Science and TechnologyWritten evidence submitted by Comments from the National Physical Laboratory (NPL)

1. Summary of Key Points

Government laboratories such as NPL can be a bridge between academia and industry and are well placed to support the commercialisation of research. Specifically NPL, managed by Serco under a government-owned, contractor-operated (GoCo) arrangement since 1995, has a track record for undertaking the commercialisation of research through effective academic and business partnerships and application of private sector best practice.

Government can encourage the commercialisation of research by supporting R&D to de-risk technology and using fiscal measures to increase the return on research exploitation investments.

The instruments of the Technology Strategy Board make a significant contribution to de-risking technology, both through supporting collaborative R&D and through networking.

Early adopter customers help to commercialise research, and there are opportunities for government to increase its role as an early adopter through procurement through the SBRI.

Involving the private sector in the operation of Public Sector Research Establishments can lead to innovative approaches to bridging the “valley of death”.

We are part of the intermediate sector and would welcome an opportunity to give further oral evidence to the Committee of the importance and role of the intermediate sector in the UK innovation ecosystem.

2. About NPL

The National Physical Laboratory (NPL) is a leading UK research establishment with an annual turnover of £70 million and a staff of 600. It is the largest science asset directly owned by BIS and occupies a unique position as the UK’s National Measurement Institute (NMI) sitting at the intersection between scientific discovery and real-world application. In 1995 DTI (now BIS) established NPL as a GoCo, Government-owned Contractor-operated, national science and technology laboratory and since that time it has been operated by Serco. The involvement of the private sector in the management of NPL has greatly enhanced its ability to commercialise research—see para 9, Q7.

NPL undertakes work for government and its agencies and for business. Its expertise and original research underpin quality of life, innovation and competitiveness for UK citizens and business:

NPL provides companies with access to world-leading technical expertise and scientific facilities, assuring the confidence required to realise competitive advantage from the use of new materials, techniques and technologies.

NPL develops and maintains the nation’s top-level measurement standards, supporting an infrastructure of traceable measurement throughout the UK and the world, to ensure accuracy and consistency.

An important aspect of NPL’s work is the exchange of knowledge with business, government and academia which it carries out through a Knowledge Services Division of over 30. This team:

Supports the dissemination of knowledge from NPL’s R&D programmes; economists at BIS estimated a return on government investment of 50:1 for NPL R&D programmes.

Oversees the exploitation of NPL’s intellectual property; for example spinning out Argento Diagnostics Ltd as an SME now working with UK Sport to develop a Point of Care testing technology to support UK’s high performance sports groups.

Manages large parts of two Knowledge Transfer Networks for the Technology Strategy Board.

Supports academia to exploit their research for example through a Research Council funded Knowledge Transfer Account at Surrey University.

3. Q1: What are the difficulties of funding the commercialisation of research, and how can they be overcome?

The first step in the commercialisation of research is the identification of any intellectual property generated by it, and then the assessment as to whether this has potential commercial value. Those carrying out research do not always appreciate the commercial value of some of the innovations created by their work. This requires different skills and methods which have been developed at NPL, such as procedures to capture IP and, where appropriate, investment of Proof of Concept funds to test the commercial potential and carry out early-stage development. As important as the potential value of the innovation itself is the leadership to support its exploitation and whether the technology has reached a sufficient maturity for commercialisation.

Developing technology for commercialisation usually requires taking risks and making large investments. The challenge is to match the return on investment with the size of the risks taken. This can usually only be achieved through a staged process where the level of risk is reduced as the requirement for investment rises. Success requires:

Entrepreneurial drive sustained over a number of years through the stages that lead to successfully spanning the valley of death.

Knowledge of how to use the staged process necessary to cross the valley of death.

Recognition of the need for and access to a range of specialist skills complementing those of the innovator.

Market-pull for the product, ie right product at the right time for the right market sector.

Ready access to a wide range of finance, such as Proof of Concept funds, grants, loans and equity investment.

Difficulties arise in commercialising research when:

The market, eg investments provided by Angel Funds and Venture Capital, is unable or unwilling to invest because the risks to generate a return are still too high

The right knowledge and skills are not assembled for successful commercialisation.

Government can increase the commercialisation of research by catalysing the interactions necessary to overcome these barriers to success, and where the “valley of death” is too wide for the market to bridge, can provide financial support, for example through funding for translational research to prepare new technologies for commercialisation.

4. Q2: Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

For many sectors the difficulties of commercialisation of research are common because they are subject to similar risks. However for some sectors there are additional risks to commercialisation:

Where the sector is highly regulated, eg the pharmaceutical sector. Meeting regulatory requirements is costly and lengthens the time to market.

Innovative, disruptive technology, such as new sensors, may offer clear technical advantages over existing technology and be used in new applications with potentially enormous commercial advantages. However, if based on an entirely new principles, it will require significant investment to de-risk and demonstrate reliability if the market is going to adopt the technology, especially in critical application areas such as healthcare, aerospace, energy, and safety. To develop a robust technology and prove reliability, technology innovators from SMEs, Universities and RTOs need to access and understand the end users in these critical application areas; to access other technology areas such as materials and electronics; and to access supply chain partners for design, manufacturing, and testing & validation. Our experience of running technology networks is that networking is a very effective way of brokering the right connections and bringing together development teams across the value chain to develop and prove disruptive technologies. Further, our experience of working as part of these value chains using NPL scientific and metrology expertise has proved that measurement, testing and validation are critical in the acceptance of new technologies and methods in the uptake and commercialisation of disruptive technologies.

Where an innovation aims to replace a well-established mature technology, eg parts of the sensors and instrumentation sector. Innovative products are initially likely to be produced in small numbers at a higher cost so that although delivering greater value through their novelty, they find it difficult to compete in the market because they are seen as of lower value for money when compared with much lower cost mass produced products.

5. Q3: What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?

NPL does not have specific examples of UK-based research transferring outside the UK for commercialisation. However, we are aware of an example of an international company that chose to maintain part of its R&D support facility in the UK. Agilent Technologies is a leading international instrumentation company that has decided to keep some of its laboratories at Winnersh in the UK in part at least because of the close working partnership with NPL and UK accredited laboratories, and the excellence of the services they provide. As evidence for this we attach in an appendix an extract from a letter NPL received from a General Manager of Agilent Technologies (UK) Ltd a couple of years ago.

6. Q4: What evidence is there that the Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

NPL is often asked by UK businesses to partner in collaborative R&D projects funded through the Technology Programme of the Technology Strategy Board; we are currently partners in over 50 such projects. The fact that business seeks NPL out as a partner provides clear evidence that the research carried out by NPL, funded by BIS through the programmes of the National Measurement System, is valued by those tasked with commercialising research. Through our work with these business partners we also are very aware of both how important these collaborative projects can be in de-risking the exploitation of research and of the impact they make on innovating products and processes. However, we are constrained by commercial confidentiality from providing specifics for current or recently completed projects.

We can also provide evidence of the support provided by the Knowledge Transfer Networks for the commercialisation of research. During the 5 years NPL managed the Sensors and Instrumentation KTN it helped companies leverage £97M to de-risk technology to prepare it for commercialisation. The KTN also has much anecdotal evidence of how the networking it has facilitated has helped bridge the valley of death by bringing together potential customers and innovators. For example an entrepreneur set up a new business as the direct result of Rolls Royce asking to be its first customer at a KTN event. Contacts are gold-dust to start-up businesses.

More recently, we welcome the Government’s commitment to “Catapults” (formerly Technology Innovation Centres) managed by the TSB. However, it is important that these centres should be business-led and complement existing centres of excellence (often Research and Technology Organisations).

Our experience of developing the Technology Innovation Fund at NPL is that a relatively small value of support, that is well targeted, can provide disproportionate benefit to companies, especially SMEs. We can provide examples. We encourage the Technology Strategy Board to continue to develop a diverse range of funding mechanisms to support innovative companies which reflects the diversity of needs of these companies, from the company size, sector, complexity of development projects and number of collaborators.

7. Q5: What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

We highlight the following as aspects of the Government’s recently published “Innovation and Research Strategy for Growth” that will help bridge the valley of death:

Government can help the commercialisation of research by tipping the balance between risk and return on investment. This can be by funding the de-risking of new technology through instruments like Innovation Vouchers, the SMART programme and collaborative R&D supported by the Technology Programme.

It also helps increase the return on investment through appropriate fiscal measures like R&D tax credits.

SMEs want customers even more than investment. Government procurement supports commercialisation of research for example through the SBRI scheme.

The Strategy also highlights the role of the intermediate sector, including NPL, as an important part of the UK’s innovation infrastructure in the following extracts:

Our [The UK] excellence in teaching and research is underpinned by institutions with a global reputation, such as the British Standards Institution, the UK Accreditation Service, the National Physical Laboratory and the Intellectual Property Office.

The government will also continue to invest in translational research at Public Sector Research Establishments, such as the National Physical Laboratory, which support business to develop innovative products and services.

The UK Innovation ecosystem also embraces Innovation infrastructure organisations, including the National Measurement Office, National Physical Laboratory, British Standards Institution and UK Accreditation Service.

Research and Technology Organisations (RTOs) are positioned between academia and business users of technology. They are a range of companies and organisations whose activities bridge gaps in the process of converting research outcomes into innovation and new technologies for use. Examples include … the National Physical Laboratory providing knowledge-based services to support the application of science and technology through better measurement. This intermediate sector is an important part of the innovation system, and is estimated to contribute £3 billion annually to UK GDP, and support over 60,000 jobs.

The National Measurement Office, National Physical Laboratory and British Standards Institution will work with international measurement and standards bodies and committees to promote the UK’s strengths in measurement and standards and to the UK businesses associated with them.

In conclusion it states:

We believe that the intermediate sector is an under-used asset. It provides technical advice in many sectors, including agri-food and water where we are seeking to encourage higher levels of investment in innovation. We will work with RTOs to develop a strategy for using their experience and expertise as part of the innovation ecosystem.

The Strategy clearly recognises the importance of the intermediate sector to the innovation ecosystem and that it is an under-used asset. We would welcome an invitation to give further oral evidence on the vital role of the intermediate sector to your Committee. The key points are illustrated in the following diagram which shows the position of NPL as a member of the intermediate sector between academia and business. The diagram uses Technology Readiness Levels (TRLs)1 to map out the journey from scientific discovery to industrial exploitation. The intermediate sector carries out translational research developing technology from TRL 1 to 3 in academia to TRL 7 to 9 in the applied research laboratories of business.

As a government laboratory NPL along with its innovation infrastructure partners of National Measurement Office, British Standards Institution and UK Accreditation Service supports the commercialisation of research all the way from product concept to trading.

 

However, whilst the strategy recognises the importance of Public Sector Research Establishments (PSREs) like NPL for translational research, it does not include any recommendations to enhance their role. Our experience is that involving the private sector in the operation of PSREs significantly increases their ability to provide translational research services to help business, both large and small, to bridge the valley of death. (See responses to Questions 8 and 9).

We have clear evidence of the value of the support NPL can give innovating business. In an independent survey of 1,000 UK businesses, a benefit of £700M in additional profitability was identified for a single year, dependent upon accessing measurement services to support product and process innovation.

8. Q6: 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?

Our experience is that involving the private sector in the operation of PSREs like NPL leads to innovative solutions for the exploitation of their intellectual property. We give as an example the exploitation of a technology for Point of Care diagnosis by NPL:

The new science on which the technology depends came out of a government research programme at NPL.

Serco used an internally funded Strategic Research Programme for a Proof of Concept project for the technology.

The success of this project led to the establishment of a company Argento Diagnostics to exploit the technology.

Serco then provided management expertise and a loan of £2 million to Argento Diagnostics to develop a prototype.

Argento Diagnostics was spun out of NPL as a limited company.

Good progress is now being made to fully commercialise the technology in its first application for UK high performance sports groups.

9. Q7: What other types of investment or support should the Government develop?

It is our experience that involving the private sector in the operation of PSREs significantly enhances the commercialisation of their research. If we take NPL as an example:

Tripled its revenue from the commercialisation of its research since 2004 (now approaching £25 million per annum).

Established regional hubs in partnership with academia and industry to serve the needs of local industry (eg laboratory at the University of Huddersfield).

Provided financial (£2 million) support and management expertise to exploit NPL intellectual property through the spin out of a bio-diagnostic company.

Supported the exploitation of intellectual property through the establishment of a Proof of Concept fund for NPL IP.

Invested £40 million in the last 10 years in scientific capital assets at NPL.

Worked with many research partners, currently over 300 in the UK and abroad, and interacted with nearly 2,000 SMEs.

Brokered £100 million of funding for the de-risking of technology (£1M pa of which is provided by Serco itself through the NPL Technology Innovation Fund).

NPL has developed partnerships with major businesses in the UK, eg Rolls Royce and BP, to help them innovate to continue to compete internationally.

However, such commercialisation is not at the expense of the science with NPL’s peer reviewed publications and citations more than doubling since 2004.

Public Sector Research Establishments (PSREs) like NPL maintain significant scientific and technological capability to fulfil their core government function, in the case of NPL to provide the UK national measurement system infrastructure. NPL makes spare capacity on this capability available to business and government customers through R&D services at commercial rates. NPL often receives inquiries from SMEs with a need to de-risk a technology through the application of our specialist facilities and knowledge which they cannot to afford to access, putting the commercialisation of their research at risk.

February 2012

APPENDIX

EXTRACT FROM LETTER FROM AGILENT TECHNOLOGIES (UK) LTD TO NPL

As you known, we made some significant changes to our European services business a couple of year ago. The main theme of that change was to centralise many of our service deliverables such as calibration and repair. With increasing complexity of our instruments and consequent increasing cost to maintain them, we had to get a better utilisation of our equipment ands achieve a higher productivity. Due to its proximity to two of our main factories and excellent logistics, we selected the Agilent site in Böblingen, southern Germany, as our main European service operation.

At the same time as we made this decision, we also realised that we had to maintain and improve our high frequency and accredited work. Although, it might have been more obvious to set this up in Böblingen, we took the decision to expand our operation in Winnersh, UK to deliver this European wide service. One of the main reasons that we made this decision was due to the close working relationship that we have developed over many years with NPL and UKAS.

As you known, we have now completed a significant investment in our UK labs—both in terms of the infrastructure and people. We are delivering an excellent service from this operation and it is, today, one of the highest performance labs in Agilent. The services that we deliver from Winnersh are for customers both in Europe and countries beyond. I am certain that without the guideance and consulting that we have had from you and your colleagues in NPL, we would not have achieved that. In particular, the help that you gave us in the last year to establish the IPIMMS and 50GHz Noise Source systems was invaluable. These are unique services that were only made possible through the close cooperation of NPL, UKAS and Agilent engineers.

1 TRLs were originally developed by NASA to describe the maturity of a technology from initial principles (TRL1) to actual system demonstrated through successful operation (TRL9).

Prepared 12th March 2013