Science and TechnologyWritten evidence submitted by The Electronics Technology Network

1. Summary of Outcomes

1.1 What are the difficulties of funding the commercialisation of research, and how can they be overcome?

Funding remains the significant barrier, however Product Development, and Business Management skills are cited as weaknesses in both SMEs and Universities. Within Universities, the practise to adopt Full Economic Costing is a deterrent, and in particular, makes the Collaborative R&D programme less attractive to SMEs. This report outlines recommendations to address these issues, specifically regarding funding.

1.2 Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

Technology, in general, is difficult to commercialise, due to the costs associated with prototyping, testing, and reaching into a global market. University research is focused towards new science and curiosity. Business would prefer a stronger applied research agenda. The recommendations address the issues related to building better partnerships between business and academia.

1.3 What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?

There have been examples, however, the interest shown by overseas companies concerning our University research should be a strong indicator, to us, that our research is worth exploiting, and we require a clear process to understand how this can be achieved.

1.4 What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

Current schemes have a mixed review. There is a view that more focus should be provided to assist SMEs. Current schemes put SMEs at a disadvantage, especially when working with Universities. Unnecessary bureaucracy and administration are cited as common problems with the current schemes. This report recommends alternative views to the CR&D scheme, and provides some feedback on their value.

1.5 What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

In an environment where liquidity is poor, and with funding being the greatest constraint, enabling business to get access to finance will greatly improve prospects for growth.

1.6 Should the UK seek to encourage more private equity investment (including venture capital and angel investment) into science and engineering sectors and if so, how can this be achieved?

Yes, and this is outlined in some detail in the body of the report.

1.7 What other types of investment or support should the Government develop?

The report recommends a voucher scheme to engage business, especially SMEs, with Universities. Not a new idea, but one that has worked in the past. Consideration should also be given to understand how the KTP scheme can be made financially more attractive to business, to enable them to realise the benefits of working with academia.

2. About this Survey

In response to the House of Commons, Science and Technology Select Committees call for submissions concerning the issues facing companies who wish to breech the “Valley of Death”, the Electronics Technology Network (ETN) conducted a survey across the UK Technology network of companies and universities, to gauge opinion for a number of recommendations that would address the issues.

The five recommendations focused on three specific aspects: Business working with Academia, Funding for Innovation and Promoting UK Technology and Innovation.

The ETN is well placed to comment on this subject, given its history as both a business network and a KTN (representing electronics), working with Government departments (BIS, UKTI and the TSB), Universities and the Business community, and with a membership of over 7000 (95% of whom are SMEs).

The survey was open for a short period (2 February until 6 February), and during that time, 238 companies made a response. Of the respondents, 76% have worked with Universities, 27% have engaged with the Knowledge Transfer Partnership (KTP) programme, and 28% have engaged with the TSB in the Collaborative R&D programme.

Respondents are a cross section of the technology sector, from SMEs, Large Companies and Universities. Many respondents have given their permission to acknowledge their response to this survey (see appendix 1), others have preferred to remain confidential.

In total, over 450 comments were received from the respondents, commenting, and often enhancing, the recommendations the ETN suggested. Notable comments are summarised in this report.

The views expressed in this survey, are the views of the individual, and not necessarily the views of the organisation they represent as a whole (the corporate view).

3. Business working with Academia

The Engineering and Physical Science Research Council (EPSRC) have £3.6 billion of research work-in-progress.

This is an untapped resource for the UK’s business community. Increasing the level of academia to business engagement to expose the commercial potential of this research agenda is a priority, and the first step in the process for commercialisation.

Recommendation #1—Promoting the UK’s University Research Agenda

Much more needs to be done at a regional level to highlight the Regional/Local Universities research agenda to business, in a language friendly to the business community (highlighting applications, functionality, markets). University research programmes should be show-cased through regular networking events, and accessible through a simple on-line portal

3.1. Technology Community Reaction to Recommendation #1

3.2 57% of respondents agreed with this recommendation.

3.3 A further 36% of respondents were in partial agreement, who supplied additional commentary worthy of note as follows:

3.4 Many of the comments related to the actual research that is being undertaken at Universities. Whilst there was caution to ensure that “blue sky” research is not diluted to the extent that the UK will not discover breakthroughs (such as Graphene), there was a general feeling that a mechanism needs to be put in place where a greater balance of University research is based upon “Business Needs”. The business community needs to be involved to set the research agenda, creating a stronger “market pull”, rather than a “technology push”.

3.5 Both penalties and incentives were suggested for Universities to encourage greater collaboration with business. Universities should be more proactive seeking business partners for research projects. Elevating the status and quality of technology transfer officers within the Universities was recommended. There is a perception that the University commercial staff are not regarded as critical, when considering the process to win new grant funding (for research), and therefore, are not highly respected.

3.6 Future funding for Universities should be based upon their past record of commercialisation. Incentives should be given to Universities to adapt research to reflect the skills and interests of their local business community, thereby strengthening the regions cluster. Universities should invite guest lecturers from business to further build stronger links between the business community and academia.

3.7 One significant barrier cited was the current RAE (Research Assessment Exercise) rating system that deters academia from collaboration with business due to the conflict between commercial interest and the need for publication and dissemination.

3.8 Whilst promoting a regional cluster of Universities may be pragmatic, and will serve the needs of the local business community, any related events should be marketed nationally. Businesses serious about working with Universities will travel if the agenda meets their needs.

3.9 An online portal, whilst welcomed, should be accompanied with networking events that gives both the University and Business participants the opportunity to discuss real collaborative possibilities. It is necessary to create a raison d’être for business to review the portal. A “National Research Directory” should be considered, applied consistently for not only universities, but other public bodies that receive grant funding for research (Public Sector Research Establishments)

3.10 It was felt that Universities over value IP. A more enlightened approach should be adopted, encouraging business to take up license opportunities. A review of Glasgow University’s model for licensing IP would be worthwhile.

3.11 To overcome the “language barrier” between academia and business, professional technical journalists should be employed to develop the abstracts that highlight the commercial value for research. It was noted that the project titles, abstracts and papers are not written for business, but for peer review, so it’s not surprising that there is a language mismatch.

3.12 The process for the now defunct Defence Diversification Agency should be reviewed for its merits to pull technology through to the market.

3.13 Only 6.8% of survey respondents disagreed with this recommendation. Many of the comments presented by these respondents were similar to those made above, especially the point that more funding should be placed into “applied” research. We generate too many ideas; the cost of an idea is much cheaper than the cost to commercialise the idea.

4. Business Working with Academia through Knowledge Transfer Partnerships (KTPs)

One of the most successful schemes to transfer knowledge from Universities to Academia is the Knowledge Transfer Partnership (KTP), formerly the Teaching Company Scheme. The scheme has been running since 1965, and is generally well regarded, although there remain issues concerning the cost to business, marketing the schemes to both graduates and companies, and the cost of administration.

The TSB are planning to cut the budget for KTP’s by more than 50% in 2014/15 (a reversal of recent policy, where their goal was to double the number of Graduate Associates in the scheme), despite a positive evaluation of the programme in February 2010.

Recommendation #2—Knowledge Transfer from the Universities

Review the KTP programme, specifically reducing the cost of administration, enabling the cost to business to be reduced to an attractive level to encourage greater uptake. Improve the marketing for the scheme, re-introduce the shorter, 6 month to 1 year schemes focused on product development.

4.1 Technology Community Reaction to Recommendation #2

4.2 70% of respondents agreed with this recommendation.

4.3 A further 25% of respondents were in partial agreement. In terms of getting business and Universities to work together, KTP’s are a good initial step, however some observations were noted.

4.4 KTP’s are reported to be more valuable at proof of concept, rather than during the commercialisation process. To improve this situation, an emphasis on projects that focus on product development should be a priority, utilising Business Development Graduates. Consider a scheme that would employ a “team”; engineer plus a marketer, a la Wozniak and Jobs.

4.5 In terms of cost, perhaps a “scaled” approach may be better, where micro companies pay significantly less than larger companies.

4.6 Respondents who had previously participated in a KTP scheme mentioned that the administration burden is seen as significant, and should be reduced.

4.7 For smaller companies a 6–12 month KTP project would be welcome, with an option for an extension.

4.8 Participating companies are seen as the “lesser” partner (compared to the University), and should be given more control, especially for smaller companies.

4.9 An alternative view to be considered would be science based apprenticeships, similar to the “thin sandwich” concept of the 80s.

4.10 Marketing KTP’s

As suggested by a number of respondents, the marketing of KTP’s may not actually be the issue with regards to their uptake. 77% of the respondents were aware of the programme, however only 27% of respondents had actually engaged, (Charts 3 and 4).

Chart 3

Chart 4

A key selling point of the KTP programme is the value add associated by working with the University Department, enabling business access to both academics and equipment (potentially unavailable to an SME). This is a key argument made by KTP Advisors when selling KTP’s to business; however the uptake indicates that the case is not yet made.

KTP’s can be the instrument to first engage business and academia in a collaborative way, enabling business to realise in-direct benefits other than the services of a Graduate focused on the Company’s specified project, therefore consideration should be given as to why business is not utilising the scheme, potentially giving Graduates their first experience in a business environment.

4.11 Cost—A Barrier to KTP Uptake?

The majority of respondents (56%) felt that £22k, the average salary that business would contribute to the KTP Graduate, to be too high, pointing to a significant barrier (see Chart 5).

Chart 5

An overwhelming number of respondents (64%), recommend a contribution from business towards the salary of the KTP Graduate of between £10k and £15k (see Chart 6)

This underlines the need to re-assess the KTP programme to re-align the cost structure, through simplification of the administration and application process, but with a clear goal to reduce the cost to business. Depending on how costs are allocated towards University overheads, this may require additional investment by the Government.

Chart 6

5. Business Working With Academia: Contracting Services with Universities

One of the barriers to engagement, especially for SMEs, is the fee quoted by Universities for business services. Universities are well equipped with an array of capital equipment and expertise that Businesses could utilise, especially for the test and development phase for new products or applications. Enabling Business to contract these services at commercial rates would further build relationships between academia and business. Many Universities, however, charge a service rate based upon full economic overhead cost recovery, rendering the price to business as too expensive, and therefore hindering collaboration.

Recommendation 3—Contracting Services with Universities

Encourage greater collaboration between Business and Academia, especially for SMEs, by easing the cost of engagement between University and Business. Voucher Schemes should be introduced at a regional level, enabling SMEs to contract University services for Product Development, including Proof of Concept, Prototyping and Marketing. These schemes would be in addition to Grants for R&D (Smart) and R&D Tax credits.

5.1. Technology Community Reaction to Recommendation #3

5.2 61% of respondents agreed with this recommendation.

5.3 A further 30% of respondents were in partial agreement, who supplied additional commentary worthy of note as follows:

5.4 Voucher schemes should also be available to hire commercial contractors, as well as University services. This gives business the choice to find the right partner to deliver the appropriate service, and will encourage the University to price their service at a commercial rate.

5.5 How do Businesses find out what services the Universities have to offer? A simple, national, directory should be established.

5.6 There is a concern that such a voucher scheme masks an underlying problem, which concerns the policy that Universities practise charging through Full Economic Cost (FEC) rates. University rates for services are almost double market rates in some cases. Even with a voucher scheme, the cash would be quickly consumed.

5.7 There was some concern about the expertise within Universities to undertake the task of product development. Universities may be better suited to proof of concept. Improvements should be made within Universities to improve this skill set if we are to use University facilities this way. Notwithstanding, Universities should not lose their primary focus for teaching and research, but if they are to offer commercial services to business, they should look at the support services they offer, and ensure that service levels and quality are in place.

5.8 When contracting services, IP ownership should remain firmly with the company, unless a collaborative partnership is put in place.

6. Funding the Commercialisation Activity

The Governments principal instrument to encourage collaboration between academia and business is the Collaborative R&D programme, delivered through the Technology Strategy Board. The scheme has been running since 2004, then under the management of the DTI.

The TSB commissioned a study to evaluate the performance of this programme, published in September 2011.

The evaluation report combines both actual and forecast impact results from participants of the CR&D programme, hence the evaluation is both objective and subjective. A summary of key findings is outlined in table 1 below.

Table 1

EVALUATION OF COLLABORATIVE RESEARCH & DEVELOPMENT GRANTS—2004—2009

 

Actual Impact

Forecast Impact

Number of Projects

396

 

Value of Grants awarded

£195m

 

Participants who reduced costs

5%

34%

Participants who increased turnover

9%

53%

Participants who increased employment

8%

56%

Participants who increased profitability

6%

51%

Participants who sought alternative funding before application

16%

 

Participants who sought additional funding after project completion

32%

 

Participants who have or will register a patent as a result of the project

 

35%

FTE’s created

833

13,350

Gross Value Add (GVA)

£361m

£2,877m

GVA per £ spend

£0.84

£6.71

Note: Actual & Forecast at the time of the PACEC survey

The value of the CR&D scheme can only be judged upon actual results. Given the timescale to get project to market, a considered view of the forecast impact should be made. Taking the forecast impact, the scheme would be seen as a roaring success, performing better than most VC funds, however there are several indicators that suggest that the forecast impact is unlikely to be achieved.

Principally, these are:

Given that CR&D has been running since 2004, it would reasonable to expect that early projects would by now have delivered actual results, however this does not appear to be reflected in the results for actual impact.

68% or Participants cited that the cost of the project was the main barrier preventing the project moving forward without grant funding, however only 16% had sought funding prior to the project, and only 32% sought alternative funding post project.

Since cash is still the key to moving a project forwards towards market launch, and given the low number of participants considering additional finance, it’s reasonable to conclude that not many additional results will materialise, certainly not an 8 fold improvement as forecast by the participants in the evaluation report.

It should also be noted that other, less tangible, benefits of the CR&D programme were mentioned, specifically that the main benefit to participants was an improved image and reputation for participants.

It should also be noted that projects that included two or more academics performed better than those projects without academic participation

Given that CR&D is a principal instrument that the Government has to promote collaboration between Academia and Business and therefore to commercialise research or IP, it perhaps time to consider how to improve this programme. Observations concerning the CR&D process include:

Funding is clearly the enabling ingredient that takes an innovative idea to market. The contribution made by the CR&D grant is important, and may move the technology readiness level up a notch or two, but other additional funding from private equity, be it friends, family, business angel or VC, is a clear indicator of market potential.

A major drawback of the CR&D fund is the nature of its inception and delivery. The TSB have to pick “winning” markets or technologies, pre and post competition (a processes in itself that burns valuable resource).

A better proposal would be to let the market pick out the best propositions. An early indication of a projects market value is whether or not private equity will invest. The process of due diligence, when raising capital, tests for market value.

A project with additional private funding, matched with CR&D funding, would certainly have a greater chance of success in the market place compared to the current CR&D mechanism, where only 35% of applicants consider raising additional finance. A sure indicator of the ambition of the project.

Recommendation #4—Funding Academia to Business Collaboration

Recommendation—CR&D operates as a co-investment fund, matching private equity pound for pound (with an agreed cap set at £350k—note that CR&D grants of £750k or less were evaluated as being more successful than larger grant awards)

This process would also greatly reduce the administration burden associated with the design and execution of the current CR&D mechanism.

6.1. Technology Community Reaction to Recommendation #4

6.2 56% of respondents agreed with this recommendation.

6.3 A further 28% of respondents were in partial agreement, who supplied additional commentary worthy of note as follows:

6.4 A Co-In-Investment fund would certainly improve due diligence, with private investors evaluating projects. Profits earned from successful projects should be re-invested back into the scheme.

6.5 Careful thought should be give to exit schemes, with options for equity buy back by the originator.

6.6 In the current economic climate, VC money is thin on the ground, and VCs are tending to be risk adverse, meaning that innovative technology projects may favour less well. In this climate, the Government should actually close this market failure, and make up the shortfall in investment, by increasing their contribution to the fund; a 75%/25% fund should be considered, with the Government as the significant partner.

6.7 A cap of £350k is considered too low, and investment should be based upon merit (market potential). The fund should also be applicable for 2nd and 3rd round funding.

6.8 Ensure such a fund does not penalise SME’s, especially start-ups, who may find it difficult to secure VC money. Consider gearing such a scheme towards SMEs, or even consider making such a scheme for SMEs only.

6.9 CR&D, in its current format, is billed as “investor of last resort”, which would explain the low returns generated to date. CR&D can be used by companies as a vehicle to demonstrate that they are investor ready. Given this view, CR&D should be focus on feasibility (smaller, more often), and the TSB should review their administration, which is considered too heavy by participants. Care should be taken by the TSB to avoid the condition of “grant junky”, with some companies cycling repeatedly through the proof of concept phase.

6.10 The TSB forecast for likely out-turns and performance of the CR&D programme is considered to be wildly optimistic.

6.11 Regarding the report by the TSB that projects with one or more academics is likely to be more successful, it was suggested that what may lie behind this is that larger teams are actually more successful in collaboration.

6.12 The current CR&D scheme disadvantages SMEs. Since academics are funded to 100%, and the scheme can only fund 50% of the project, SME’s often only have 15–20% of their contribution paid. The Full Economic Cost rate applied by Universities also dilutes the benefit of CR&D to SMEs

6.13 CR&D should meet stricter “additionality” rules. Large companies can often fund CR&D projects themselves. Given large companies the break through corporation tax, exclude them from CR&D and make the scheme SME only.

6.14 Survey Respondents who had participated in the CR&D scheme

6.15 28% (65 respondents) confirmed that they had participated in the CR&D programme, (Chart 7), and an analysis of their outcomes they achieved is shown in Chart 8.

6.16 Whilst a smaller sample size than the PACEC report conducted by the, the outcomes are more encouraging, however no cognisance is taken here concerning return on investment.

Chart 7

Chart 8

7. Promoting UK Technology Capability

Despite this being the Olympic year, the UK Government still has a disjointed view when it comes to promoting UK excellence, whether that be to overseas visitors, or showcasing UK Innovation.

In this space, two principal exhibitions and conferences are funding by the Government with considerable budgets, Innovate, from the Technology Strategy Board; an event that looks at the inward market and focuses on the value of the TSB, and TechWorld, from UKTI, focusing on showcasing UK capability to overseas visitors, with an emphasis on exports.

Both are sub-optimal, and this year may even compete with larger, established events such as electronica.

Simon Payne, from the Cambridge Technology Group, expresses the landscape, with regards to technology exhibitions, very well in his letter, directly to ETN members

Recommendation #5—Promoting UK Technology Capability

UKTI and the TSB should merge their two events into one showcasing the best UK Innovations from Business and University Research to an International audience. The event should be staged as “UK TechWeek”, and should be planned to coincide with other regional UK events such as National Electronics Week (NEW) or other conferences and exhibitions, enabling overseas delegates to travel throughout the UK visit to sample specific market or technology strengths

7.1 Technology Community Reaction to Recommendation #5

7.2 70% of respondents agreed with this recommendation. Significant support from industry for a combined event (between the TSB and Innovate). Only 8% disagree.

7.3 A further 22% of respondents were in partial agreement, who supplied additional commentary worthy of note as follows:

7.4 A “UK-TechWeek” would require wide appeal and diversity; SME’s would focus on their niche, but this would give international visitors an opportunity to review the depth and breadth of innovation in the UK. The week should have regional events and should not focus on events in the south.

7.5 Conferences and Lectures should be dropped, freeing up time for businesses to pitch.

7.6 A better investment would be to increase the investment into UK Pavilions at already established overseas events, discounting the cost of exhibiting for UK SMEs.

7.7 Content should be “Business Educational”; the event must attract overseas visitors.

7.8 Overseas visitors must be real business, not just the embassy or UKTI representatives.

7.9 Would Respondents attend such an event?

7.10 Table 2 illustrates the respondents view if a combined event was co-hosted, and indicates that attendance would double, when compared to Innovate, and would treble, when compared to TechWorld.

7.11 This is a strong endorsement to combine the events, create critical mass and save the taxpayer some money in the process.

Table 2

Attend a Proposed UK-TechWeek

Yes

181

 

No

56

     

Attended Innovate

Yes

98

 

No

139

     

Attended TechWorld

Yes

56

 

No

181

February 2012

APPENDIX 1

LIST OF PARTICIPATING COMPANIES

3D Metrics

ETher NDE Ltd.

4d-dynamics.net

Evince Technology Ltd

A2E Limited

FINNbiz Consultants

Abatis (UK) Ltd

Futureneering Ltd

Abington Partners

G4h Limited

ActiveSignal Ltd

GaN Systems ltd

AOS Technology Ltd

Geotechnical Instruments

AQ Technology Ltd

Grounded Innovation Ltd.

ARM Ltd.

Guy’s and St Thomas’ Charity

Arts & Science

Health Protection Agency

B J O’Connor International

Heat Light and Sound

Beer & Partners Limited

Herald Electronics Ltd

Black Kite Ltd.

High Tech Marketing

BMT Defence Services

Hosokawa Micron Limited

Brnikat Ltd

i4vision diagnostics

Calderwood Han Limited

ideaSpace Enterprise Accelerator

Cambridge Carbon Capture Ltd.

Imetab Ltd

Cambridge Insitu Limited

Industrial Microwave Services Limited

CambridgeIP

InnovationXchange (IXC) UK

CapnaDSP Ltd.

Institute of System Level Integration

Cashmaster International Limited

Intellectual Capital Group

Centre for Process Innovation

Intelligent & Green Systems Ltd.

Centre for Science and Policy

iQudos Ltd

Charis Technology Ltd.

ITACS LIMITED

Charles University in Prague

ITRI Ltd

Chronos Technology Ltd

Joseph Rhodes Limited.

Cognidox Ltd

JRI Orthopaedics Ltd

Cranfield University

JTL Systems Ltd.

Critical Software Technologies Ltd

Ketonex Limited

Data Track Technology plc

krowdthink ltd

DCN CORPORATION Limited

Lab-Tools Ltd.

Deltex Medical

Lime Tree Innovation

DriveWorks Ltd

LogicaTronics Limited

Durham University

Logystyx UK Limited

E. A. Technical Services Ltd.

Maiden Technology

e2v technologies (uk) ltd.

Maltron international Ltd

Earlswood Marketing Limited

Marine South East Ltd

easeltechnologies limited

MAST Carbon International Ltd.

Electronica Estrella Azul

MeddiQuest Limited

enteric

Medical Wireless Sensing Ltd.

Enterprise Q Ltd.

Megger Instruments Limited

Moog Components

Tallix Ltd.

National Instruments UK

Telepure Limited

Newcastle University

Terrafix Limited

Newton Industrial Group Ltd

The Innovation Agency

NHS Innovations South East Ltd

The-MTC.org

Northumbria University

The Real-Time Data Company Ltd

Novacem Limited

The TALL Group of Companies

NXP Semiconductors UK Ltd

TISICS Ltd. Titanium Composites

Ocado Technology

Tony Smee

Onzo Ltd.

Tosoh Quartz

Oxford RF Sensors Ltd

Trelleborg Industrial AVS

Oxley Dev Co Ltd

Tribosonics Ltd

Peakdale Molecular

TruPort International Limited

Peratech Ltd

Trusted Renewables

Perpetuum Ltd.

Turbopowersystems Ltd

Pickering Interfaces Ltd.

University of Birmingham

Picochip

University of Exeter

Planer plc

University of Kent

Plextek Ltd

University of Leicester

Policy Review TV

University of Portsmouth

Powertrain Ltd

uPBeat Product Development

PragmatIC Printing Ltd

Vapourtec

Premiertask Ltd

Vecta Consulting Limited

Procter & Gamble

Veraz Ltd

RAUMEDIC UK Ltd

Vision 20 20 Group Ltd.

Reactive Technologies Ltd

Warren Services

Rilton Electronics UK Ltd

Wessex Technology

Rodwell Engineering Group Ltd

XJTAG

Sandford & Associates

YTKO

Scottish Technology Network

Ziconix Ltd.

Sensatech Research Ltd

 

Shelton Machines Ltd.

 

Si-Light Technologies

 

Smart Sensors Ltd

 

Smith & Nephew

 

Soft Edge Technologies Ltd

 

Sollerta Ltd

 

Sound Experience Ltd

 

StepOut Ltd

 

Stored Energy Technology Ltd

 

Swansea University

 

Prepared 11th March 2013