Digital Catapult – Written evidence (CAT0004)
The contribution of innovation Catapults to delivering the R&D Roadmap
Digital Catapult is a national research, technology and innovation centre, with a London headquarters, and regional centres in Sunderland and Belfast.
Our mission is to accelerate the adoption of advanced digital technologies by industry, and support high growth potential startups and scaleups in the UK to overcome technical and business barriers, scale faster and attract further private sector investment.
With UK Government core grant funding, we work across four advanced digital technology areas:
Future Networks (5G, Low Powered Wide Area Networks & the Internet of Things) Artificial Intelligence (Machine Learning & Machine Vision) Immersive Technologies (Virtual Reality [VR], Augmented Reality [AR] & Haptics) Distributed Systems (Blockchain & other forms of Distributed Ledger Technologies)
We are also beginning to explore Quantum computing algorithms and software.
Opportunities for the UK from advanced digital technology adoption
There are significant opportunities for the UK in the adoption of these advanced digital technologies, coinciding with the drive for a new science, innovation and technology-driven identity for the country, as we leave the European Union. These technologies are building blocks that will transform whole sectors in the years ahead. In their combination (e.g. AI + 5G + Internet of Things + Augmented Reality) they will create the next generation of technology applications that take us from fingers on screens, to new capabilities such as digital twins (an accurate digital replica of a physical asset or thing), spatial computing (analysis and layering of information accurately over the physical environment) and virtual production (creation of new virtual content for consumer experiences and business applications). These opportunities are estimated to be worth a potential £2.2 trillion in global sales by 2025, at a mean CAGR of 43.9%1. It is where a significant share of the world’s growth will come from.
Designing and delivering interventions that drive advanced digital technology adoption
1 In combination, these technologies and the clusters of capabilities they create such as Digital Twins and Spatial Computing, are expected to create a global market worth a combined £2.2 trillion by 2025, at a mean CAGR of 43.9%. Digital Catapult aims to accelerate the collaboration between advanced digital technology supply and demand. Such connections and technical explorations enable us to: (1) Make inroads into long standing productivity challenges in parts of the UK economy; (2) Stimulate an advanced digital technology-led recovery post pandemic; and (3) spread growth more evenly across the UK.
We are able to do this because of the unique blend of expertise across engineering, technology, industry, innovation and research found at the Digital Catapult. This allows us to deliver high impact interventions to connect supply and demand, build confidence in private investment into these technologies and unlock opportunities for future business models, applications and services.
Our goal is to empower UK high growth advanced technology companies serving sectors of strategic importance to the economy. We do this by:
1. Building and operating physical and digital facilities that are ahead of market and would not exist without our investment.
2. Designing and delivering specialist national innovation and acceleration programmes
3. Creating technical research and development projects, proof of concepts and pilots that demonstrate how these technologies can work in practice.
We can already demonstrate significant impact
These interventions enable us to connect the UK’s advanced digital ecosystem – there are 3500+ AI, Immersive, Blockchain and IoT startups and scaleups – to new technical capabilities, such as 5G. We also help them to design sustainable and ethical products, applications and services for their industrial customers. Digital Catapult works hand-in-hand with 400+ small businesses a year, generating 120+ industrial collaborations. Of the early stage businesses, we have helped in the last twelve months, 140 have gone on to raise £320m as a direct result of our work. Since 2013, £4bn+ in private investment has been made in the companies that Digital Catapult has worked with.
Working with high impact UK Industry sectors
To maximise our resources and develop specialised interventions, Digital Catapult is focused on two high impact sectors of the UK economy that often underpin regional economies:
Creative Industries: For the Creative Industries, Digital Catapult has established specialist programmes and facilities to support the emergence of a new immersive and advanced technology powered, creative content and design sector. This includes playing a key role in national innovation and technical coordination for the UKRI Audience of the Future demonstrator programme; access for UK companies to Dimension studio, a world class volumetric capture facility established by Digital Catapult and Microsoft, and Creative XR a pioneering programme developed by Digital Catapult delivered jointly with Arts Council England to discover and fund new immersive content. Digital Catapult’s commitment to advanced digital technology adoption in the Creative Industries is helping the sector’s growth and stimulating first time investments into R&D. Digital Catapult has formed consortia with companies from our cohorts and wider industry partners to kick start research, development and innovation, such as the new 5G Festival project working with Warner Music, Telefonica, Metropolis Studios and UK immersive startup Mativision.
Manufacturing Industries: Digital Catapult delivers impact to manufacturing industries through optimising industrial operations, building resilient supply chains and developing sustainability in service. We have developed a strong capability in Asset Tracking and Condition Monitoring, with successful trials at NSG, Airbus, Bloodhound and the RAF using Future Network technologies to optimise industrial operations. To further accelerate the wireless and connected factory concept, we are leading the UK’s technical and innovation centres of excellence for Industrial 5G on behalf of DCMS. Within supply chains, Digital Catapult’s technical and innovation teams are building open, interoperable, digitalised supply chain systems that are resilient to shock with projects such as VITALam and the Digital Sandwich. On the theme of developing sustainability for products in service, Digital Catapult is enabling connected and intelligent assets to create new business models through programmes such as DETI in Bristol, Sellafield DLT Field Lab on nuclear waste and 5G enabled robotics with Ericsson and Tharsus, an SME based in Blythe in Northumbria. Digital Catapult is also developing the industrial startup ecosystem through the Made Smarter Technology Accelerator on behalf of UKRI. This programme connects startups to industry challenge owners, where they demonstrate proof of concepts through cascade grant funded sprints of up to £20k that can be taken forward to longer pilot R&D projects.
Overview of Digital Catapult Regional Activity
Digital Catapult’s network includes the Digital Catapult Headquarters in London; two smaller “Regional Centres” in North East Tees Valley (Sunderland) and Northern Ireland (Belfast); and a growing number of “Localised Services”, starting in MediaCityUK (Manchester) and on the south coast (Brighton). These include regional facilities such as the Immersive Labs, which allows companies to explore how virtual, augmented and mixed reality content can be used across multiple headset devices, showcase to industry how these technologies can work and be of value and enable VR/AR demos to potential customers and investors. Our centres, services and facilities help us to work with stakeholders across local government, and the entire UK innovation ecosystem, including industry and academia throughout the country. Our role includes connecting areas of innovative strength, which can be concentrated in parts of the country, to the regional users of technology that are often spread widely across the UK.
Digital Catapult Regional Centres
Digital Catapult Northern Ireland Centre
Digital Catapult Northern Ireland (NI) was launched in October 2016, co-funded by Digital Catapult and Department for the Economy, NI. With five full time employees, and an immersive lab facility, it is focused on enhancing and building the NI digital ecosystem by increasing SME involvement in digital innovation. It has worked to raise the profile of digital innovators in the region and create collaborations between innovators and industry, leading to greater uptake of advanced digital technologies across NI businesses. The centre has worked with businesses of all sizes, from Seagate, Bombardier and Collins, to collaborations with Belfast Harbour and the BBC, and accelerating the growth of numerous high growth potential startups such as Axial3D.
Digital Catapult North East Tees Valley
This centre was established in 2015, co-funded by Digital Catapult and the European Regional Development Fund (ERDF), and delivered by Sunderland Software City. The North East Tees Valley team is made up of five full time employees and an immersive lab facility. It supports businesses from across the North East to encourage the adoption of emerging technologies and helps to educate them on the impact they can have on productivity and performance. The Digital Catapult NETV focuses on existing regional strengths in areas such as manufacturing, automotive and the social care sector. They have to date worked with numerous high growth potential startups, and a range of local businesses including Nissan, Dyer Engineering and P&G.
Digital Catapult Localised Services
We have two localised services in Brighton and MediaCityUK. These locations offer facilities such as labs, demonstrators and testbeds, alongside innovation programmes – delivered by partners.
Brighton
Digital Catapult’s localised services in Brighton are co-funded from Digital Catapult core funding and through commercial contracts with the Coast to Capital LEP, Brighton City Council, Brighton Dome and Festival and Wired Sussex. Together they have delivered a range of facilities and projects:
5G for Brighton Dome & Festival: In 2019 we partnered with the Brighton Dome to launch a 5G-enabled arts venue in Brighton to transform audience experiences. Brighton Immersive Lab: launched in October 2017, the Brighton Immersive Lab offers a range of hardware to innovators and industry (120+ businesses so far). 5G Brighton Testbed: Launched in January 2017, we collaborated with Wired Sussex / University of Brighton to build the first non-university based 5G testbed in the UK, allowing for commercial and applied explorations of 5G by industry and innovators.
MediaCityUK, Manchester
Digital Catapult’s services for Manchester stem from a partnership with The Landing, MediaCityUK’s tech hub which specialises in high growth tech startups. MediaCityUK Digital Catapult 5G Enabled Immersive Lab: Launched in 2019, Digital Catapult and The Landing operate a brand new joint Immersive Lab, which is the first in the UK to be 5G enabled.
We are currently building new local presence in Bristol, Birmingham and Nottingham around specific foundation projects. We have strategic relationships with the Mayors of combined authorities in West of England, Greater Manchester and the West Midlands and in the North East. We also work closely with Coast to Capital LEP, Nottinghamshire LEP, and a number of other LEPs around the country.
Digital Catapult’s views on UK R&D ambitions of investing 3% of GDP by 2030
Digital Catapult welcomes the UK Government’s commitment to doubling public R&D spend to £18bn during the next 5 years, with a longer-term goal of reaching 3% of GDP by 2030. The importance of support for R&D is clear: for every £1 invested by the government in R&D, private sector R&D output rises by 20p per year in perpetuity, raising the level of the UK’s knowledge base and enabling further economic growth.2
For this target to be reached, it is crucial that increases in UK Government investment in R&D are coupled with well thought out changes to modes of funding, infrastructure and regulation, by improving policymakers’ understanding of the UK’s research and innovation ecosystem.
In 2019, Digital Catapult hosted an event launching two OECD reports focused on innovation policy responses, with in-depth consideration of policy options and experiments across OECD countries, including the use of R&D intensity as a policy target. Based on these discussions, and our applied R&D experience we recommend that the following points are considered:
The Linear Model of Innovation is not the only route to market for emerging technologies.
The ‘Linear model of innovation’ suggests that innovation starts with basic research, is followed by applied research and development, and ends with production and diffusion. This model views the relationship between R&D and economic growth as unidirectional and is often the route taken in areas such as life sciences. It emphasises scientific research advance over innovations that occur in existing companies (such as advanced digital technology startups and scaleups) and new emerging sectors.
This suggests a policy focus on merely increasing public R&D may have less than desired impact unless there are matching investments all the way along the chain: this means investing in R&D but also supporting smaller innovative companies to develop new products and services.
2 Haskel J, Hughes A, Bascavusoglu-Moreau E (2014) The Economic Significance of the UK Science Base. A report for the Campaign for Science and Engineering. Adopting an innovation systems approach in policy formation – an approach that considers the support for these smaller companies in their commercialisation journey for innovation, would instead reflect the dynamic and often complex interplay of actors, institutions and networks, in the process of creating new ideas, building capacity and bringing innovations into economic and social use.
Increase policy understanding of the value and diversity of innovation and R&D interventions to ensure there are best practice models that encapsulate the diversity of routes to commercialisation.
Measuring innovation effectively has proved challenging, and this has hindered efforts to determine what works to boost innovation. Public debate on the UK’s innovation performance has often focused on investment into scientific research and development. While these factors continue to be important to the UK’s economy in the future, policy also needs to reflect wider considerations for commercialisation of innovation. In Nesta’s report The Innovation Gap3, and further research into intangible assets from the OECD, the case has been made for a wider and more relevant set of metrics to measure innovation. Nesta in particular concluded that compared to other developed economies, the UK underperforms on traditional innovation indicators such as R&D and IP metrics. However, when wider measures of ‘hidden innovation’4 were included such as the role of skills, business models, marketing and product design, UK innovation performance was ranked highly against comparator countries.5 Since the publication of this report, R&D has continued to be the main metric used by the UK Government to measure innovation.
As such, it could be highly beneficial for policymakers to explore new approaches to measuring the economic impact of spill over effects from innovation (including R&D but also other intangible assets such as skills, training, customers, branding, software, IP etc.), particularly in enabling and emerging technologies. Measuring investments in these intangible assets offers insights for policymakers on important areas for innovation and commercialisation that are currently being missed by a primary focus on measuring R&D. Exploring what the dynamic and emergent impacts arising in the wider innovation system mean for interventions, will help policymakers and the innovation ecosystem to better understand the wider value of innovation investment, the types of intervention required to solve various challenges in adoption and clear measurable ways to assess impact of these interventions.
Reaching a higher number and broader range of companies
The UK already has a thriving startup ecosystem in place, able to quickly bring new products to market. In order to continue to support that while focusing on key target sectors to retain the UK’s competitive edge, larger grant mechanisms
3 https://www.nesta.org.uk/report/the-innovation-gap/ 4 ‘Hidden innovation’ refers to innovation activities not reflected in traditional indicators such as investment in R&D or patents awarded. Different sectors innovate differently and the role of skills, business models, marketing and product design are overlooked with a limited focus on R&D. 5 Subsequent research was undertaken as part of the Innovation Index project: https://www.nesta.org.uk/report/innovation-index-2009/ such as Innovate UK grants and the ISCF could be complemented by smaller, more readily accessible funds.
There are a number of examples of how this can work effectively. At a small and targeted scale, Digital Catapult working with Arts Council England, designed the CreativeXR programme to cascade small grant funding of up to £20k per early stage creative company, to allow them to explore and develop new immersive content using virtual & augmented reality. By offering small amounts of funding to creative companies located in a total of 15 different towns and cities, and access to Digital Catapult regional facilities and partners, CreativeXR cohorts acquired a total of £1.1M+ in funding, £750k+ from the CreativeXR fund and £620k+ from external sources, with 56% of cohort companies increasing their revenue. The immersive content that has been created through the programme has been showcased in over 35 international film festivals including TriBeCa and Sundance and nominated for or winning 18 awards.
This model has now been extended by Digital Catapult and UKRI into manufacturing, through the Made Smarter Technology Accelerator. This national acceleration programme supports UK manufacturers to innovate, invest into and adopt advanced digital technologies. Designed for industry the programme is a cascade match funding programme for medium and large manufacturers to work with advanced digital technology startups. Digital Catapult works with industry to define the scope of the challenges, select the high potential growth startups and scaleups that can develop solutions, and cascade the funding with technical and industry expert support throughout the proof of concept development. The solutions that are then developed are showcased to the wider sector, with some to be taken forward and developed into commercialised solutions for the sector.
These short agile cascade funding approaches offer clear and tangible ways to engage and increase R&D investment from new actors in the market – while stimulating engagement between supply and demand. Further exploration of how to connect R&D funding competitions through innovation and acceleration type activities linked to industrial challenges, will create a clear pathway from R&D through to commercialisation, with a ready pipeline of customers. These activities could then link to larger projects in R&D that bring together these smaller proofs of concepts and pilots to be tested at a broader scale, to prove how they can work in tandem. This will be critical when considering further interventions such as digital twins, which rely on multiple advanced digital technology solutions being deployed and connected together.
Digital Catapult’s views on the UK regional levelling up agenda
Digital Catapult welcomes the UK Government’s levelling up agenda. We believe that in order to accelerate the adoption of advanced digital technologies for the benefit of the UK economy, it is important to connect regional specialisms and niche skill sets to a broader national ecosystem of innovation. This means connecting UK advanced digital technology startups and scaleups to more traditional sectors that underpin regional economies (such as manufacturing and creative industries). By leveraging the UK’s existing strengths in research and innovation, the UK Government can ensure the benefits of these emerging technologies can reach all parts of the economy and the country, accelerating their adoption across a range of industries and creating new higher value regional jobs.
This requires paying close attention to where there are market, system and capability failures that prevent or slow adoption in these sectors and regions. Digital Catapult’s regional activities focus on addressing these failures. We do this by: connecting supply and demand for these technologies through regional and national innovation and R&D programmes, which help to unlock further private investment; and building new regional and virtual R&D facilities and capabilities that can be used by businesses to prove business models and de-risk exploration.
Strengths, challenges and opportunities
As a result of the UK’s existing strengths in these advanced digital technologies, the UK is ranked third in the world (behind the US and China) for emerging technology private investment since 2015 (Tech Nation 2020 and Crunchbase). This is due to the accelerated adoption of advanced digital technologies already taking place in a number of sectors of the UK economy. The UK’s financial services sector for example is leading in AI adoption, with 72% of the country’s banks, insurance companies and other financial institutions already working with these transformative technologies (Microsoft, 2019).
Despite these strengths, the rate of advanced digital technology adoption varies from sector to sector and from region to region. Some of the UK’s most important sectors for regional economies are significantly behind others in their rate of adoption. In UK manufacturing for example, less than 5% of manufacturers are adopting AI capabilities, less than 7% are adopting Augmented & Virtual Reality, and less than 11% are adopting the internet of things (MakeUK 2020).
With a lack of ready customers in these sectors, less than 5% of the UK’s advanced digital technology startups and scaleups are focusing on developing scalable products, applications and services that can solve the challenges of more traditional regional based industries and make them more productive. This lack of deployment means UK startups and scaleups have not been able to grow to the equivalent of Germany’s mittelstand – a range of mid sized companies that have exportable innovative solutions that can transform a variety of sectors.
Regional market, system and capability failures
This is where the market, system and capability failures exist. On the demand side, the potential customers of advanced technology are often not aware of the opportunities, fail to have the right connections to guide them through technology adoption, and through sheer unfamiliarity regard a new technological venture as a risky step in the dark. This leads to fears over high costs and an uncertain return on investment, meaning that products and services do not scale in the market. These problems are particularly prevalent in regions outside of London and the South East and in sectors like manufacturing.
The problem is not only on the demand side. For the suppliers of advanced digital technology, there is often a chronic lack of awareness of the scale of opportunities that exist in industrial sectors. Taken together, these failings on the supply and demand side lead to a market failure: neither side willing to invest at the level required to enable at-scale sector wide adoption. This means there is a lack of commercially mature businesses in the UK that can address the advanced digital technology needs of multiple clients and customers in industrial industries at any one time.
Disconnected advanced technology supply and demand leads to regional disparity
To compound the issue for the UK economy and regional levelling up goals, many innovative advanced digital technology startups are also based in cities and/or the golden triangle of Oxford, Cambridge, and London (from Digital Catapult’s research, London alone is home to an estimated 82% of the advanced digital technology startups and scaleups in the UK).
This leads to a lack of direct connections and commercial collaborations with regionally based industrial sectors to create customer pipelines in those domains. It is for this reason that there are less than 200 UK advanced technology startups focused on providing solutions for industrial sectors, and of the top 50 highest invested advanced technology companies in the UK (Crunchbase), zero are specifically focused on industrial sectors of the economy.
Many UK technology startups instead focus on quicker wins and geographically closer sectors (e.g. financial services, healthcare, advertising), or sectors with cultural similarities (e.g. software and IT) rather than slower moving sectors in the industrial and engineering space where future returns are uncertain. This is also partly due to the pressure that venture capitalists and investors place on these startups to generate quick pipelines of customers to justify their investment and build market traction. Furthermore, these advanced technology startups are often sold to larger foreign technology businesses, before they are able to grow and establish themselves in the domestic market at a scale which would allow them to expand their offering to new sectors.
As a result, there is a lack of scale in supply to meet growing demand from more traditional industrial sectors, who are looking for off the shelf advanced technology products and services. Where adoption activity does take place, it is small, risk laden and results in what McKinsey calls “pilot purgatory”. This lack of real-world industrial customer opportunities for advanced technology startups and scaleups in the UK, means that they face significant barriers to attracting private investment, building customer pipelines and ultimately even developing relevant products and services for those sectors – linked in part to the R&D challenges highlighted above.
Without the connections, without the environment to test and trial and build confidence to work together, and without industry understanding and technical know-how, it is extremely unlikely for these high growth companies to apply their technology to specific regional based productivity challenges and create a market that is investable by the private sector.
Digital Catapult is helping to tackle this challenge. We do this by designing and delivering targeted innovation and R&D projects, programmes and activities that are designed to build confidence between advanced digital technology supply and demand, establish capabilities around the country and connect specialist regional businesses and sectors to a national innovation ecosystem of startups and scaleups, research institutions and advanced digital infrastructure providers.
Written Evidence Response
1. What are the latest science and technology developments underpinning your Catapult that will lead to commercialisation?
Digital Catapult focuses on advanced digital technologies such as 5G, AI and Machine Learning, the Internet of Things, Virtual and Augmented Reality and Distributed Ledger technology. These are technologies that have the potential for multiple transformative applications, with many routes to commercialisation. They are also sufficiently advanced and fast-changing that the market for their application is not yet fully developed, therefore demanding intervention to exploit this potential.
To do this, we develop technical, innovation and policy expertise, and knowledge of those industries where there are challenges in the adoption of these technologies. We use this to build leading edge R&D and testbed facilities ahead of the market, which helps both the supply and demand side explore real world applications. This includes focusing on how to overcome adoption and commercialisation challenges, develop new products and services and test across multiple devices.
For example, Digital Catapult is supporting the UK’s commercialisation of “Industrial 5G”, through the creation of the UK’s most advanced testbed infrastructure and the associated acceleration and innovation programmes. This is developed in partnership with LEPs across the country (Brighton, London, Birmingham, Nottingham), commercial network providers including Ericsson and manufacturers including Seagate, Siemens and Tharsus Robotics. The work has led to industrial 5G demonstrators, which aim to demonstrate new innovations such as 5G enabled digital twins for advanced manufacturing with BAE Systems. We are also now collaborating with DCMS in developing OpenRAN applications, which will help the UK in its pursuit of a more diversified supply chain for mobile networks. Each of these activities are linked to the role we play as an expert neutral advisor to the Digital, Culture, Media and Sport Department’s 5G Testbeds and Trials programme.
Digital Catapult technology programmes provide us with evidence on how our work with advanced digital technology companies can provide opportunities for their industrial customers. The confidence created then leads to private investment and further adoption. The challenge is to connect sectors in industries well outside the South East to solutions developed by start-up companies found overwhelmingly in London (82%).
The importance of combined technologies
Each of the technologies we have mentioned have high potential in their own right but it is in the combination of multiple technologies that even greater competitive advantage can be found. For example, combining AI, 5G and the Internet of Things devices may create the intelligent data and connectivity capabilities able to transform whole businesses and sectors by solving multiple industry challenges at scale.
Key areas of technology aggregation in which we are active and exploring include:
1. Digital Twins for manufacturing 2. Spatial Computing, Virtual Design and Virtual Production 3. Secure, Intelligent, Connected and Transparent Supply Chains
AND
4. Quantum Computing (software) – in incubation.
Advanced digital technologies, and the clusters of capabilities they create, are forecast to achieve a global market value of £2.2 trillion by 2025, at a mean annual growth rate of 43.9%6. Our goal is simply to ensure that the advantage of these growing markets accrues to the UK.
2. How might such science and technology developments lead to a substantial increase in private sector funding of R&D in the areas covered by your Catapult?
Advanced digitalisation will underpin the transformation of economies across the world over the next 5-10 years and beyond. They will drive increased productivity, reduce carbon emissions, create millions of highly skilled new jobs, and grow the economy more broadly through extensive network and spill over effects. Early adoption of those technologies will enable businesses to transform themselves, enhance their capabilities with new products and services, and increase their market share through increased global competitiveness.
By leveraging the UK’s existing strengths in research and innovation, Digital Catapult can ensure the benefits of these technologies reach all parts of the economy and the country. This means accelerating their adoption across a range of industries. To do this we must pay close attention to where there are market, system and capability failures that prevent or slow adoption.
In the digital space, as much innovation takes place in online startups in the marketplace as happens in universities. For this reason, we focus much of our work on early stage businesses in our selected technology and industrial areas. In the 7 years since the Catapult was founded, more the £4bn has been invested into companies that have been through our programmes. While not the sole metric of success, such significant private investment provides us with a good proxy for our impact in the broader economy.
6 In combination, these technologies and the clusters of capabilities they create such as Digital Twins and Spatial Computing, are expected to create a global market worth a combined £2.2 trillion by 2025, at a mean CAGR of 43.9%. (Various Market research sources, including Market & Markets and Research and Markets) 3. What should be the role of Innovate UK in enabling your Catapult to achieve more private sector investment in R&D?
The Catapult model has matured over the past 7 years, with an impressive network of expert staff who work directly with business, investors, academia and government. Catapults have become what they were intended to be, a strategic asset and a valuable innovation investment. Their impact on the UK economy could however be strengthened with more emphasis from IUK on partnership with Catapults, with clear strategic alignment and not just the mechanics of governance.
To ensure future growth in advanced digital technologies, it is not enough just to increase the amount of public R&D; IUK should work with the Catapult Network, policymakers across departments and the wider innovation ecosystem to build a stronger understanding of the diversity of businesses within existing and newly emerging sectors and the support they need to translate innovation into commercialisable propositions. Public R&D is a fraction of private R&D – but if leveraged and focused correctly it can trigger market growth opportunities quickly and at scale when there is a well understood commercial opportunity. Doing this effectively requires an enhanced understanding of what enables the private sector to develop an idea through to commercialisation and the variety of ways this can be done – in order to fully understand which interventions will yield the most success. IUK can make greater use of the Catapult Network to achieve this.
A systems approach of this kind would exploit the massive network effects to be derived from better connected supply chains and more consistent but competitive adoption of technologies within industrial sectors.
To increase the level of private sector investment in R&D it is not enough to push for more grant funding. Industry is also looking for supportive technical capability, facilities and knowledge before it will further commit scarce resources. In many cases they do not have the questions to ask, let alone the answers and find it hard to predict where change and disruption from digital technologies will come from. Joint expertise and resources in Digital Catapult and IUK can identify challenges that often require large scale, complex multi stakeholder programmes to solve market, system and capability failures. This could be a range of new R&D facilities such as testbeds and demonstrators, or regional and national acceleration programmes, but would require targeted government investment to happen due to there being market, capability and system failures that mean it would not exist without intervention.
The joint development of these programmes is where we can make a significant difference. IUK can also help to identify collaborative research projects with industry and academia where Digital Catapult can help to move those projects to the next stage of commercialisation, for example from proof of concept to small scale pilot and then large scale deployment.
A good example of this type of collaboration is Digital Security by Design (DSbD) where Digital Catapult are currently working with UKRI and ARM to develop a large-scale programme for the adoption of their latest state of the art security architecture, CHERI. CHERI addresses security flaws that have impacted high value sectors such as retail, health, finance etc, on a global scale. The immediate research is focusing on how CHERI addresses current security vulnerabilities and further research with key stakeholders is exploring the adoption process of new cybersecurity technology.
This will be followed by further consultation with industry, allowing them to access and experiment with CHERI. The research gathered will form the basis of an innovation programme that will accelerate the adoption of DSbD technologies among early early stage tech companies and develop a strong base of developers in the UK utilising digital security by design. More collaborative programmes like DSbD would be welcome between IUK and Digital Catapult – to help leverage national capabilities, market engagement and best practice innovation programme design approaches to seize opportunities and tackle long standing barriers to technology adoption.
4. What is the split between large and SME industries with whom your Catapult would aim to collaborate to achieve substantial new innovation tie-ups?
Digital Catapult believes that in order to meet the 3% target of R&D spend as part of GDP by 2030, it is critical to increase the number of companies investing in R&D for the first time. We enable this by engaging with small companies who have not invested into R&D previously, encouraging them to join consortia and explore collaborations with industry. In FY19/20 almost 90% (411 out of 462) of the companies Digital Catapult worked with are SMEs, many of which are early stage startups and scaleups. This includes being part of R&D consortia or selected to be on one of our acceleration programmes. Digital Catapult’s work with small companies has proven successful in helping them to secure investment, improving their products and services, growing their employee numbers and finding commercial customers.
Digital Catapult has helped early stage companies to secure grant funding for the first time, which can act as a catalyst to increase private sector investment in R&D. In FY19/20 we worked with 51 large companies through commercial contracts or as part of R&D consortiums. There is enormous value and impact in bringing together industrial businesses with scale up companies who can innovate for them.
An example of this is the collaboration fostered between London based AI startup Flexciton and Seagate, a multinational data storage company and manufacturer of hard drives based in Derry, Northern Ireland. Seagate has a highly complex 1800 step manufacturing process. Flexciton were an early stage AI company based in London, who were one of only a few AI companies looking to develop their product and service in the manufacturing domain. Digital Catapult helped Seagate to define their challenge and identify the technologies needed to solve it. We then connected them to a targeted cohort of 27 advanced technology innovators from Northern Ireland and the wider UK. Through the process Seagate received 17 proposals, breaking a frustrating three-year barrier to solving their challenge. They selected two data science and AI companies for the first time to execute proof of concepts related to schedule optimisation and matching. This included a local data science company from Northern Ireland, helping to bring revenue to the region. For the most innovative part of their solution they started working with Flexciton, for a new planning and scheduling product. Through this engagement Flexciton have gone on to scale through a pipeline of industrial customers, closing an £800k seed round, raising £2.5m series A investment and growing their team to 15+ people. Seagate have also gone on to explore how 5G can transform their business, joining the Digital Catapult & Ericsson on our national “Industrial 5G” acceleration programme – actively exploring and developing the business case for 5G powered solutions to improve factory performance.
5. Should more universities be involved with your Catapult, and if so, how should they be incentivized?
Digital Catapult has a growing programme of academic engagement, working with over 50 UK universities who are looking to build deeper connections with both the supply and demand of advanced digital technologies. This includes universities located in London and across the UK.
The depth of engagement matters as much as the number of universities we work with. With some universities, for example Bristol, Digital Catapult has built a portfolio of multiple collaborative projects, such as My World to explore 5G, AI and Immersive applications in multiple sectors. While Digital Catapult is not co- located at Bristol University, in the long term we would like to build shared capital assets or facilities with universities. To explore what these deeper relationships can evolve into, it would be beneficial to have a set of best practices and other institutional models, looking at the Catapult Network and other RTO’s, with a view to establishing more working partnerships with specific departments. Through our work with hundreds of early stage companies a year, Digital Catapult can offer deeper connections, collaborations and R&D projects between universities and local early stage startup businesses working with advanced digital technologies. This will enable universities to have a route to research commercialisation that does not focus solely on spin outs, but also on embedded talent and ideas.
Catapults, in specific areas of sector specialism, can also provide an improved industrial interface for universities. Catapult centres and research institutions can co-exist to help companies to test, validate and explore how technologies can be used to solve their challenges. This is a critical component to the development of proof of concepts and the demonstration of business value for the demand side to invest into new and innovative technologies.
However, this is only one part of the equation.
While it is critical to empower more traditional industrial companies to explore new technologies for ROI, the same applies to advanced digital technology startups and scaleups in the exploration of new markets to create their own ROI. This means that startups and scaleups, which typically reside in urban centres with access to ready capital and customers, are often disconnected from regional economic centres and industrial sectors. This means these small innovative companies are slower to develop scalable products and services for those left behind sectors. Instead they focus their energy on easier wins such as financial services, advertising or the IT sector – where there are ready customers, capital and investment.
Universities, research institutions and local research technology organisations can help to bridge the skills gap, but they do not create the supply side of the market. This is where Digital Catapult plays a critical role, instilling confidence for investment in both supply and demand of advanced digital technologies – working with Universities, local partners and organisations and industry – connected to a broader national ecosystem of innovation and startups.
As such, in advanced digital technologies the transfer of skills and expertise from universities into the market could be increased through a closer engagement with the ecosystem of startup companies. This is a different approach than one that assumes a linear transfer of tech or IP from a university lab to a product created by a spin out company. While the spin out route has some track record of success, it is more appropriate in some sectors than others. In areas where software and code is more open, where real world application increases value, such as in internet services, the startup world can often create more impactful and innovative products and services than university spin outs.
It is therefore important to note that not all innovative advanced digital technology startup companies are spin outs, in fact many are not. These startups can develop relevant products through early stage R&D that will commercialise faster than university led R&D through the development of market ready products and services. This is an important consideration for the nature of R&D and innovation in the digital sphere when developing policy interventions.
6. How might your Catapult’s activities help the Government’s proposed levelling-up agenda?
Digital Catapult is a national asset with deep technical expertise and a strong understanding of what it takes to accelerate the adoption of advanced digital technologies, and the barriers to doing this across the UK. We have built this expertise through a variety of physical centres, facilities, projects and partnerships and by working with companies across the UK. We have a headquarters in London and local centres in Sunderland and Belfast. We are currently building new local presence in Bristol, Birmingham and Nottingham around specific foundation projects. We have strategic relationships with the Mayors of combined authorities in West of England, Greater Manchester and the West Midlands. We are working closely with Coast to Capital LEP, Nottinghamshire LEP, and a number of others.
For example, we have designed and now deliver a number of specialised national acceleration programmes that help to connect advanced digital technology startups and scaleups, predominantly based in the golden triangle of Oxford, Cambridge and London, to industrial sectors with low levels of advanced digital technology adoption, located in regions lacking this expertise. Such innovation activities connect cohorts of participants with industry challenge owners, solving real-world problems while helping to attract further investment (both domestic and international) and facilitating new business contracts. These new connections can be crucial in helping to revitalise regions and creating higher paid jobs. Building on this requires fostering and scaling the supply of advanced digital technology startups and scaleups, and supporting them to build solutions which can meet growing regional demand.
The best example of this is the Digital Catapult-designed Made Smarter Accelerator, developed on behalf of UKRI and the Industrial Strategy Challenge Fund to connect UK advanced technology startups to industry challenges. The programme supports manufacturing companies of various sizes from across the UK to develop proof of concepts with UK startups and scaleups working with AI, Immersive, Blockchain and the internet of things. Programmes like these support businesses, enable them to improve the business case for intervention, test ideas and then go on to develop further funded projects that can seed the creation of new products and services. The learning from this can then spill over into the broader ecosystem of manufacturers that have similar challenges.
Note that this also only covers one aspect of what is needed. Individual sectors in different parts of the country are at different levels of industry digitalisation, technology adoption and innovation ecosystem maturity, and therefore require a variety of interventions. Furthermore, developing advanced digital technology startups and scaleups located in regions outside of the South East takes time and dedicated support. That is why we have built R&D facilities such as our immersive lab, our machine intelligence garage and our 5G testbeds, and located these in London, Brighton, Northern Ireland, Manchester, and North East & Tees Valley. These assets help growing companies access equipment, hardware and expertise otherwise unavailable.
However Digital Catapult is just a £12m a year investment from the UK Government. The scale of intervention needed to increase levels of advanced digital adoption across UK industry is much more than can be achieved with that size of intervention alone. We can point out the direction of travel and, through industrial collaboration, we maximise our leverage. Our activities and policy implementation experience provide a unique perspective on the role advanced digital technologies can play in increasing productivity, and demonstrate that advanced digital adoption across the country will not happen at the pace and scale desired if left to the market alone.
The government must make advanced digital technology adoption in important, regionally distributed sectors, a core element of its levelling up agenda. Digital Catapult stands ready to support this by helping the Government to understand the barriers, and determining the most effective ways to address them.
25 November 2020