Technology Innovation Centres

Written evidence submitted by the Technology Strategy Board (TSB) (TIC 67)

Technology Innovation Centres

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 incentivise s 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 ⅓, ⅓, ⅓. 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 ⅓, ⅓, ⅓ 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 (E.g. 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

02 December 2010