Written evidence submitted by The Centre
for Process Innovation Ltd (CPI) (TIC 28)
1. INTRODUCTION
AND DECLARATON
OF INTERESTS
The Centre for Process Innovation (CPI) is an innovation
centre that serves the Process Industries. The Chemistry Innovation
KTN notes that the chemistry using industries in the UK turnover
over £800bn/yr and directly employs over 2.3 million people
(see appendix).
CPI is based in the North East of England and serves
the Industrial Biotechnology, Advanced Manufacturing, Printable
Electronics and High Temperature sectors. It is an intermediate
technology institute that sits between academia and industry.
CPI has an open access capital asset base of over £55m and
employs over 120 people from a wide range of business and technology
disciplines. It works with SMEs, large corporates, universities
and the finance community to link market pull with technology
push and has so far supported the creation of over 120 new businesses
and provided a return of some 780% on the public investment into
the centre.
CPI is seeking to become on of the first elite independent
technology innovation centres (TICs) announced in the recent comprehensive
spending review that work between invention and the commercial
market.
2. What is
the Fraunhofer model and would it be applicable in the UK?
2.1. The Fraunhofer model
is part of the German research, innovation and development system.
There are 59 Fraunhofer Institutes grouped into 7 major technology
areas. They operate between invention and commercialisation.
Their role is to link researchers and industrial companies.
In a typical year the Fraunhofer network turns over €1.6
billion. A third of this is contributed directly from the German
federal and Länder regional governments. The other 67% come
from a combination of private organisations and from publicly
financed research projects. The additional public funding comes
from German technology projects and other public organisations
such as the EU. Total public funding from all sources is around
50%. Although linked to individual Universities the network operates
as separate businesses with different skills.[3]
2.2. Public investment in
science and technology development must be affordable. If there
is inadequate return, continued investment is difficult to justify.
Currently the UK favours knowledge creation over the development
of products and services. Insufficient resource is placed onto
transforming research into market ready products, processes and
services that create significant value in the economy.
2.3. Public investment is
required for research and discovery (knowledge creation) where
risks are highest and uncertainty is greatest. This is needed
to further scientific understanding and to discover ideas that
could create economic value. The UK is one of the acknowledged
world leaders in creating knowledge through its public investment
in research and discovery.
2.4. In the UK's competitor
countries public investment is also used to identify research
work that could be developed into commercial products and to catalyse
private investment. The development and commercial demonstration
of the technology is also supported, leading to subsequent exploitation
by the private sector.
2.5. This is the Innovation
Phase that is filled by the Fraunhofer Institutes in Germany (similar
organisations operate in other countries such as VTT in Finland).
In the UK the amount of public funding going into the innovation
step is insufficient to ensure that value is created from the
UK's excellent science and technology research. The UK does not
have enough public/private innovation centres like the Fraunhofers.
2.6. The conclusion from
the comparison with Germany is that the UK needs to invest to
fill the innovation gap between research and commercial exploitation.
The proposal to establish a network of elite independent technology
innovation centres (TICs) is both sensible and appropriate. These
would combine technology innovation assets with incubation facilities
and have strong links with financial organisations (such as a
Green Investment Bank) that are willing to fund the development
of early stage technology businesses.
2.7. In some markets, this
research, innovation and commercialisation supply chain is referred
to in Technology Readiness Levels (TRLs). TRLs range from 1 to
9. Universities typically work in level 1 to 3 and commercial
businesses at level 8 and 9. The innovation gap is in TRLs 4
to 7.
2.8. TICs could resemble
the Fraunhofer Institutes, but CPI's view is that the UK should
follow a model where a small number of centres are focused on
technologies in which the UK has a high chance of global economic
success. This model gives the UK centres greater access to cross
disciplinary skills from a number of universities, allows the
centres to develop deep expertise in the technologies, and is
more market driven. This approach would bring greater focus and
market drive than the fragmented Fraunhofer approach.
2.9. The centres need to
be independent from universities and co-ordinated by a central
body (the Technology Strategy Board). An ideal structure would
be have 10 or 12 key technology innovation centres each with 5
to 6 satellite centres rather than Fraunhofer's 59 centres working
in 7 groups.
3. Are there existing Fraunhofer-type research
centres within the UK, and if so, are they effective?
3.1. CPI is an example of
a technology innovation centre in the style of a Fraunhofer Institute.
Although just over 6 years old, (Fraunhofer and VTT are each
more than 50 years old), CPI is already recognised as a TIC by
the equivalent organisations both in Europe and around the world.
Fraunhofer-Gesellschaft was a member of the CPI pre-incorporation
Board and contributed to setting-up the organisation.
3.2. CPI uses market knowledge
and technology understanding to develop products and processes
quickly and efficiently with minimal risk to its public and private
sector partners. IT works in Technology Readiness Levels 4 to
7.
3.3. CPI is a not-for-profit
company limited by guarantee. It is an independent company created
in April 2004 by One North East, the regional development agency
for the North-East of England, to address the innovation gap in
the process sector.
3.4. CPI's goal is to be
national in scale and importance with a strong international positioning.
We operate to world class standards to ensure that international
companies have the choice of working with the UK, and SMEs have
access to competitive and benchmarked world-class capability.
3.5. CPI has ambitious plans
to grow its two technology areas to revenues of some £50m
per year, and employing more than 300 staff by 2020. Even at
this scale, each of these areas will only be of average size
compared to a single Fraunhofer Institute.
3.6. Initially 100% funded
by One NorthEast, CPI is targeting a 50:50 public:private partnership
(the same as the Fraunhofer model). In the 6 years since inception,
it has diversified its sources of public funding to include Europe,
the Technology Strategy Board, and BIS amongst others, and reduced
its dependence on One NorthEast to well below 50% of its revenues.
Its commercial revenues have grown from zero to some 15% of the
total (£2.5m).
3.7. The CPI business model
develops processes and technologies that meet an identified market
need. It has already delivered substantial benefit because it
links the needs of business to CPI assets and technology expertise.
The approach combines business pull with technology
push. The model is to:
— Carry
out market analysis with businesses or partners that have technology
or a defined market need;
— Set-up
a team of technology, market and commercial professionals to design
assets to develop a range of technologies which meet the market
need;
— Find
a combination of private and public investment to build and operate
the development assets;
— Private
companies - both SME and large companies - use the assets and
CPI expertise to prove, develop and scale-up their technology
until it is ready for commercialisation;
— Companies
then invest their own funds to take the technology to market and
create value;
— The
development assets are retained and developed by CPI for use by
other companies and projects to build a UK capability in the sector.
3.8. CPI is driven by an
independent, business-led Board and which includes representatives
from academia. The Board and the CPI Executive management team
are assisted by a company technology advisory committee (TAC)
and each technology area is advised by specific technology and
innovation advisory groups (TIAGs). The TAC and the TIAGs are
independent advisory groups comprising recognised expert representatives
from industry, academia and the public sector. This approach
ensures CPI is being advised by the best.
3.9. CPI creates partnerships
between public organisations, academia and private industry to
deliver capability not available to any individual organisation.
This is delivered by a team of 120 highly qualified scientists,
engineers and other staff, who have extensive management, project
management and commercial experience.
3.10. The CPI team has consistently
delivered innovation assets and leading edge development programmes
on time and to budget. Since inception, it has grown at over
60% per year and now serves many major clients including Arup,
Tata, Croda International, Ensus, DeLaRue, Dr Reddy's, Johnson
Matthey, Unilever and Thorn Lighting.
3.11. It has far outgrown
its regional beginnings and has created a national and international
reputation in two technology areas which are strategically important
to the UK:
— Advanced
Manufacturing for the Process Industries - CPI develops advanced
manufacturing technologies for the energy, high value chemicals,
carbon capture and pharmaceuticals markets amongst others with
a combined potential future economic impact for the UK of between
£4bn and £12bn by 2025[4].
This business unit houses the National Industrial Biotechnology
Facility (NIBF), the Industrial Biotechnology Demonstrator (IBD)
and the Anaerobic Digestion Development Centre (ADDC). All have
significant funding from the Department for Business Innovation
and Skills (BIS) and the Department for Energy and Climate Change
(DECC).
— Printable
Electronics - CPI is home to the National Printable Electronics
Centre (PETEC) where experimental processes are transformed into
manufacturable products for a market expected to be worth some
£4bn to the UK economy by 2020 - Assuming the UK takes 5%
of the global market[5].
The asset base has been created with significant support from
BIS. It targets barrier coatings, advanced material deposition
processes, printable electronic materials, printable circuits
for high resolution display and smart packaging applications,
solid state lighting and organic photo-voltaics: all areas where
UK industry can develop value from the global printable electronic
supply chain.
3.12. At CPI, these technology
areas have a capital asset base of over £55m. This has been
largely funded by the public sector and is available on an open
access basis.
3.13. CPI and its assets
feature largely in the collaborative projects. Many are stimulated
by the Technology Strategy Board's technology competitions.
3.14. The CPI model has been
developed and tested to serve the process industries. It is now
being applied to high temperature processing in collaboration
with Tata Steel to develop a centre for gasification and pyrolysis
technologies.
3.15. CPI works with a number
of businesses that have been spun out of Universities such as
Imperial and Cambridge.
3.16. CPI is strongly networked
with academia and works with many of the leading research intensive-universities
in the UK. Examples include Cambridge, Imperial College, Manchester
and Swansea on Printable Electronics. In Industrial Biotechnology,
CPI is working with many universities including Durham, Manchester,
Newcastle, York and Robert Gordon and links are developing with
other leading UK institutions. We also have a number of important
relationships with overseas universities.
3.17. One of the main challenges
facing process technology businesses in the UK is that of raising
the early stage finance necessary to support long term development.
To help alleviate this problem CPI is working with the investment
community to develop collaborative cross sector funding models
that address this issue. This has been discussed with the British
Venture Capital Association (BVCA) and work is in progress to
develop an investment model that links TICs with the private sector
to support investment in early stage businesses.
3.18. The UK has only a small
number of potential technology innovation centres that work in
the innovation space, but most of the UK competitor countries
have purpose-built centres or institutes that fill this space.
In addition to the Fraunhofers, others include VTT in Finland,
and TNO and ECN in the Netherlands. Potential UK examples include
the Advanced Manufacturing Park in Sheffield serving the engineering
manufacturing industry and the National Renewable Energy Centre,
NaREC, providing testing services for the renewable energy industry.
The Hauser Review1 gives examples of other centres.
4. What other
models are there for research centres oriented towards applications
and results?
4.1. In CPI's view there
are three fundamental models that can be followed:
4.1.1. The creation of application development
centres in individual or groups of Universities. The advantage
of this type of centre is that the innovation process is located
close to the source of the invention. However, the disadvantage
is that it can only support the output of the university or universities
it serves. It is a technology-pushed model, and assumes that
the university grouping is doing market relevant research. It
limits the value creation opportunities for the UK and does not
support the wide range of inventive organisations that also produce
technology ideas. These include SMEs, large companies, individuals
and government organisations;
4.1.2. The development of single company based
innovation centres that focus on the technology of a specific
company. This type of centre can support the development of growing
businesses and keep them at the forefront of international technology
generation and thus create value for the company. The disadvantage
is similar to that of the university centres as it limits the
value creation opportunities to a specific company, is fraught
with state-aid potential, and does not support the wide range
of inventive organisations that also produce technology ideas.
This is unlikely to create the best value for the UK from a public
intervention;
4.1.3. The creation of independent technology
innovation centres that serve selected nationally important technology
platforms or industry bases. The advantage of this type of organisation
is that it becomes skilled at all aspects of the innovation process
and can serve a wide range of inventors/researchers. It can work
with a number of universities and companies within the technology
space and can support SMEs and inward investors as well. This
larger national centre can build up a flexible reconfigurable
asset base that can service a range of innovation ideas and processes.
The challenge for this type of centre is retaining the confidentiality
of the wide range of partners the organisation works with. This
is a manageable process with well proven mechanisms.
4.2. CPI's conclusion is
that the independent technology innovation centre model is the
most sensible approach to creating wealth for the UK as a whole.
In our experience, the centre is also likely to spin-out companies
to seed the process of building a cluster of companies, supported
by the centre.
5. Whose
role should it be to coordinate research in a UK-wide network
of innovation centres?
5.1. The UK needs a mechanism
to set the long-term strategic direction for science & technology.
Such a body should be drawn from departments in Government and
combined with senior figures from industry, finance and the third
sector. The role would be to define target markets and work
collaboratively to cover all the technology readiness levels.
The strategic technology areas should match national policies
and needs. Such a body could be established under the aegis
of the Department for Business, Innovation and Skills to provide
guidance to the Technology Strategy Board.
5.2. Once the technology
target areas have been set and funding decided a national body
could be tasked with implementing the strategic plan. This body
should be independent of the research councils and direct government
management. CPI believes that the appropriate body to co-ordinate
TICs in the UK would be the Technology Strategy Board (TSB).
It would need additional resource to deliver this function, but
strengthening and developing the TSB would deliver value to the
UK.
5.3. The TSB must coordinate
and not control the TICs. A performance management framework
is essential, such as in the Fraunhofers, where more public funding
rewards greater acquisition of private sector revenue up to a
limit (to discourage the centres from becoming too private sector
dominated), and failure is results in less funds. Such a process
will allow the centres to nurture an entrepreneurial approach.
5.4. It is also important
that the TICs play a significant coordination role with academia
and other TSB initiatives such as the Knowledge Transfer Networks.
The explicit collaboration that the TIC model brings between
the Research Councils, the TSB and Industry must be continued
through to individual universities, the TICs and their industry
partners.
6. What effect
would the introduction of Fraunhofer-type institutes have on the
Public Sector Research Establishments and other existing research
centres that undertake Government sponsored research?
6.1. The challenge is not
to decrease or diminish the amount of work done in the UK's Public
Sector Research Establishments and other centres. It is to ensure
that the UK fills the innovation gap between invention and commercialisation.
As such the establishment of technology innovation centres should
be seen as adding greater strength to the UK value creation process
by addressing a market failure.
7. OTHER
ISSUES
7.1. The European Union has a large number of
collaborative research, innovation and demonstration programmes
that are well funded. These include the Framework programmes
and the strategic energy technology (SET) plan. The UK contributes
to these programmes, but has no systematic strategy for securing
and using these funds to assist in its innovation activities.
The TICs should provide a focus and a strong base for bringing
UK industry together and creating a collaborative strategy with
our European partners that also secures funding to assist UK companies.
Nigel Perry, FREng
Chief Executive Officer
Dr Graham Hillier, CEng,
FRSA
Director of Strategy and Futures
Centre for Process Innovation Ltd
1 December 2010
3 CPI Internal Benchmarking Study June 2009 and Fraunhofer
website Back
4
IB 2025: Maximising UK Opportunities from Industrial Biotechnology
in a Low Carbon Economy, BERR, May 2009 Back
5
Plastic Electronics: A UK Strategy for Success, BIS, December
2009 Back
| 
