces of this world
will recognise what they are because they are involved with things
like ETIs and all of the other pseudo TICs around the UK already.
But the SME community and the smaller businesses will need to
recognise what they are getting into when they are working with
these sorts of centres. I think, actually, it is very important.
Also differentiating what we are talking about now from what's
already in the market, for want of a better term, is also very
important.
Professor Parker:
I think that "TICs" is rather unfortunate, so finding
a good name quickly for these would be quite useful. I agree with
Tim that it is about brand management. It's about them having
a strong brand and one that people associate with, so finding
an inspirational figure to name the centres after would help people
understand what those centres are trying to achieve. So Henry
Royce Centres would be a good start.
Dr Bradshaw: Surely,
Andrew Miller Centres.
Chair: As we are at the
end of the session, maybe we should invite you to spend your Christmas
pondering that last question. Maybe the folk who are listening
to our exchanges externally might come up with some bright ideas
that we could feed into our reports. Thank you very much for your
attendance this morning and for being so frank. It's been an extremely
helpful session. Thank you.
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