Technology Innovation Centres
Written evidence submitted by The Centre for Process Innovation Ltd (CPI) (TIC 28)
Technology Innovation Centres
1.
INTRODUCTION
AND DECLARATON OF INTERESTS
The Centre for Process Innovation (
CPI
)
is an innovation centre that serves the Process Industries
.
T
he Chemistry Innovation K
TN notes that the
chemistry using
industr
ies 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 a
n
open access capital asset base of over £55m and employs over 120 people from a w
i
de 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.
2.2.
Public
investment in
science and technology
development
must be affordable
.
If
the
re is inadequate return,
continued investment is difficult to justify
.
Currently the
UK
f
avours
knowledge creation
over the development of
p
roducts and services
. I
nsufficient resource
is placed
o
nto 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 a
nd
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 p
ublic investment is
also
used to
identify
research
work that could be d
evelop
ed
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
th
e
innovation step
is insufficient to ensure that value is created from the
UK
’s
excellent
science and technology
research
.
T
he
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
,
th
is
research, innovation and
commercialisation
supply chain is referred to in
Technology Readiness Levels (TRLs)
.
TRLs range from 1 to 9
.
U
niversities 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
£
4
bn
and £12bn
by 202
5
.
T
his 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 £
4
bn
to the
UK
economy by 2020
– Assuming the
UK
takes
5
% of the global market
.
T
he 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
:
a
ll 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 T
echnology
S
trategy
B
oard
’s technology competitions.
3.14.
The CPI model
has been developed and tested to serve the process industries
.
It is
now being applied to h
igh temperature processing
in collaboration
with Tata Steel
to develop
a
c
entre
for
gasification and pyrolysis tec
hnologies
.
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 Rober
t
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 p
r
oblem
CPI
is
work
ing
with the
investment community
to
develop
collaborative cross sector funding models t
hat
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
invest
ment
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
department
s
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
c
ould 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
co
uld be tasked with
implementing
the strategic plan
.
This body should be independent of the research councils and direct government management
.
CPI believes that t
he 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 strengthen
ing
and develop
ing
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 reward
s 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 e
s
tablishment 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
01 December 2010
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