House of Commons - Technology and Innovation Centres - Science and Technology Committee

Technology and Innovation Centres - Science and Technology Committee Contents

5 Operational model

Governance

100. The Fraunhofer Institutes in Germany rely on "simple and uniform corporate governance principles" and a "high level of autonomy of the individual Fraunhofer Institutes".[163] The Technology Strategy Board (TSB) appears to have taken these principles on board. The Technology and Innovation Centres (TICs) prospectus proposes a governance structure with three main elements:

i. Oversight Committee—which will oversee the network of Technology and Innovation Centres and will report to the TSB's Governing Board;

ii. Management Board—an autonomous business-led board for each centre that will oversee the programme of work; and

iii. TSB Programme Team—a small team within TSB to support the Oversight Committee and provide day-to-day delivery of the core funding programme.[164]

OVERSIGHT

101. Dr Bradshaw, from the Confederation of British Industry (CBI), explained that although TICs "need to operate at arm's length from Government [...] an element of co-ordination" was needed to ensure TICs did not end up duplicating work carried out by others.[165] Professor Parker, from Rolls-Royce, agreed that oversight from TSB should prevent centres from overlapping with work done elsewhere".[166] Dr Bradshaw added that the governance structure had to allow TICs to "link in with other parts of the innovation system".[167] Iain Gray, from the TSB, told us that the TSB would put in place an oversight board that would have "strong representation from both the business community with some representation from the academic community—big hitters".[168]

102. Professor Perry, from the Centre for Process Innovation Ltd (CPI), added that it was important to recognise that TICs would be "delivering value to the public sector in terms of economic benefit […] and therefore it's appropriate that the public sector is also represented in the governance process".[169] We asked Rt Hon David Willetts MP, the Minister of State for Universities and Science, what the Government's role would be in overseeing the network of TICs. He told us that:

What we are envisaging is these autonomous business-led management boards for each individual Technology Innovation Centre and an oversight committee that will be within the Technology Strategy Board […] However, ultimately, the TSB answers to Ministers and, of course, we are answerable to the Commons and bodies such as this one. So the overall strategic decisions and performance will be discussed with and cleared with Ministers.[170]

103. The TSB should coordinate the oversight of the network of TICs. We conclude that the Oversight Committee should consist of major players—with expertise in technology commercialisation and innovation—in business, academia, and from the public sector.

MANAGEMENT BOARD

104. Patrick Reeve, from the British Private Equity and Venture Capital Association (BVCA), argued that strong management of each centre was necessary to "make decent commercial decisions in a fast-changing market and not be overly stifled by the supervisory boards".[171] As such, each TIC would need an autonomous management board that would oversee its programme of work, independent of the Oversight Committee.

105. Professor Brook, from the Association of Independent Research and Technology Organisations (AIRTO), explained that TICs needed representation from the "constituency" to which they were accountable.[172] A number of organisations told us that the management board should include representatives from both business and academia.[173] Dr Bradshaw, from the CBI, suggested that business, in particular, had a very strong role to play in helping to lead the TICs.[174] This was a view shared by Professor Ridgway, from the Advanced Manufacturing Research Centre (AMRC).[175] The Minister agreed that the board needed "a very strong business element".[176]

106. Professor Perry, from the CPI, told us:

It's quite critical to recognise that the TIC is delivering value to the private sector, and therefore the private sector has a very significant role in the governance process, so that's the business-led, large corporate and SMEs, because there are different challenges in those.[177]

107. We asked the Minister about the balance of those represented on the board. He told us that he was trying not to specify things like the balance of the composition of a board.[178]

108. We agree with the Minister that each TIC must have a very strong business element. While we understand his reluctance to specify the balance of the composition of the board, we recommend that, to ensure the interests of SMEs are fully taken into account, at least one board member represent small businesses.

LEADERSHIP

109. The TSB recognised that the performance and culture of a TIC would inevitably come down to "a few key individuals, such as the CEO, Chair of the Board and other senior staff, who must have the right blend of enthusiastic entrepreneurial spirit, industrial experience and knowledge of the academic base".[179] The TSB has stated that it is committed to working with each centre, to create an appropriate framework for the appointment of these key individuals to ensure the TICs are effectively run.[180]

110. We asked Iain Gray if it would be beneficial for the TICs, like the Fraunhofer Institutes, to be run by an individual who is also an academic, such as a professor at a university, thus providing a link between the centre and the academic base. Mr Gray did not see this as "mandatory".[181] The Minister said that "it is not something we would forbid [nor do we] envisage that as a requirement".[182]

111. The successful launch and operation of TICs will require individuals at the top of the organisation who are not only talented managers but can build bridges between business and academia. While it may be going too far to require chief executives of TICs to be active academics, we encourage the TSB to help centres find suitable individuals who are well connected to the relevant research base.

The business model

112. The TICs prospectus indicates the TSB's expectation that each centre, once established, will be "an independent legal entity, constituted on a 'not for profit' basis separately from any host organisation or other major partners".[183]

113. We took oral evidence from representatives of two existing centres, CPI and AMRC, and asked them to explain their own business models to us. Professor Perry told us:

CPI is a company limited by guarantee […] and, as such, we can't receive private sector or financial institution investment […] so you need to create devices which, basically, are companies limited by shares, and that is where our spin-outs come in. We are trying to generate spin-outs for a number of reasons. First, so that we can attract private investment. Secondly, those spin-outs are using technology that we have developed and they will, therefore, reward that technology. Thirdly, at some point those companies will be sold and there will be equity proceeds for CPI in total.[184]

114. Professor Ridgway told us AMRC is "not a company limited by guarantee".[185] Its finances are administered by the University of Sheffield. The advantages of this were the ability to "get—if you're going for European funding—better returns on grant rates and overhead rates".[186]

115. Professor Brook, from AIRTO, added that:

When you look at trying to bring something like this [a TIC] into existence […] the model you generally come back to is the company limited by guarantee, at least to start with. You're then not beholden to a particular set of shareholders. You re-invest whatever surpluses you make rather than distribute them to the shareholders. Your assets can't be distributed to shareholders if the organisation does get into trouble.[187]

116. We asked the Minister if the TSB's expectation that centres would be independent legal entities would preclude some existing centres from becoming TICs. He told us he did not think it would be a barrier.[188]

117. We recommend that the TSB set out details of a preferred business model, including legal structure, for TICs. This model should draw on the experiences of existing centres and be capable of amendment as time goes on.

Managing intellectual property

118. With TICs having a remit to work across business and academia the effective management of intellectual property (IP) will be crucial. Professor Perry, from the CPI, told us:

It is a very important art form that the TIC is able to work with IP without leaking it and is able to work both pre-competitively and post-competitively. Pre-competitively is somewhat easier. Post-competitively, you are dealing with quite significant levels of investment and quite significant levels of knowledge, which need to be protected.[189]

119. Patrick Reeve, from the BVCA, considered that this was not such a problem in some sectors. He highlighted the pharmaceutical industry as a sector that had a good model for managing IP rights: "drug licences are often shared between more than one of the large pharmaceutical companies and [...] also with the universities as well". He added that the ultimate share of intellectual property was simply a question of who reduced the risk of the investment and at what point.[190] Dr Bradshaw, from the CBI, told us:

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.[191]

120. AMRC explained that it had dealt with IP rights in a unique way:

the [AMRC] model […] requires every partner to buy into the benefits of funding and undertaking generic research, the fruits of which can be shared, on a free licence basis, by the whole partnership. The knowledge developed is also available to the wider industrial community but a commensurate charge is levied to contribute to the ongoing research costs.[192]

AMRC added that industry partners were also able to pay for additional research outside the collaborative agreement. The IP rights would then be held by the company (or companies) commissioning the research.[193]

121. Dr Bembo, representing the Association for University Research and Industry Links (AURIL) and Universities UK, told us "horror stories […] tend to be fairly few and far between […] the negotiations over intellectual property often fall down in part on issues of costing and pricing of work".[194] However, Professor Brook, from AIRTO, warned that:

The more partners there are in a network [e.g. in a large hub and spoke network], the more complicated things can become. Then it is a matter of who is managing that network and who manages the TICs and what they do in disseminating best practice out to the spokes and how they want them to work […] to get this co-ordinated will take some time and effort.[195]

122. Iain Gray recognised that a "consistent set of rules" needed to be established and "the Lambert report provides a template that has worked between business and universities".[196] The Minister, however, told us that whilst IP rights would have to be negotiated, he was not sure that there would need to be "a national requirement" and that it would probably be set out on a per case basis.[197]

123. The management of intellectual property rights will be crucial to an effective working relationship between TICs, academia and business. We ask the TSB to set out principles for IP management, including an outline of current best practice, in its TIC implementation plan but we reject the need for prescription.

163 Ev w166 (Fraunhofer Gesellschaft) Back

164 Technology Strategy Board, Technology and Innovation Centres: a prospectus, January 2011, p 6 Back

165 Q 23 Back

166 Q 24 Back

167 Q 23 Back

168 Q 97 Back

169 Q 61 Back

170 Q 128 Back

171 Q 25 Back

172 Q 61 Back

173 Ev w7 (University of Leeds), para 4.5; Ev w32 (DREM Ventures Ltd, Optropreneurs Ltd, Pinacl Solutions UK Ltd and Grounded Innovation Ltd), para 54; Ev 43 (Centre for Process Innovation Ltd), para 3.8; and Ev w153 (The Russell Group), para 4.5 Back

174 Q 23 Back