Written evidence submitted by the Technology
Strategy Board (TSB) (TIC 67)
1. The Technology Strategy Board is a business-led
organisation with a leadership role to stimulate technology development
and innovation in the areas which offer the greatest potential
for boosting UK growth and productivity. We promote, support
and invest in technology development and innovation for the benefit
of UK business. We spread knowledge, bringing people together
to solve problems or make new advances. The Technology Strategy
Board is the prime channel through which the Government incentivises
business-led technology innovation.
2. Declaration of Interest: The Technology Strategy
Board, sponsored by the Department for Business, Innovation and
Skills, has responsibility for establishing and managing a network
of Technology and Innovation Centres to help commercialise new
and emerging technologies. This follows the announcement by the
Prime Minister on 4 November 2010 that over £200m will be
invested in Technology and Innovation Centres over the next four
years. The Technology Strategy Board also has responsibility
for publishing a Strategy and Implementation Plan for Technology
and Innovation Centres in the UK by April 2011.
3. We welcome the opportunity to respond to this
inquiry and have set out our response below against the questions
set by the Committee.
What is the Fraunhofer model and would it be applicable
to the UK?
4. With fifty nine institutes and an annual turnover
of 1.6bn Euros, the Fraunhofer Group (FhG) is one of the largest
applied research organisations in Europe. Positioned between
Universities and industry, they have a strong reputation for making
scientific and technical excellence available to German industry.
The funding model is often expressed as 1/3, 1/3, 1/3. Approximately
one third of the funding is granted by the German federal government
and Lander; one third is collaborative research and development
type funding, including funding won competitively from EU programmes,
and the remainder is directly contracted commercial revenue.
There is a very strong Fraunhofer "corporate brand"
but within that each of the institutes has considerable operational
autonomy.
5. The way in which a particular model is deployed
is often dependent on the context and the environment in which
it will operate. The German and UK innovation systems are different
in both structure and the way they operate. The German innovation
system has evolved with an expanding Fraunhofer network firmly
embedded at its heart. Taking the Fraunhofer model and deploying
it in the UK without modifying the approach to take account of
the context of the UK innovation system is likely to result in
sub-optimal performance. Centres alone cannot stimulate innovation
and wealth creation in any economy. They must form an integral
part of a structured programme with a strategic vision.
6. There are however specific elements of the
Fraunhofer model, as well as similar elements from other international
examples, which are less context dependent. They therefore translate
more easily into the context of the UK innovation system. Such
elements include the 1/3, 1/3, 1/3 funding model; having critical
mass in an area; a large measure of autonomy for individual centres,
subject to performance; and, the need for a strong brand presence.
7. The sustained, predictable long-term public
investment in Fraunhofer Institutes has made it easier to deliver
critical mass. This is a long-term view that recognises that
the payback to the economy accrues over many years and should
not be viewed as something which will deliver economic growth
in the short-term.
8. Finding the right balance of national control
and operational autonomy of the Technology and Innovation Centres
is very important. The German funding model is fairly sophisticated,
giving more core-funding to Institutes as they increase commercial
revenue.
9. Robust working links to a strong and well
supported scientific research base are a pre-requisite, as is
the ability to draw from across the pool of talent in the whole
of the UK. Getting the incentives and interfaces right will be
critical to successful cooperation between Technology and Innovation
Centres, Universities and industry. In Germany, many Fraunhofer
Institutes play an important role in linking German Universities
with industry. The situation in the UK has developed in
different ways with different performance incentives for Universities
and business. It will be important that future UK Technology
and Innovation Centres establish the right linkages with the full
range of talent and expertise and that existing strong relationships
between business and UK Universities are also supported.
10. There is a requirement for business-focused
Technology and Innovation Centres in the UK to make it easier
for UK industry, particularly SMEs, to access world-leading research
and technical capability. The centres can play an important role
in helping businesses solve their technical and commercialisation
challenges. The centres should have:
— reach
into world-class science
— capability
to undertake collaborative applied R&D with business
— capability
to undertake contract research for business
— strong
business focus with a professional delivery ethos
— critical
mass of activity between business and knowledge base
— expertise
in skills development
— access
to world-leading knowledge.
Are there existing Fraunhofer-type research centres
within the UK, and if so, are they effective?
11. There are a large number of centres and other
organisations that operate in the UK to bridge the gap between
Universities and industry: there are the RDA and DA funded centres
(Eg AMRC, AFRC, CPI, and MNT centres); the Research and Technology
Organisations; Contract Research Organisations and technical consultancies;
and, coming from the other direction, there are University centres
(including centres such as the Innovation and Knowledge Centres
funded by the Research Councils and Technology Strategy Board)
and other public sector research organisations. However, we don't
believe there are any centres currently in the UK fully meeting
the requirements we believe necessary to be seen as a Technology
and Innovation Centre.
12. Effectiveness must be when a centre enables
economic activity that far outweighs the public investment. Effectiveness
must be helping to stimulate a vibrant industry around the centres.
This is long-term and difficult to measure. The only near-term
measure can be the eagerness of industrial partners and customers
to invest time and money in the centres.
13. The effectiveness of UK centres could be
much better and has to date been hampered by a number of things,
including:
— a lack
of long-term strategic integration and co-ordination with other
public investment measures and no overarching brand;
— a piecemeal
approach to investment in centres has not helped long term investment
in capability - the RDAs for instance could only ever commit to
three years of funding aligned to Spending Review periods;
— the
scale of many centres has been too small to have an impact on
the national economy, let alone achieve international recognition.
14. Public funds for centres can only be justified
if they are providing something special that the private sector
will not fund or is beyond the resources of an individual company.
Many centres have been established with injections of public capital
and then asked to become sustainable. This appears to result
in two main outcomes: either the centre approaches public funding
bodies for further ad hoc injections of capital investment for
major equipment refresh programmes, or the centre evolves to compete
against commercial players in more lucrative markets and ceases
to be "special". Centres require long-term investment
which is strategically managed and which enables the centre to
invest in higher risk areas in anticipation of business needs.
What other models are there for research centres
oriented toward applications and results?
15. There are many variations of research centres.
As well as the Fraunhofer Institutes, there are a number of European
and international centres which provide a range of slightly different
approaches. These include the Inter-University Micro Electronics
Centre in Belgium; the Industrial Technology Research Institute
in Taiwan; the Electronics and Communications Research Institute
in South Korea; the Torch Centres in China and the Carnot Institutes
in France. More detailed explanation of these centres is set
out in the review conducted by Hermann Hauser and so we have not
sought to provide detail here.
16. Every technology area and market operates
in a slightly different way and therefore the best approach for
a centre to help address the barriers to adoption of new technologies
by business will be different in each area. Most centres however
seek to reduce financial and technical risk making it easier for
companies to adopt new and innovative technologies. This would
include making available expertise and equipment that requires
an investment that no individual company could justify either
because of the size of the investment or the length of the pay-back
period.
17. Early stage, less mature technology areas
(for example those still looking for robust commercial applications
and models) may be more suitable for university based centres,
such as the Innovation and Knowledge Centres (IKCs) which are
jointly funded by the Research Councils and the Technology Strategy
Board. The IKCs focus more on emerging technologies in areas
of research excellence where scientific breakthroughs have been
achieved and where there is the potential to accelerate early
commercialisation.
18. Some technology areas may need smaller, more
local centres that drive the adoption, rather than the development
of a technology. Other markets may need a greater emphasis on
start-up incubation facilities, or increasing knowledge transfer
and sharing through virtual centres. In establishing Technology
and Innovation Centres in the UK, an important point worth stating
is that they will not be the right answer for every one of the
UK's priority areas and other approaches may be more suitable.
Whose role should it be to coordinate research
in a UK-wide network of innovation centres?
19. No matter how excellent, a UK-wide network
of innovation centres working alone would not be effective in
stimulating economic activity and anchoring the activity of global
companies in the UK. Investment in Technology and Innovation
Centres is one piece of a jigsaw. A strong research base on which
to draw is a pre-requisite. A business community willing to invest
time and money is essential. Public funding bodies with investment
programmes in relevant technologies and application areas are
vital to stimulate long-term activity.
20. The UK's investment in Technology and Innovation
Centres must be an integral part of a structured and coordinated
innovation system. The Technology Strategy Board, as the lead
innovation organisation in the UK, will be looking to take a much
more proactive leadership role in bringing coherence to the UK
innovation system. We will do this through working with a range
of partners and stakeholders. We believe we have the broad view
and the experience to ensure that Technology and Innovation Centres
are integrated and seen as part of the bigger picture and have
the ability to leverage other investments.
21. The activity delivered by each Technology
and Innovation Centre must be informed by its industrial customers
and public sector partners. The advantage of a model where the
majority of the funding must be won through competitive routes
is that it keeps the centres focussed on providing services that
remain relevant to business. It is important to set technology
and application areas in which the centres operate but within
those bounds each centre must have a reasonable degree of autonomy
in how it operates.
22. We believe the Technology Strategy Board
is best placed to provide the coordination and drive a UK network
of Technology and Innovation Centres.
What effect would the introduction of Fraunhofer-type
institutes have on the work of Public Sector Research Establishments
and other existing research centres that undertake Government
sponsored research?
23. The Technology and Innovation Centres will
not be direct competitors for PSREs or other UK research centres.
Their coverage and focus must be different but complementary.
The past 20 years has seen the disappearance of a large number
of public sector and corporate laboratories in the UK. The establishment
of a network of Technology and Innovation Centres in the UK will
help to fill the gap which now exists.
24. The primary objective of the Technology and
Innovation Centres is to make leading edge technology available
to businesses that would otherwise be beyond the reach of individual
companies and to solve the development, scale-up and other technical
challenges that face many innovative companies as they seek to
bring new products and services to market. The research that
is carried out by the Technology and Innovation Centres should
be aimed primarily at improving their offering to industry, and
informed by their interaction with industry.
25. In future, what is important is to get the
shape and position of the Technology and Innovation Centres right
in the UK innovation landscape so that they complement the PSREs.
They need to be appropriately incentivised to work with existing
research establishments and the wider research base and innovative
companies.
Technology Strategy Board
2 December 2010
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